Financial Services and Markets Act 2000

[F1 Ring-fencing rules U.K.

Textual Amendments

F1 Pt. 9B inserted (1.3.2014 for the insertion of ss. 142A-142F, 142I, 142W-142Z1 for specified purposes) by Financial Services (Banking Reform) Act 2013 (c. 33), ss. 4(1), 148(5); S.I. 2014/377, art. 2(1)(b), Sch. Pt. 2

142H Ring-fencing rules U.K.

(1) In the exercise of its power to make general rules, the appropriate regulator must in particular make rules—

(a) requiring a ring-fenced body to make arrangements to ensure the effective provision to the ring-fenced body of services and facilities that it requires in relation to the carrying on of a core activity, and

(b) making provision for the group ring-fencing purposes applying to ring-fenced bodies and to authorised persons who are members of a ring-fenced body's group.

(2) Section 142E(1)(c) does not affect the power of the appropriate regulator to make general rules imposing restrictions on the extent of the shares or voting power that a ring-fenced body may hold in another company, except where a restriction on the extent of the shares or voting power that the ring-fenced body may hold in the company is imposed by order under section 142E(1)(c).

(3) General rules that are required by this section or make provision falling within subsection (2) are in this Act referred to as “ring-fencing rules”.

(4) The “group ring-fencing purposes” are—

(a) ensuring as far as reasonably practicable that the carrying on of core activities by a ring-fenced body is not adversely affected by the acts or omissions of other members of its group;

(b) ensuring as far as reasonably practicable that in carrying on its business a ring-fenced body—

(i) is able to take decisions independently of other members of its group, and

(ii) does not depend on resources which are provided by a member of its group and which would cease to be available to the ring-fenced body in the event of the insolvency of the other member;

(c) ensuring as far as reasonably practicable that the ring-fenced body would be able to continue to carry on core activities in the event of the insolvency of one or more other members of its group.

(5) Ring-fencing rules made for the group ring-fencing purposes must include—

(a) provision restricting the power of a ring-fenced body to enter into contracts with other members of its group otherwise than on arm's length terms;

(b) provision restricting the payments that a ring-fenced body may make (by way of dividend or otherwise) to other members of its group;

(c) provision requiring the disclosure to the appropriate regulator of information relating to transactions between a ring-fenced body and other members of its group;

(d) provision requiring a ring-fenced body to ensure that its board of directors (or if there is no such board, the equivalent management body) includes to a specified extent—

(i) members who are treated by the rules as being independent of other members of the ring-fenced body's group,

(ii) members who are treated by the rules as being independent of the ring-fenced body itself, and

(iii) non-executive members;

(e) provision requiring a ring-fenced body to act in accordance with a remuneration policy meeting specified requirements;

(f) provision requiring a ring-fenced body to act in accordance with a human resources policy meeting specified requirements;

(g) provision requiring arrangements made by the ring-fenced body for the identification, monitoring and management of risk to meet specified requirements;

(h) such other provision as the appropriate regulator considers necessary or expedient for any of the purposes in subsection (4).

(6) The reference in subsection (5)(e) to a remuneration policy is a reference to a policy about the remuneration of officers, employees and other persons who (in each case) are of a specified description.

(7) The reference in subsection (5)(f) to a human resources policy is a reference to a policy about the appointment and management of officers, employees and other persons who (in each case) are of a specified description.

(8) In this section—

• “the appropriate regulator” means—

  (a)

  in relation to a PRA-authorised person, the PRA;

  (b)

  in relation to any other authorised person, the FCA;

• “shares” has the meaning given in section 422;

• “specified” means specified in the rules;

• “voting power” has the meaning given in section 422.

142I Powers of Treasury in relation to ring-fencing rules U.K.

(1) The Treasury may by order require the appropriate regulator, as defined in section 142H(8), to include (or not to include) in ring-fencing rules specified provision relating to—

(a) any of the matters mentioned in section 142H(5)(a) to (g), or

(b) any other specified matter.

(2) The power to make an order under this section is exercisable only if the Treasury consider it necessary or expedient to do so—

(a) for any of the group ring-fencing purposes as defined in section 142H(4), or

(b) otherwise for securing the independence of ring-fenced bodies from other members of their groups.

(3) “Specified” means specified in the order.

142J Review of ring-fencing rules etc U.K.

(1) The PRA must carry out reviews of its ring-fencing rules and of any rules made by it under section 192JA (rules applying to parent undertakings of ring-fenced bodies).

(2) The first review must be completed before the end of the period of 5 years beginning with the day on which the first ring-fencing rules come into force.

(3) Subsequent reviews must be completed before the end of the period of 5 years beginning with the day on which the previous review was completed.

(4) The PRA must give the Treasury a report of each review.

(5) The Treasury must lay a copy of the report before Parliament.

(6) The PRA must publish the report in such manner as it thinks fit.

(7) If (because any ring-fenced body is not a PRA-authorised person) section 142H has the effect of requiring the FCA to make ring-fencing rules, subsections (1) to (6) apply to the FCA as they apply to the PRA.]