25(1)This paragraph applies if—U.K.
(a) the relevant foreign bank has liabilities to another entity F1 . . . (subject to sub-paragraph (2)) F2 . . . (“the bank's liabilities”),
[F3(b)the bank recognises, as assets, amounts due from that other entity (“N”) to the bank (“N's liabilities”),]
(c)there is in place an agreement between the bank and N which makes provision for there to be a single net settlement of all the bank's liabilities (so far as covered by the provision) and all N's liabilities (so far as covered by the provision) if the netting event occurs, and
(d)the provision mentioned in paragraph (c) is legally effective and enforceable.
(2) If the UK allocated equity and liabilities of the bank are being determined for the purposes of paragraph 17(17) or 19(17), this paragraph does not apply if N is—
(a)an entity within paragraph 18(9) or 20(9) (as the case may be), or
(b)another relevant foreign bank covered by paragraph 17(17) or 19(17) (as the case may be).
(3)For the purposes of sub-paragraph (1)—
(a) “ agreement ” includes an agreement which forms part of a multi-lateral agreement, arrangement or trading facility,
[F4(b)references to amounts due from N include securities provided by the relevant foreign bank to N as collateral, but only where the bank recognises those securities in its balance sheet or statement of financial position, and]
(c)F5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(d)“the netting event occurs” if the insolvency or bankruptcy of the relevant foreign bank or N gives rise to the termination of any arrangements under which any liability covered by the provision mentioned in sub-paragraph (1)(c) arises.
[F6Section 556 of CTA 2009 (meaning of securities and similar securities) applies for the purposes of this sub-paragraph as it applies for the purposes of Chapter 10 of Part 6 of that Act.]
(4)F7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5)In determining the amount of the bank's assets at Step 1 in paragraph 24(1), the amount of the bank's net settlement assets is to be reduced (but not below nil) by the amount of the bank's net settlement liabilities.
(6)In determining the amount of the permanent establishment's assets at Step 2 in paragraph 24(1)—
(a)the reduction in the bank's assets under sub-paragraph (5) is to be ignored, but
(b)the amount of the permanent establishment's net settlement assets is to be reduced by Z%.
(7)For this purpose, “Z%” is the proportion by which the bank's net settlement assets are reduced under sub-paragraph (5).
(8)In determining the amount of the bank's chargeable equity and liabilities at Step 3 in paragraph 24(1), the amount of the bank's net settlement liabilities is to be reduced (but not below nil) by the amount of the bank's net settlement assets (ignoring the reduction under sub-paragraph (5)).
(9)The bank's “net settlement liabilities” are the bank's liabilities so far as they—
(a)are covered by the provision mentioned in sub-paragraph (1)(c), and
(b)are not excluded liabilities.
(10)The bank's “net settlement assets” are its assets so far as corresponding to N's net settlement liabilities.
(11) “ N's net settlement liabilities ” means N's liabilities so far as they are covered by the provision mentioned in sub-paragraph (1)(c).
(12)The permanent establishment's “net settlement assets” are its assets so far as they are part of the bank's net settlement assets.
(13)If the bank's net settlement liabilities exceed the bank's net settlement assets (ignoring the reduction under sub-paragraph (5)), and a proportion (A%) of those liabilities is long term liabilities and a proportion (B%) of those liabilities is short term liabilities, under sub-paragraph (8)—
(a)the long term liabilities are reduced by A% of the bank's net settlement assets, and
(b)the short term liabilities are reduced by B% of those assets.
Textual Amendments
F1 Word in Sch. 19 para. 25(1)(a) omitted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by virtue of The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 7(2)(a)(i)
F2 Words in Sch. 19 para. 25(1)(a) omitted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by virtue of The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 7(2)(a)(ii)
F3 Sch. 19 para. 25(1)(b) substituted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 7(2)(b)
F4 Sch. 19 para. 25(3)(b) substituted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 7(3)(a)
F5 Sch. 19 para. 25(3)(c) and following word omitted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by virtue of The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 7(3)(b)
F6 Words after Sch. 19 para. 25(3)(d) inserted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 7(3)(c)
F7 Sch. 19 para. 25(4) omitted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by virtue of The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 7(4)