Banking Act 1987

The Bank of England (in this Act referred to as “the Bank”) shall have the powers conferred on it by this Act and the duty generally to supervise the institutions authorised by it in the exercise of those powers.

It shall also be the duty of the Bank to keep under review the operation of this Act and developments in the field of banking which appear to it to be relevant to the exercise of its powers and the discharge of its duties.

The Bank shall, as soon as practicable after the end of each of its financial years, make to the Chancellor of the Exchequer and publish in such manner as it thinks appropriate a report on its activities under this Act in that year; and the Chancellor of the Exchequer shall lay copies of every such report before Parliament.

Neither the Bank nor any person who is a member of its Court of Directors or who is, or is acting as, an officer or servant of the Bank shall be liable in damages for anything done or omitted in the discharge or purported discharge of the functions of the Bank under this Act unless it is shown that the act or omission was in bad faith.

As soon as practicable after the coming into force of this section the Bank shall establish a committee to be known as the Board of Banking Supervision.

The Bank shall make regular reports to the Board on matters which the Bank considers relevant to the discharge by the independent members of their duty under subsection (3) above and shall provide them with such other information as they may reasonably require.

The ex officio members shall give written notice to the Chancellor of the Exchequer in any case in which it is decided that the advice of the independent members should not be followed and the independent members shall be entitled to place before the Chancellor the reasons for their advice.

The Board shall prepare an annual report on its activities and that report shall be included in the report made by the Bank under section 1(3) above for the financial year in question.

Section 1(4) above shall apply to an act or omission by a member of the Board in the discharge or purported discharge of his functions under this section as it applies to an act or omission of a person there mentioned in the discharge or purported discharge of the functions of the Bank.

Schedule 1 to this Act shall have effect with respect to the Board.

Subject to section 4 below, no person shall in the United Kingdom accept a deposit in the course of carrying on (whether there or elsewhere) a business which for the purposes of this Act is a deposit-taking business unless that person is an institution for the time being authorised by the Bank under the following provisions of this Part of this Act.

The fact that a deposit has been taken in contravention of this section shall not affect any civil liability arising in respect of the deposit or the money deposited.

Section 3 above shall not apply to the acceptance of a deposit by the Bank or by a person for the time being specified in Schedule 2 to this Act.

The exemption of a person specified in that Schedule shall be subject to any restriction there specified in the case of that person.

Section 3 above shall not apply to any transaction prescribed for the purposes of this subsection by regulations made by the Treasury.

Regulations under subsection (4) above may make any exemption for which they provide subject to compliance with specified conditions or requirements.

Any order under subsection (3)(a) above and any regulations under subsection (4) above shall be subject to annulment in pursuance of a resolution of either House of Parliament, and no order shall be made under subsection (3)(b) above unless a draft of it has been laid before and approved by a resolution of each House of Parliament.

In the application of paragraph (e) of subsection (3) above to a sum paid by a partnership that paragraph shall have effect as if for the reference to the person paying the sum there were substituted a reference to each of the partners.

For the purposes of subsection (1) above all the activities which a person carries on by way of business shall be regarded as a single business carried on by him.

In determining for the purposes of subsection (2)(b) above whether deposits are accepted only on particular occasions regard shall be had to the frequency of those occasions and to any characteristics distinguishing them from each other.

For the purposes of subsection (2) above there shall be disregarded any deposit in respect of the acceptance of which the person in question is exempt from the prohibition in section 3 above and any money received by way of deposit which is not used in the manner described in subsection (1) above.

The Treasury may after consultation with the Bank by order amend the meaning of deposit or deposit-taking business for the purposes of all or any provisions of this Act.

Without prejudice to the generality of the power conferred by subsection (1) above, an order under that subsection amending the meaning of deposit-taking business may provide for taking into account as activities of an institution the activities of any person who is connected with it in such manner as is specified in the order.

Any order under this section shall be subject to annulment in pursuance of a resolution of either House of Parliament.

An order under this section may contain such transitional provisions as the Treasury think necessary or expedient and may exclude or modify the effect of the order on any other enactment which is expressed to have effect in relation to a deposit or a deposit-taking business within the meaning of this Act.

Any institution may make an application for authorisation to the Bank.

At any time after receiving an application and before determining it the Bank may by written notice require the applicant or any person who is or is to be a director, controller or manager of the applicant to provide additional information or documents.

The directions and requirements given or imposed under subsections (2) and (3) above may differ as between different applications.

Any information or statement to be provided to the Bank under this section shall be in such form as the Bank may specify; and the Bank may by written notice require the applicant or any such person as is mentioned in subsection (3) above to provide a report by an accountant or other qualified person approved by the Bank on such aspects of that information as may be specified by the Bank.

An application may be withdrawn by written notice to the Bank at any time before it is granted or refused.

The Bank may, on an application duly made in accordance with section 8 above and after being provided with all such information, documents and reports as it may require under that section, grant or refuse the application.

The Bank shall not grant an application unless satisfied that the criteria specified in Schedule 3 to this Act are fulfilled with respect to the applicant.

No authorisation shall be granted to a partnership or unincorporated association if the whole of the assets available to it are owned by a single individual.

An authorisation granted to a partnership shall be granted in the partnership name and, without prejudice to sections 11 and 12 below, shall not be affected by any change in the partners.

Where the Bank grants an application for authorisation it shall give written notice of that fact to the applicant.

Where the Bank proposes to refuse an application for authorisation it shall give the applicant written notice of its intention to do so, stating the grounds on which it proposes to act and giving particulars of the applicant’s rights under subsection (4) below.

Where the ground or a ground for the proposed refusal is that the Bank is not satisfied that the criterion in paragraph 1 of Schedule 3 to this Act is fulfilled in the case of any such person as is there mentioned, the Bank shall give that person a copy of the notice mentioned in subsection (2) above, together with a statement of his rights under subsection (4) below.

An applicant who is given a notice under subsection (2) above and a person who is given a copy of it under subsection (3) above may within such period (not being less than twenty-eight days) as is specified in the notice make written representations to the Bank; and where such representations are made the Bank shall take them into account before reaching a decision on the application.

Where the Bank refuses an application it shall give written notice of that fact to the applicant and to any such person as is mentioned in subsection (3) above, stating the reasons for the refusal and giving particulars of the rights conferred by section 27 below.

The Bank may omit from the copy given to a person under subsection (3) above and from a notice given to him under subsection (5) above any matter which does not relate to him.

If in the case of an authorised institution whose principal place of business is in a country or territory outside the United Kingdom it appears to the Bank that the relevant supervisory authority in that country or territory has withdrawn from the institution an authorisation corresponding to that conferred by the Bank under this Part of this Act, the Bank may revoke the authorisation and shall do so if that country or territory is a member State.

In the case of an authorised institution which is an authorised person under the M1Financial Services Act 1986 or holds a consumer credit licence under the M2Consumer Credit Act 1974 the Bank may revoke the authorisation if it appears to the Bank that the institution has ceased to be an authorised person under the said Act of 1986 (otherwise than at the request or with the consent of the institution) or that the licence under the said Act of 1974 has been revoked.

The Treasury may after consultation with the Bank by order make provision corresponding to subsection (4) above in relation to any authorisation or licence granted under such other enactments as may appear to the Treasury to be appropriate; but any such order shall be subject to annulment in pursuance of a resolution of either House of Parliament.

The Bank may revoke the authorisation of an authorised institution if it appears to the Bank that an administration order has been made in relation to the institution under section 8 of the M3Insolvency Act 1986 F1or under Article 21 of the Insolvency (Northern Ireland) Order 1989.

A limit on the duration of an authorisation shall not be such as to allow the authorisation to continue in force for more than three years from the date on which it is imposed; and such a limit may, in particular, be imposed in a case in which the Bank considers that an institution should be allowed time to repay its depositors in an orderly manner.

Any condition imposed under this section may be varied or withdrawn by the Bank; and any limit imposed under this section on the duration of an authorisation may be varied but not so as to allow the authorisation to continue in force for longer than the period mentioned in subsection (3) above from the date on which the limit was first imposed.

The fact that a condition imposed under this section has not been complied with (whether or not constituting an offence under subsection (6) above) shall be a ground for the revocation of the authorisation in question but shall not invalidate any transaction.

An institution whose authorisation is restricted by the imposition of a limit on its duration may apply under section 8 above for a new authorisation and, if that authorisation is granted, the restricted authorisation shall cease to have effect.

This section applies where, in the case of an authorised institution which is a credit institution incorporated in or formed under the law of any part of the United Kingdom, the Bank is informed by a supervisory authority in another member State that the institution is failing to comply with an obligation imposed by or under any rule of law in force in that State for purposes connected with the implementation of the Second Council Directive.

The Bank shall as soon as practicable send a copy of the information received by it to every other authority which it knows is a connected UK authority.

If the proposed action is within paragraph (b) or (c) of subsection (1) above the notice under that subsection shall specify the proposed restrictions or, as the case may be, the proposed variation.

A notice under subsection (1) above shall state the grounds on which the Bank proposes to act and give particulars of the institution’s rights under subsection (5) below.

An institution which is given a notice under subsection (1) above and a person who is given a copy of it under subsection (4) above may within the period of fourteen days beginning with the day on which the notice was given make representations to the Bank.

The Bank shall give the institution and any such person as is mentioned in subsection (4) above written notice of its decision and, except where the decision is to take no further action, the notice shall state the reasons for the decision and give particulars of the rights conferred by subsection (9) and section 27 below.

A notice under subsection (7) above of a decision to revoke or restrict an authorisation or to vary the restrictions on an authorisation shall, subject to section 27(4) below, have the effect of revoking the authorisation or, as the case may be, restricting the authorisation or varying the restrictions in the manner specified in the notice.

Where the decision notified under subsection (7) above is to restrict the authorisation or to vary the restrictions on an authorisation otherwise than as stated in the notice given under subsection (1) above the institution may within the period of seven days beginning with the day on which the notice was given under subsection (7) above make written representations to the Bank with respect to the restrictions and the Bank may, after taking those representations into account, alter the restrictions.

A notice under subsection (7) above shall be given within the period of twenty-eight days beginning with the day on which the notice under subsection (1) above was given; and if no notice under subsection (7) is given within that period the Bank shall be treated as having at the end of that period given a notice under that subsection to the effect that no further action is to be taken.

Where the Bank varies a restriction on an institution’s authorisation with its agreement or withdraws a restriction consisting of a condition the variation or withdrawal shall be effected by written notice to the institution.

The Bank may omit from the copy given to a person under subsection (4) above and from a notice given to him under subsection (7) above any matter which does not relate to him.

In any such case the Bank may by written notice to the institution revoke the authorisation or impose or vary the restriction.

Any such notice shall state the reasons for which the Bank has acted and, in the case of a notice imposing or varying a restriction, particulars of the rights conferred by subsection (5) and by section 27 below.

Subsection (4) of section 13 above shall apply to a notice under subsection (2) above imposing or varying a restriction as it applies to a notice under subsection (1) of that section in respect of a proposal to impose or vary a restriction; but the Bank may omit from a copy given to a person by virtue of this subsection any matter which does not relate to him.

An institution to which a notice is given under this section of the imposition or variation of a restriction and a person who is given a copy of it by virtue of subsection (4) above may within the period of fourteen days beginning with the day on which the notice was given make representations to the Bank.

The Bank shall within the period of twenty-eight days beginning with the day on which the notice was given under subsection (2) above give the institution concerned written notice of its decision under subsection (6) above and, except where the decision is to rescind the original decision, the notice shall state the reasons for the decision.

Where the notice under subsection (7) above is of a decision to take the action specified in subsection (6) (b) above the notice under subsection (7) shall have the effect of imposing the restriction or making the variation specified in the notice and with effect from the date on which it is given.

Where a notice of the proposed revocation of an institution’s authorisation under section 13 above is followed by a notice revoking its authorisation under this section the latter notice shall have the effect of terminating any right to make representations in respect of the proposed revocation and any pending appeal proceedings in respect of a decision implementing that proposal.

An authorised institution may surrender its authorisation by written notice to the Bank.

A surrender shall take effect on the giving of the notice or, if a later date is specified in it, on that date; and where a later date is specified in the notice the institution may by a further written notice to the Bank substitute an earlier date, not being earlier than that on which the first notice was given.

The surrender of an authorisation shall be irrevocable unless it is expressed to take effect on a later date and before that date the Bank by notice in writing to the institution allows it to be withdrawn.

If in the course of a financial year of the Bank it makes a material change in the principles in accordance with which it is acting or proposing to act as mentioned in subsection (1) above it shall include a statement of the change in the report made by it for that year under section 1(3) above; and the Bank may, at any time, publish in such manner as it thinks appropriate a statement of the principles in accordance with which it is acting or proposing to act as mentioned in that subsection.

Every report made by the Bank under section 1(3) above shall contain a list of the institutions which are authorised under this Act at the end of the financial year to which the report relates.

The Bank shall make available to any person on request and on payment of such fee, if any, as the Bank may reasonably require a list of the institutions which are authorised either at the date of the request or at such earlier date, being not more than one month earlier, as may be specified in the list.

The Bank may give public notice of the fact that an institution has ceased to be authorised.

No person shall falsely state, or do anything which falsely indicates, that he is entitled although not an authorised institution to accept a deposit in the course of carrying on a business which for the purposes of this Act is a deposit-taking business.

No direction shall be given by virtue of paragraph (a) or (b) of subsection (1) above, and any direction given by virtue of either of those paragraphs shall cease to have effect, if the Bank gives the institution notice that it is not proposing to take any further action pursuant to the notice mentioned in that paragraph or if the Bank’s decision to revoke the institution’s authorisation is reversed on appeal.

No direction shall be given by virtue of paragraph (d) of subsection (1) above, and any direction given by virtue of that paragraph shall cease to have effect, if the Bank allows the institution to withdraw the surrender of its authorisation.

No direction shall be given to an institution under this section after it has ceased to have any liability in respect of deposits for which it had a liability at a time when it was authorised; and any such direction which is in force with respect to an institution shall cease to have effect when the institution ceases to have any such liability.

A contravention of a prohibition imposed under this section shall not invalidate any transaction.

A direction under section 19 above shall be given by notice in writing and may be varied by a further direction; and a direction may be revoked by the Bank by a notice in writing to the institution concerned.

Where a direction requires the removal of a person as director, controller or manager of an institution the Bank shall give that person a copy of the direction (together with a statement of his rights under subsection (4) below) and, if the direction is confirmed, a copy of the notice mentioned in subsection (2)(b) above.

An institution to which a direction is given which requires confirmation under subsection (2) above and a person who is given a copy of it under subsection (3) above may, within the period of fourteen days beginning with the day on which the direction is given, make written representations to the Bank; and the Bank shall take any such representations into account in deciding whether to confirm the direction.

The Bank may omit from the copies given to a person under subsection (3) above any matter which does not relate to him.

Subsection (1) above applies also in relation to a person becoming a partner in an authorised institution which is a partnership formed under the law of any part of the United Kingdom.

A notice under paragraph (a) of subsection (1) above shall contain such information as the Bank may direct and the Bank may, after receiving such a notice from any person, by notice in writing require him to provide such additional information or documents as the Bank may reasonably require for deciding whether to serve a notice of objection.

Where additional information or documents are required from any person by a notice under subsection (3) above the time between the giving of the notice and the receipt of the information or documents shall be added to the period mentioned in subsection (1) (b) above.

A person served with a notice under subsection (2) above may, within the period of one month beginning with the day on which the notice is served, make written representations to the Bank; and where such representations are made the Bank shall take them into account in deciding whether to serve a notice of objection.

Subsections (2)(a) and (4)(a) above shall not require the Bank to specify any reason which would in its opinion involve the disclosure of confidential information the disclosure of which would be prejudicial to a third party.

Where a person required to give a notice under section 21 above in relation to his becoming a controller of any description becomes a controller of that description without having given the notice the Bank may serve him with a notice of objection under this section at any time within three months after becoming aware of his having done so and may, for the purpose of deciding whether to serve him with such a notice, require him by notice in writing to provide such information or documents as the Bank may reasonably require.

The period mentioned in section 21(1)(b) above (with any extension under subsection (4) of that section) and the period mentioned in subsection (6) above shall not expire, if it would otherwise do so, until fourteen days after the end of the period within which representations can be made under subsection (3) above.

No direction shall be given in a case within subsection (1)(b) above more than three months after the Treasury becomes aware of the fact that the person concerned has become a controller of the relevant description.

Any notice of objection served by virtue of a direction under this section shall state the grounds on which it is served.

Where it appears to the Bank that a person who is a shareholder controller of any description of an authorised institution incorporated in the United Kingdom is not or is no longer a fit and proper person to be such a controller of the institution it may serve him with a written notice of objection to his being such a controller of the institution.

A person served with a notice under subsection (2) above may, within the period of one month beginning with the day on which the notice is served, make written representations to the Bank; and where such representations are made the Bank shall take them into account in deciding whether to serve a notice of objection.

Subsections (2)(a) and (4)(a) above shall not require the Bank to specify any reason which would in its opinion involve the disclosure of confidential information the disclosure of which would be prejudicial to a third party.

A person shall not be guilty of an offence under subsection (1) above if he shows that he did not know of the acts or circumstances by virtue of which he became a controller of the relevant description; but where any person becomes a controller of any such description without such know-ledge and subsequently becomes aware of the fact that he has become such a controller he shall be guilty of an offence unless he gives the Bank written notice of the fact that he has become such a controller within fourteen days of becoming aware of that fact.

A person guilty of an offence under subsection (1) or (2) above shall be liable on summary conviction to a fine not exceeding the fifth level on the standard scale.

The court may, on the application of the Bank, order the sale of any specified shares to which this section applies and, if they are for the time being subject to any restrictions under subsection (2) above, that they shall cease to be subject to those restrictions.

Where an order has been made under subsection (3) above the court may, on the application of the Bank, make such further order relating to the sale or transfer of the shares as it thinks fit.

Where shares are sold in pursuance of an order under this section the proceeds of sale, less the costs of the sale, shall be paid into court for the benefit of the persons beneficially interested in them; and any such person may apply to the court for the whole or part of the proceeds to be paid to him.

A copy of the notice served on the person concerned under subsection (2) above shall be served on the institution or company to whose shares it relates and, if it relates to shares held by an associate of that person, on that associate.

The jurisdiction conferred by this section shall be exercisable by the High Court and the Court of Session.

Any person on whom a notice of objection is served under section 22 or 24 above may appeal to a tribunal constituted as aforesaid against the decision of the Bank to serve the notice; but this subsection does not apply to a person in any case in which he has failed to give a notice or become or continued to be a controller in circumstances in which his doing so constitutes an offence under section 25(1), (2) or (3) above.

The Tribunal may suspend the operation of a restriction or direction or a variation of a restriction or direction pending the determination of an appeal in respect of the decision imposing or varying the restriction or giving or varying the direction.

Where an appeal is brought under section 27 above a tribunal to determine the appeal shall be constituted in accordance with subsection (2) below.

The Treasury may out of money provided by Parliament pay to the persons appointed as members of a tribunal under this section such fees and allowances in respect of expenses as the Treasury may determine and may also out of such money defray any other expenses of a tribunal.

On an appeal under section 27(1) or (3) above the question for the determination of the tribunal shall be whether, for the reasons adduced by the appellant, the decision was unlawful or not justified by the evidence on which it was based.

Where the tribunal reverses a decision of the Bank to refuse an application for authorisation it shall direct the Bank to grant it.

On an appeal under section 27(2)(a) above the question for the determination of the tribunal shall be whether, for the reasons adduced by the appellant, the finding of the Bank was not justified by the evidence on which it was based; and on an appeal under section 27(2)(b) above the question for the determination of the tribunal shall be whether, for the reasons adduced by the appellant, the decision requiring the appellant’s removal was unlawful or not justified by the evidence on which it was based.

A decision by the tribunal on an appeal under section 27(2)(a) above that a finding in respect of the appellant was not justified shall not affect any refusal, revocation or restriction wholly or partly based on that finding; but on an appeal under section 27(2)(b) above the tribunal may confirm or reverse the decision to require the removal of the appellant.

Notice of a tribunal’s determination, together with a statement of its reasons, shall be given to the appellant and to the Bank; and, unless the tribunal otherwise directs, the determination shall come into operation when the notice is given to the appellant and to the Bank.

Notice of a tribunal’s determination of an appeal under section 27(2) above shall also be given to the institution concerned and, where the determination is to reverse a decision to require the removal of the appellant as director, controller or manager of an institution, the determination shall not come into operation until notice of the determination has been given to that institution.

A tribunal may give such directions as it thinks fit for the payment of costs or expenses by any party to the appeal.

On an appeal under section 27(2) above the institution concerned shall be entitled to be heard.

A person who, having been required in accordance with regulations under this section to attend and give evidence, fails without reasonable excuse to attend or give evidence, shall be liable on summary conviction to a fine not exceeding the fifth level on the standard scale.

Any regulations made under this section shall be subject to annulment in pursuance of a resolution of either House of Parliament.

An institution or other person who has appealed to a tribunal may appeal to the court on any question of law arising from the decision of the appeal by the tribunal and an appeal on any such question shall also lie at the instance of the Bank; and if the court is of opinion that the decision was erroneous in point of law, it shall remit the matter to the tribunal for re-hearing and determination by it.

No appeal to the Court of Appeal or to the Court of Appeal in Northern Ireland shall be brought from a decision under subsection (1) above except with the leave of that court or of the court or judge from whose decision the appeal is brought.

An appeal shall lie, with the leave of the Court of Session or the House of Lords, from any decision of the Court of Session under this section, and such leave may be given on such terms as to costs, expenses or otherwise as the Court of Session or the House of Lords may determine.

The Treasury may after consultation with the Bank and the Building Societies Commission make regulations for regulating the issue, form and content of deposit advertisements.

A person whose business it is to publish or arrange for the publication of advertisements shall not be guilty of an offence under this section if he proves that he received the advertisement for publication in the ordinary course of his business, that the matters contained in the advertisement were not (wholly or in part) devised or selected by him or by any person under his direction or control and that he did not know and had no reason for believing that publication of the advertisement would constitute an offence.

For the purposes of this section an advertisement issued outside the United Kingdom shall be treated as issued in the United Kingdom if it is directed to persons in the United Kingdom or is made available to them otherwise than in a newspaper, journal, magazine or other periodical publication published and circulating principally outside the United Kingdom or in a sound or television broadcast transmitted principally for reception outside the United Kingdom.

Regulations under this section shall be subject to annulment in pursuance of a resolution of either House of Parliament.

If the Bank considers that any deposit advertisement issued or proposed to be issued by or on behalf of an authorised institution is misleading, the Bank may by notice in writing give the institution a direction under this section.

Not less than seven days before giving a direction under this section the Bank shall give the institution concerned notice in writing of its intention to give the direction stating the reasons for the proposed direction and giving particulars of the rights conferred by subsection (4) below.

An institution to which a notice is given under subsection (3) above may within the period of seven days beginning with the day on which the notice was given make written representations to the Bank; and the Bank shall take any such representation into account in deciding whether to give the direction.

A direction under this section may be varied by a further direction; and a direction may be revoked by the Bank by a notice in writing to the institution concerned.

In this section “deposit advertisement” has the same meaning as in section 32 above and subsections (4) and (6) of that section shall apply also for the purposes of this section.

In this section “unsolicited call” means a personal visit or oral communication made without express invitation.

Regulations under this section shall be subject to annulment in pursuance of a resolution of either House of Parliament.

For the purposes of this section the definition of deposit in section 5 above shall be treated as including any sum that would be otherwise excluded by subsection (3) of that section.

Subject to subsection (3) below, an authorised institution shall give written notice to the Bank of the fact that any person has become or ceased to be a director, controller or manager of the institution.

A notice required to be given under subsection (1) above shall be given before the end of the period of fourteen days beginning with the day on which the institution becomes aware of the relevant facts.

The Bank may by a notice in writing wholly or partly dispense from the obligation imposed by subsection (1) above any authorised institution whose principal place of business is outside the United Kingdom.

An institution which fails to give a notice required by this section shall be guilty of an offence and liable on summary conviction to a fine not exceeding the fifth level on the standard scale.

A person who becomes a significant shareholder in relation to an authorised institution incorporated in the United Kingdom shall within seven days give written notice of that fact to the Bank.

For the purposes of this section “a significant shareholder”, in relation to an institution, means a person who, either alone or with any associate or associates, is entitled to exercise, or control the exercise of, 5 per cent. or more but less than 15 per cent. of the voting power at any general meeting of the institution or of another institution of which it is a subsidiary.

Subject to subsection (4) below, any person who contravenes subsection (1) above shall be guilty of an offence.

A person shall not be guilty of an offence under subsection (3) above if he shows that he did not know of the acts or circumstances by virtue of which he became a significant shareholder in relation to the institution; but where any person becomes such a shareholder without such knowledge and subsequently becomes aware of the fact that he has become such a shareholder he shall be guilty of an offence unless he gives the Bank written notice of the fact that he has become such a shareholder within fourteen days of becoming aware of that fact.

A person guilty of an offence under this section shall be liable on summary conviction to a fine not exceeding the fifth level on the standard scale.

Subsection (1) above applies also where the transaction or transactions relate to different persons if they are connected in such a way that the financial soundness of any of them may affect the financial soundness of the other or others or the same factors may affect the financial soundness of both or all of them.

If an authorised institution to which subsection (1) above applies has one or more subsidiaries which are not authorised institutions the Bank may by notice in writing to that institution direct that that subsection shall apply to it as if the transactions and available capital resources of the subsidiary or subsidiaries, or such of them as are specified in the notice, were included in those of the institution.

The reports required to be made by an institution under subsection (1) above shall be made, in a case within paragraph (a) of that subsection, in respect of such period or periods and, in a case within paragraph (b) of that subsection, at such time before the transaction or transactions are entered into, as may be specified by notice in writing given to the institution by the Bank; and those reports shall be in such form and contain such particulars as the Bank may reasonably require.

Any question whether an institution is or would be exposed to risk as mentioned in subsection (1) above (or in that subsection as extended by subsection (2)) shall be determined in accordance with principles published by the Bank or notified by it to the institution concerned; and those principles may in particular make provision for determining the amount at risk in particular circumstances or the extent to which any such amount is to be taken into account for the purposes of this section.

For the purposes of this section the available capital resources of an institution (or, in a case within subsection (3) above, of an institution and its relevant subsidiary or subsidiaries) and the value of those resources at any time shall be determined by the Bank and notified by it to the institution by notice in writing; and any such determination, which may be varied from time to time, shall be made by the Bank after consultation with the institution concerned and in accordance with principles published by the Bank.

The principles referred to in subsections (6) and (7) above may make different provision for different cases and those referred to in subsection (6) may, in particular, exclude from consideration, either wholly or in part, risks resulting from transactions of a particular description or entered into in particular circumstances or with persons of particular descriptions.

An institution which fails to make a report as required by this section shall be guilty of an offence; but where an institution shows that at the time when the report was required to be made it did not know that the facts were such as to require the making of the report it shall not be guilty of an offence by reason of its failure to make a report at that time but shall be guilty of an offence unless it makes the report within seven days of becoming aware of those facts.

An institution guilty of an offence under this section shall be liable on summary conviction to a fine not exceeding the fifth level on the standard scale.

For the avoidance of doubt it is hereby declared that references in this section to “one person” include references to a partnership.

The accountant or other person appointed by an institution to make any report required under subsection (1)(b) above shall be a person nominated or approved by the Bank; and the Bank may require his report to be in such form as is specified in the notice.

Where, by virtue of subsection (3) above, the Bank or any officer, servant or agent of the Bank has power to require the production of any documents from an authorised institution, the Bank or that officer, servant or agent shall have the like power to require the production of those documents from any person who appears to be in possession of them; but where any person from whom such production is required claims a lien on documents produced by him, the production shall be without prejudice to the lien.

The foregoing provisions of this section shall apply to a former authorised institution as they apply to an authorised institution.

The Bank may by notice in writing served on any person who is or is to be a director, controller or manager of an authorised institution require him to provide the Bank, within such time as may be specified in the notice, with such information or documents as the Bank may reasonably require for determining whether he is a fit and proper person to hold the particular position which he holds or is to hold.

The Bank may exercise the powers conferred by subsections (1) and (3) above in relation to any person who is a significant shareholder of an authorised institution within the meaning of section 37 above if the Bank considers that the exercise of those powers is desirable in the interests of the depositors or potential depositors of that institution.

Any person who without reasonable excuse fails to comply with a requirement imposed on him under this section shall be guilty of an offence and liable on summary conviction to imprisonment for a term not exceeding six months or to a fine not exceeding the fifth level on the standard scale or to both.

A statement made by a person in compliance with a requirement imposed by virtue of this section may be used in evidence against him.

Nothing in this section shall compel the production by a barrister, advocate or solicitor of a document containing a privileged communication made by him or to him in that capacity.

Any officer, servant or agent of the Bank may, on producing if required evidence of his authority, enter any premises occupied by a person on whom a notice has been served under section 39 above for the purpose of obtaining there the information or documents required by that notice and of exercising the powers conferred by subsection (5) of that section.

Any officer, servant or agent of the Bank may, on producing if required evidence of his authority, enter any premises occupied by any person on whom a notice could be served under section 39 above for the purpose of obtaining there such information or documents as are specified in the authority, being information or documents that could have been required by such a notice; but the Bank shall not authorise any person to act under this subsection unless it has reasonable cause to believe that if such a notice were served it would not be complied with or that any documents to which it would relate would be removed, tampered with or destroyed.

Any person who intentionally obstructs a person exercising rights conferred by this section shall be guilty of an offence and liable on summary conviction to imprisonment for a term not exceeding six months or to a fine not exceeding the fifth level on the standard scale or to both.

Where a person appointed under subsection (1) above decides to investigate the business of any body by virtue of subsection (2) or (3) above he shall give it written notice to that effect.

The foregoing provisions of this section shall apply to a former authorised institution as they apply to an authorised institution.

For the purpose of exercising his powers under this section a person appointed under subsection (1) above may enter any premises occupied by a body which is being investigated by him under this section; but he shall not do so without prior notice in writing unless he has reasonable cause to believe that if such a notice were given any documents whose production could be required under this section would be removed, tampered with or destroyed.

A person exercising powers by virtue of an appointment under this section shall, if so required, produce evidence of his authority.

A statement made by a person in compliance with a requirement imposed by virtue of this section may be used in evidence against him.

Nothing in this section shall compel the production by a barrister, advocate or solicitor of a document containing a privileged communication made by him or to him in that capacity.

The Bank or a duly authorised officer, servant or agent of the Bank may take copies of or extracts from any documents produced under this section.

Any officer, servant or agent of the Bank may, on producing if required evidence of his authority, enter any premises occupied by a person on whom a notice has been served under subsection (1) above for the purpose of obtaining there the information or documents required by the notice, putting the questions referred to in paragraph (c) of that subsection or exercising the powers conferred by subsection (2) above.

Any person who without reasonable excuse fails to comply with a requirement imposed on him under this section or intentionally obstructs a person in the exercise of the rights conferred by subsection (3) above shall be guilty of an offence and liable on summary conviction to imprisonment for a term not exceeding six months or to a fine not exceeding the fifth level on the standard scale or to both.

A statement made by a person in compliance with a requirement imposed by virtue of this section may be used in evidence against him.

Nothing in this section shall compel the production by a barrister, advocate or solicitor of a document containing a privileged communication made by him or to him in that capacity.

A warrant under this section shall continue in force until the end of the period of one month beginning with the day on which it is issued.

A statement made by a person in compliance with a requirement imposed by virtue of this section may be used in evidence against him.

In the application of subsection (1) above to Scotland, the reference to a justice of the peace includes a reference to a sheriff and for the reference to information on oath there shall be substituted a reference to evidence on oath; and in the application of that subsection to Northern Ireland for the reference to laying an information on oath there shall be substituted a reference to making a complaint on oath.

An institution which fails to comply with paragraph (a) of subsection (1) above or with any request made in accordance with paragraph (b) of that subsection shall be guilty of an offence and liable on summary conviction to a fine not exceeding the fifth level on the standard scale.

In the case of an institution incorporated in the United Kingdom the accounts referred to in subsection (1) above include the auditors’ report on the accounts and, in the case of any other institution whose accounts are audited, the report of the auditors.

The foregoing provisions of this section shall apply to a former authorised institution as they apply to an authorised institution.

In the application of subsection (2) above to Northern Ireland for the references to F6Chapter V of Part XI and sectionsF7235(2) and 235(3) and 237 of the Companies Act 1985 there shall be substituted references to F8F9Chapter V of Part XII and Articles, 243(2), 243(3) and 245 of the Companies (Northern Ireland) Order 1986.

An institution or auditor who fails to comply with this section shall be guilty of an offence and liable on summary conviction to a fine not exceeding the fifth level on the standard scale.

In relation to an auditor of an authorised institution this section applies to any matter of which he becomes aware in his capacity as auditor and which relates to the business or affairs of the institution or any associated body.

In this section “associated body”, in relation to an institution, means any such body as is mentioned in section 39(6) or (7) above.

If it appears to the Treasury that any accountants or class of accountants who are persons to whom subsection (1) above applies are not subject to satisfactory rules made or guidance issued by a professional body specifying circumstances in which matters are to be communicated to the Bank as mentioned in that subsection the Treasury may, after consultation with the Bank and such bodies as appear to the Treasury to represent the interests of accountants and authorised institutions, make regulations applying to those accountants and specifying such circumstances; and it shall be the duty of an accountant to whom the regulations apply to communicate a matter to the Bank in the circumstances specified by the regulations.

Regulations under this section may make different provision for different cases and no such regulations shall be made unless a draft of them has been laid before and approved by a resolution of each House of Parliament.

This section applies to the auditor of a former authorised institution as it applies to the auditor of an authorised institution.

The jurisdiction conferred by this section shall be exercisable by the High Court and the Court of Session.

If on the application of the Bank the court is satisfied that profits have accrued to a person as a result of deposits having been accepted in contravention of section 3 above the court may order him to pay into court or, except in Scotland, appoint a receiver to recover from him, such sum as appears to the court to be just having regard to the profits appearing to the court to have accrued to him.

In deciding whether, and if so, on what terms to make an order under this section the court shall have regard to the effect that payment in accordance with the order would have on the solvency of the person concerned or otherwise on his ability to carry on his business in a manner satisfactory to his creditors.

Any amount paid into court or recovered from a person in pursuance of an order under this section shall be paid out to such person or distributed among such persons as the court may direct, being a person or persons appearing to the court to have made the deposits as a result of which the profits mentioned in subsection (1) above have accrued or such other person or persons as the court thinks just.

On an application under this section the court may require the person concerned to furnish it with such accounts or other information as it may require for determining whether any and if so, what profits have accrued to him as mentioned in subsection (1) above and for determining how any amounts are to be paid or distributed under subsection (3) above; and the court may require any such accounts or other information to be verified in such manner as it may direct.

The jurisdiction conferred by this section shall be exercisable by the High Court and the Court of Session.

The body corporate known as the Deposit Protection Board and the Fund known as the Deposit Protection Fund established by section 21 of the M7Banking Act 1979 shall continue to exist.

Schedule 4 to this Act shall have effect with respect to the Board.

The money constituting the Fund shall be placed by the Board in an account with the Bank.

As far as possible, the Bank shall invest money placed with it under subsection (2) above in Treasury bills; and any income from money so invested shall be credited to the Fund.

All authorised institutions shall be liable to contribute to the Fund and are in this Part of this Act referred to as “contributory institutions”.

Contributions to the Fund shall be levied on a contributory institution by the Board by the service on the institution of a notice specifying the amount due, which shall be paid by the institution not later than twenty-one days after the date on which the notice is served.

In its application to this section, section 5(3) above shall have effect with the omission of paragraphs (b) and (c).

Subject to subsection (4) below, where an institution becomes a contributory institution after the coming into force of this Part of this Act the Board shall levy from it, on or as soon as possible after the day on which it becomes a contributory institution, an initial contribution of an amount determined in accordance with subsection (2) or (3) below.

Where the institution concerned has no deposit base the amount of an initial contribution levied under this section shall be the minimum amount for the time being provided for in section 56(1) below.

The Board may waive an initial contribution under this section if it appears to it that the institution concerned is to carry on substantially the same business as that previously carried on by one or more institutions which are or were contributory institutions.

If at the end of any financial year of the Board the amount standing to the credit of the Fund is less than £3 million the Board may, with the approval of the Treasury, levy further contributions from contributory institutions so as to restore the amount standing to the credit of the Fund to a minimum of £5 million and a maximum of £6 million.

If at any time it appears to the Treasury to be desirable in the interests of depositors to increase the size of the Fund, the Treasury may, after consultation with the Board, by order amend subsection (1) above so as to substitute for the sums for the time being specified in that subsection such larger sums as may be specified in the order; but no such order shall be made unless a draft of it has been laid before and approved by a resolution of each House of Parliament.

An order under subsection (2) above may authorise the Board forthwith to levy further contributions from contributory institutions so as to raise the amount standing to the credit of the Fund to a figure between the new minimum and maximum amounts provided for by the order.

If it appears to the Board that payments under section 58 below are likely to exhaust the Fund, the Board may, with the approval of the Treasury, levy special contributions from contributory institutions to meet the Fund’s commitments under that section.

Repayments to institutions under this section shall be made pro rata according to the amount of the special contribution made by each of them but the Board may withhold the whole or part of any repayment due to an institution that has become insolvent and, in the case of an institution that has ceased to be a contributory institution, may either withhold its repayment or make it to any other contributory institution which, in the opinion of the Board, is its successor.

The amount of the inital contribution levied from a contributory institution shall be not less than £10,000.

The amount of the initial contribution or any further contribution levied from a contributory institution shall not exceed £300,000.

No contributory institution shall be required to pay a further or special contribution if, or to the extent that, the amount of that contribution, together with previous initial, further and special contributions made by the institution, after allowing for any repayments made to it under section 55(2) above or section 63 below, amounts to more than 0.3 per cent. of the institution’s deposit base as ascertained for the purpose of the contribution in question.

No order shall be made under subsection (5) above unless a draft of it has been laid before and approved by a resolution of each House of Parliament.

This section applies where the liabilities in respect of deposits of a person specified in Schedule 2 to this Act (an “exempted person”) are transferred to an institution which is not such a person (a “transferee institution”).

Whether or not the transferee institution is already a contributory institution at the time of the transfer it shall be treated for the purposes of the levying from it of any further or special contribution as having such deposit base as it would have if the sterling deposits with its United Kingdom offices and the sterling certificates of deposit issued by it included respectively sterling deposits with the United Kingdom offices of the exempted person and sterling certificates of deposit issued by that person.

In its application to this section, section 5(3) above shall have effect with the omission of paragraphs (b) and (c).

Subject to the provisions of this section, if at any time an administration order is made under section 8 of the M10Insolvency Act 1986 F10or under Article 21 of the Insolvency (Northern Ireland) Order 1989 in relation to an institution and at that time it is such an institution as is mentioned in subsection (1) above the Board shall pay out of the Fund to each depositor who has a protected deposit with that institution an amount equal to three-quarters of his protected deposit; and that payment shall be made as soon as practicable after the deposit is or becomes due and payable under the terms on which it was made or, if later, the approval of the administrator’s proposals under section 24 of that Act F11or, as the case may be, under Article 36 of that Order.

Where the Board makes such a deduction as is mentioned in paragraph (a) of subsection (3) above it may agree with the authority responsible for the scheme or by which the guarantee was given to reimburse that authority to the extent of the deduction or any lesser amount.

The Board may decline to make any payment under subsection (1) or (2) above to a person who, in the opinion of the Board, has any responsibility for, or may have profited directly or indirectly from, the circumstances giving rise to the institution’s financial difficulties.

There shall be deducted from any payment to be made by the Board in respect of a deposit under subsection (2) above any payment in respect of that deposit already made by the administrator; and where an institution becomes insolvent after an administration order has been in force in relation to it the payments to be made by the Board under subsections (1) and (2) above, taken together, in respect of a depositor’s protected deposits with the institution shall not exceed an amount equal to three-quarters of those deposits.

The Treasury may, after consultation with the Board, by order amend subsections (1), (2) and (6) above so as to substitute for the fraction for the time being specified in those subsections such other fraction as may be specified in the order; but no such order shall be made unless a draft of it has been laid before and approved by a resolution of each House of Parliament.

Where a representative of the Board exercises his right to be a member of such a committee as is mentioned in paragraph (b)(ii) or (iv) of subsection (8) above or to be a commissioner by virtue of paragraph (b)(iii) of that subsection he may not be removed except with the consent of the Board and his appointment under that subsection shall be disregarded for the purposes of any provision made by or under any enactment which specifies a minimum or maximum number of members of such a committee or commission.

For the purposes of this Part of this Act an unincorporated association which is formed under the law of another member State and is not a partnership becomes insolvent on the occurrence of any event which appears to the Board to correspond as nearly as may be to any of those mentioned in subsection (1)(a), (b) or (c) or (2)(a), (b) or (c) above.

Subject to the provisions of this section, in relation to an institution in respect of which a payment falls to be made under section 58(1) above any reference in this Act to a depositor’s protected deposit is a reference to the total liability of the institution to him immediately before the time when it becomes insolvent, limited to a maximum of £20,000, in respect of the principal amounts of and accrued interest on sterling deposits made with United Kingdom offices of the institution.

For the purposes of subsection (2) above no account shall be taken of any liability unless a claim for repayment of the deposit which gives rise to it has been lodged with the administrator.

The Treasury may, after consultation with the Board, by order amend subsections (1) and (2) above so as to substitute for the sum for the time being specified in those subsections such larger sum as may be specified in the order; but no such order shall be made unless a draft of it has been laid before and approved by a resolution of each House of Parliament.

Where an institution becomes insolvent after an administration order has been in force in relation to it the maximum applying under subsection (1) above to a depositor’s protected deposit with the institution shall be reduced by the amount of his protected deposit or deposits with the institution taken into account for the purposes of subsection (2) above.

Where the trustee referred to in paragraph (b) of subsection (9) above is not a bare trustee and there are two or more beneficiaries that paragraph applies only if all the beneficiaries fall within section 5(3)(e) above.

Subsection (10) above does not extend to Scotland and, in Scotland, where there are two or more beneficiaries of a trust the trustee of which is referred to in paragraph (b) of subsection (9) above that paragraph applies only if all the beneficiaries fall within section 5(3)(e) above.

In the cases to which this section applies sections 58 and 60 above shall have effect with the following modifications.

Subject to the provisions of this section, where any persons are entitled to a deposit as trustees they shall be treated as a single and continuing body of persons distinct from the persons who may from time to time be the trustees, and if the same persons are entitled as trustees to different deposits under different trusts they shall be treated as a separate and distinct body with respect to each of those trusts.

Where a deposit is held for any person or for two or more persons jointly by a bare trustee, that person or, as the case may be, those persons jointly shall be treated as entitled to the deposit without the intervention of any trust.

Subsection (3) above does not extend to Scotland and, in Scotland, where a deposit is held by a person as nominee for another person or for two or more other persons jointly, that other person or, as the case may be, those other persons jointly shall be treated as entitled to the deposit.

A deposit to which two or more persons are entitled as members of a partnership (whether or not in equal shares) shall be treated as a single deposit.

Subject to subsection (5) above, where two or more persons are jointly entitled to a deposit and subsection (2) above does not apply each of them shall be treated as having a separate deposit of an amount produced by dividing the amount of the deposit to which they are jointly entitled by the number of persons who are so entitled.

Where a person is entitled (whether as trustee or otherwise) to a deposit made out of a clients’ or other similar account containing money to which one or more other persons are entitled, that other person or, as the case may be, each of those other persons shall be treated (to the exclusion of the first-mentioned person) as entitled to so much of the deposit as corresponds to the proportion of the money in the account to which he is entitled.

Where an authorised institution is entitled as trustee to a sum which would be a deposit apart from section 5(3)(a) above and represents deposits made with the institution, each of the persons who made those deposits shall be treated as having made a deposit equal to so much of that sum as represents the deposit made by him.

The Board may decline to make any payment under section 58 above in respect of a deposit until the person claiming to be entitled to it informs the Board of the capacity in which he is entitled to the deposit and provides sufficient information to enable the Board to determine what payment (if any) should be made under that section and to whom.

Where an institution becomes insolvent after an administration order has been in force in relation to it subsections (2) and (3) above shall not apply to any compensation payment to the extent to which the Board has received a payment in respect of it by virtue of subsection (4)(a) above.

Where by virtue of section 61 above the compensation payment is or is to be made by the Board to a person other than the person to whom the institution is liable in respect of the deposit any reference in the foregoing provisions of this section to the liability to the depositor shall be construed as a reference to the liability of the institution to the person to whom that payment would fall to be made by the Board apart from that section.

Where the Board makes a payment under section 58(4) above in respect of an amount deducted from a payment due to a depositor this section shall have effect as if the amount had been paid to the depositor.

Any money received by the Board under section 62 above (“recovered money”) shall not form part of the Fund but, for the remainder of the financial year of the Board in which it is received, shall be placed by the Board in an account with the Bank which shall as far as possible invest the money in Treasury bills; and any income arising from the money so invested during the remainder of the year shall be credited to the Fund.

Except where special or further contributions can be repaid in full, repayments to institutions under this section shall be made pro rata according to the amount of the special or further contribution made by each of them.

If in the course of operating the Fund it appears to the Board desirable to do so, the Board may borrow up to a total outstanding at any time of F22£50 million or such larger sum as, after consultation with the Board, the Treasury may from time to time by order prescribe.

An order under subsection (1) above shall be subject to annulment in pursuance of a resolution of either House of Parliament.

Any amount borrowed by virtue of this section shall be disregarded in ascertaining the amount standing to the credit of the Fund for the purposes of sections 54 (1), 55 (2) and 63 (5) above.

If required to do so by a request in writing made by the Board, the Bank may by notice in writing served on a contributory institution require the institution, within such time and at such place as may be specified in the notice, to provide the Board with such information and to produce to it such documents, or documents of such a description, as the Board may reasonably require for the purpose of determining the contributions of the institution under this Part of this Act.

Subsections (4), (5), (11) and (13) of section 39 above shall have effect in relation to any requirement imposed under subsection (1) above as they have effect in relation to a requirement imposed under that section.