The Credit Institutions (Protection of Depositors)Regulations 1995

Meaning of insolvency etc.

38.  After section 25 of the 1986 Act there shall be inserted the following section—

“Meaning of insolvency etc.

25A.— (1) For the purpose of the protective scheme provisions of this Part, a building society becomes insolvent—

(a) on the making by the Commission of a determination that, for reasons which directly relate to the society’s financial circumstances, the society—

(i) is unable to repay investments which are due and payable; and

(ii) has no current prospect of being able to do so; or

(b) on the making by a court in any part of the United Kingdom, or in another EEA State, of a judicial ruling which—

(i) directly relates to the society’s financial circumstances; and

(ii) has the effect of suspending the ability of investors to make claims against the society,

but only if investments made with the society have become due and payable and have not been repaid; and the occurrence of any of those events in those circumstances constitutes a ‘participating institution insolvency’ for the purposes of those provisions.

(2) For the purposes of the protective scheme provisions of this Part, a participating EEA institution becomes insolvent—

(a) on the making by the supervisory authority in the institution’s home State of a declaration that investments held by the institution are no longer available; or

(b) on the making by a court in any part of the United Kingdom, or in an EEA State other than the institution’s home State, of a judicial ruling which—

(i) directly relates to the institution’s financial circumstances; and

(ii) has the effect of suspending the ability of investors to make claims against the institution,

but only if, in a case falling within paragraph (b) above, investments made with the society have become due and payable and have not been repaid; and the occurrence of any of those events, in those circumstances in a case falling within that paragraph, constitutes a ‘participating institution insolvency’ for the purposes of those provisions.

(3) For the purposes of the protective scheme provisions of this Part—

(a) a participating institution which has become insolvent by virtue of such a determination or declaration as is mentioned in subsection (1)(a) or (2)(a) above ceases to be insolvent on any withdrawal of the determination or declaration; and

(b) a participating institution which has become insolvent by virtue of such a judicial ruling as is mentioned in subsection (1)(b) or (2)(b) above ceases to be insolvent on any reversal of the ruling (whether on appeal or otherwise).

(4) In relation to a building society, it shall be the duty of the Commission—

(a) to make such a determination as is mentioned in subsection (1)(a) above within 21 days of its being satisfied as there mentioned; and

(b) to withdraw such a determination within 21 days of its ceasing to be so satisfied.

(5) In this section ‘investment’—

(a) in relation to a building society or Irish building society, means a deposit with or a share in the society;

(b) in relation to any other participating institution, means a deposit with the institution.”