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Part 1U.K.Special Resolution Regime

Modifications etc. (not altering text)

[F1Chapter 3 U.K. Special resolution action]

Textual Amendments

F1Pt. 1 Ch. 3 formed from ss. 4-83 (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 7

[F2Mandatory write-down, conversion etc of capital instrumentsU.K.

Textual Amendments

F2Ss. 6A-6D and cross-heading inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 10

6C.Mandatory reduction instruments: implementation of requirements of section 6BU.K.

(1)Where the principal amount of a relevant capital instrument [F3or a relevant internal liability] is reduced under section 6B—

(a)the reduction must be permanent, subject to any provision made by virtue of section 48Y(1)(a);

(b)no liability to the holder of the relevant capital instrument [F4or the relevant internal liability] remains under, or in connection with, so much of the amount of the instrument [F5or relevant internal liability] as constitutes the reduction, except for—

(i)any liability already accrued in a case where the principal amount of the instrument [F5or the relevant internal liability] is not reduced or converted (or both) to the full extent of its capacity, and

(ii)any liability for damages that may arise as a result of any challenge to the legality of the exercise of the power of reduction;

(c)no compensation is to be paid to any holder of the relevant capital instrument [F6or the relevant internal liability] other than in accordance with subsection (4).

(2)Nothing in subsection (1)(b) prevents the provision of Common Equity Tier 1 instruments to a holder of relevant capital instruments [F7or relevant internal liabilities] in accordance with subsection (4).

(3)In order to effect a conversion of relevant capital instruments [F8or relevant internal liabilities] under section 6B, the Bank of England may require the bank, or a UK parent undertaking, to issue Common Equity Tier 1 instruments to the holders of the relevant capital instruments [F8or relevant internal liabilities].

(4)The relevant capital instruments [F9or relevant internal liabilities] may only be so converted if—

(a)the Common Equity Tier 1 instruments are issued by the bank, or by a [F10UK parent] undertaking of the bank with the agreement of the [F11Bank of England],

(b)the Common Equity Tier 1 instruments are issued prior to the issue of any shares by the bank, or by a parent undertaking of the bank, for the purposes of provision of own funds by the [F12Treasury],

(c)the Common Equity Tier 1 instruments are awarded and transferred without delay following the exercise of the conversion power, and

(d)the conversion rate that determines the number of Common Equity Tier 1 instruments that are provided in respect of each relevant capital instrument [F13or relevant internal liability] [F14represents appropriate compensation to the affected creditor for any loss incurred in consequence of the conversion of that instrument or liability.]

[F15(4A)Where different conversion rates are applied to different classes of instrument or liability, a lower conversion rate must be applied to subordinated debt than is applied to debts ranking higher in the hierarchy of claims in normal insolvency proceedings.]

(5)For the purposes of the provision of Common Equity Tier 1 instruments in accordance with subsections (2), (3) and (4), the Bank of England may require the bank or a UK parent undertaking of the bank to maintain at all times the necessary prior authorisation to issue the relevant number of Common Equity Tier 1 instruments.

(6)Before making a mandatory reduction instrument, the Bank must consult—

(a)the PRA,

(b)the FCA, and

(c)the Treasury.

(7)In this section—

Textual Amendments