19(1)This paragraph applies if the relevant group is a relevant non-banking group.U.K.
(2)The amount of the chargeable equity and liabilities of the relevant group is the sum of all type A, type B, type C and type D equity and liabilities.
(3) Type A equity and liabilities are the chargeable equity and liabilities of any relevant UK banking sub-group.
(4) “ UK banking sub-group ” means a group of entities—
(a)which is a group for the purposes of those provisions of international accounting standards or UK GAAP which relate to the preparation of consolidated financial statements,
(b) which has as its parent or parent undertaking for the purposes of those provisions an entity which is a UK resident bank, and
(c)the members of which are all members of the relevant group.
(5) A UK banking sub-group is “relevant” if—
(a)consolidated financial statements for the chargeable period are prepared for it under international accounting standards or UK GAAP, and
(b) its members are not members of any larger UK banking sub-group for which such financial statements are prepared.
(6) To determine the amount of the chargeable equity and liabilities of a relevant UK banking sub-group—
(a)determine the amount of the sub-group's equity and liabilities (other than excluded equity and liabilities) as at the end of the chargeable period,
(b)adjust the amount in accordance with paragraphs 20 and 44 (so far as applicable), and
(c)finally, reduce the amount (but not below nil) by—
(i)the amount of the sub-group's high quality liquid assets as at the end of that period, other than any asset which for the purposes of an adjustment under paragraph (b) is an asset to which paragraph 20(12) applies, and
(ii)where sub-paragraph (8) applies, the amount determined under that sub-paragraph.
(7)Sub-paragraph (8) applies where—
(a) as at the end of the chargeable period, the assets of the relevant UK banking sub-group include a financial asset in respect of an advance of cash made by a member of the sub-group,
(b)that financial asset is not an asset which, for the purposes of an adjustment under sub-paragraph (6)(b), is an asset to which paragraph 20(12) applies, and
(c)underlying that asset, as collateral, is an item (“the collateral”) owned by that member which would form part of the sub-group's high quality liquid assets as at the end of that period were the collateral, rather than the financial asset, an asset of the sub-group.
(8)The amount within sub-paragraph (6)(c)(ii) is—
(a)the amount of the financial asset as at the end of that period or, if lower, an amount equal to the fair value of the collateral as at that time, or
(b)if this sub-paragraph applies in relation to more than one financial asset, the total of the amounts determined under paragraph (a) in respect of each of those assets.
(9) For the purposes of this paragraph and paragraph 20 the assets, equity and liabilities of a relevant UK banking sub-group are to be determined by reference to the amounts recognised in its consolidated financial statements for the chargeable period.
(10) Type B equity and liabilities are the chargeable equity and liabilities of any UK resident bank which—
(a)is a member of the relevant group, but
(b) is not a member of a relevant UK banking sub-group.
(11) Type C equity and liabilities are the chargeable equity and liabilities of any entity (apart from a UK resident bank) which—
(a)is a member of the relevant group, and
(b) is a member of a UK banking sub-group but is not a member of a relevant UK banking sub-group.
(12)To determine the amount of the chargeable equity and liabilities of an entity covered by sub-paragraph (10) or (11)—
(a)determine the amount of the entity's equity and liabilities (other than excluded equity and liabilities) as at the end of the chargeable period,
(b)adjust the amount in accordance with paragraphs 20 and 44 (so far as applicable), and
(c)finally, reduce the amount (but not below nil) by—
(i)the amount of the entity's high quality liquid assets as at the end of that period, other than any asset which for the purposes of an adjustment under paragraph (b) is an asset to which paragraph 20(12) applies, and
(ii)where sub-paragraph (14) applies, the amount determined under that sub-paragraph.
(13)Sub-paragraph (14) applies where—
(a)as at the end of the chargeable period, the assets of the entity include a financial asset in respect of an advance of cash made by the entity,
(b)that financial asset is not an asset which, for the purposes of an adjustment under sub-paragraph (12)(b), is an asset to which paragraph 20(12) applies, and
(c)underlying that asset, as collateral, is an item (“the collateral”) owned by that entity which would form part of the entity's high quality liquid assets as at the end of that period were the collateral, rather than the financial asset, an asset of the entity.
(14)The amount within sub-paragraph (12)(c)(ii) is—
(a)the amount of the financial asset as at the end of that period or, if lower, an amount equal to the fair value of the collateral as at that time, or
(b)if this sub-paragraph applies in relation to more than one financial asset, the total of the amounts determined under paragraph (a) in respect of each of those assets.
(15)For the purposes of this paragraph and paragraph 20 the assets, equity and liabilities of an entity covered by sub-paragraph (10) or (11) are to be determined by reference to—
(a)the amounts recognised in the entity's financial statements for the chargeable period as prepared under international accounting standards or UK GAAP, or
(b)if no such financial statements are prepared, the amounts which would have been so recognised had such financial statements been prepared—
(i)under international accounting standards, or
(ii)under UK GAAP if that is what the entity prepares its financial statements under.
(16)In reducing the amount of any equity or liabilities under sub-paragraph (6)(c) or (12)(c), long term equity and liabilities are to be reduced before short term liabilities.
(17) Type D equity and liabilities are the UK allocated equity and liabilities (see paragraph 24) as at the end of the chargeable period of any relevant foreign bank which—
(a)is a member of the relevant group, but
(b) is not a member of a UK banking sub-group.
(18)If—
(a) the amount of the equity and liabilities, as at the end of the chargeable period, of a relevant UK banking sub-group or an entity covered by sub-paragraph (10) or (11), or
(b) the amount of the UK allocated equity and liabilities, as at the end of that period, of a relevant foreign bank covered by sub-paragraph (17),
is less than £50,000,000, the equity and liabilities, or UK allocated equity and liabilities, may be ignored for the purposes of this paragraph and paragraph 20.
(19)But the total amount of equity and liabilities which may be ignored under sub-paragraph (18) may not exceed £200,000,000.
20(1)This paragraph applies for the purposes of paragraph 19(6) and (12).U.K.
(2) In this paragraph “ relevant member ” means—
(a) a relevant UK banking sub-group,
(b) a UK resident bank covered by paragraph 19(10), or
(c)an entity covered by paragraph 19(11).
(3) Sub-paragraph (4) applies if the members of a relevant UK banking sub-group are also members of one or more larger UK banking sub-groups.
(4) Any equity of the relevant UK banking sub-group is to be left out so far as it would have been eliminated under normal consolidation procedures had consolidated financial statements for the chargeable period been prepared for the larger or largest UK banking sub-group—
(a)under international accounting standards, or
(b)under UK GAAP if the entity which is the parent or parent undertaking for the larger or largest UK banking sub-group prepares its financial statements under UK GAAP.
(5) Sub-paragraph (6) applies if a relevant member within sub-paragraph (2)(b) or (c) is a member of one or more UK banking sub-groups.
(6) Any equity of the relevant member is to be left out so far as it would have been eliminated under normal consolidation procedures had consolidated financial statements for the chargeable period been prepared for the UK banking sub-group or the largest UK banking sub-group—
(a)under international accounting standards, or
(b)under UK GAAP if the entity which is the parent or parent undertaking for the UK banking sub-group or the largest UK banking sub-group prepares its financial statements under UK GAAP.
(7)The following liabilities of a relevant member are to be left out—
(a)liabilities to other relevant members, and
(b)liabilities to a relevant foreign bank covered by paragraph 19(17) so far as the bank's assets corresponding to the liabilities are assets of the permanent establishment through which the bank carries on a trade in the United Kingdom as determined at Step 2 in paragraph 24(1).
(8)Sub-paragraph (12) applies if—
(a) an entity (“M”) within sub-paragraph (9) has liabilities to another entity (“N”) not within that sub-paragraph F1 . . . (“M's liabilities”),
[F2(b)M, or another entity within sub-paragraph (9), recognises, as assets, amounts due from N or another entity not within that sub-paragraph (“N's liabilities”),]
(c)there is in place an agreement which makes provision for there to be a single net settlement of all M's liabilities, and liabilities of other entities within sub-paragraph (9) to N or another entity which is not within that sub-paragraph, (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.
(9)An entity is within this sub-paragraph if it is—
(a) a member of a relevant UK banking sub-group, or
(b)a relevant member within sub-paragraph (2)(b) or (c).
(10)For the purposes of sub-paragraph (8)—
(a) “ agreement ” includes an agreement which forms part of a multi-lateral agreement, arrangement or trading facility,
(b)if N is a relevant foreign bank covered by paragraph 19(17), liabilities of M to N are to be ignored so far as [F3N recognises assets in respect of those liabilities as] assets of the permanent establishment through which N carries on a trade in the United Kingdom as determined at Step 2 in paragraph 24(1),
[F4(c)references to amounts due from N or another entity not within sub-paragraph (9) include securities provided by M or another entity within that sub-paragraph to N or another entity not within sub-paragraph (9) as collateral, but only where M or that other entity within that sub-paragraph recognises those securities in its balance sheet or statement of financial position, and]
(d)F5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(e)“the netting event occurs” if the insolvency or bankruptcy of—
(i) M, or another entity within sub-paragraph (9) which has F6 . . . a liability covered by the provision mentioned in sub-paragraph (8)(c), or
(ii)N, or another entity not within sub-paragraph (9) which has such a liability,
gives rise to the termination of any arrangements under which such a liability arises.
[F7Section 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.]
(11)F8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(12)The amount of M's net settlement liabilities is to be reduced (but not below nil) by the amount of M's net settlement assets.
(13) “ M's net settlement liabilities ” means M's liabilities so far as they—
(a)are covered by the provision mentioned in sub-paragraph (8)(c), and
(b)are not excluded liabilities.
(14) “ M's net settlement assets ” means the assets of M, or of another entity within sub-paragraph (9), so far as corresponding to N's net settlement liabilities.
(15)But—
(a)if N's net settlement liabilities include liabilities of a relevant foreign bank covered by paragraph 19(17), X% (as determined at Step 2 in paragraph 24(1)) of the assets corresponding to the liabilities of the relevant foreign bank are to be disregarded for the purposes of sub-paragraph (14), and
(b)if sub-paragraph (12) applies in relation to more than one entity within sub-paragraph (9), no part of an asset may be included in the net settlement assets of more than one such entity.
(16) “ N's net settlement liabilities ” means N's liabilities so far as they are covered by the provision mentioned in sub-paragraph (8)(c).
(17)If M's net settlement liabilities exceed M's net settlement assets, 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 (12)—
(a)the long term liabilities are reduced by A% of M's net settlement assets, and
(b)the short term liabilities are reduced by B% of those assets.
Textual Amendments
F1 Words in Sch. 19 para. 20(8)(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) , 5(2)(a)
F2 Sch. 19 para. 20(8)(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) , 5(2)(b)
F3 Words in Sch. 19 para. 20(10)(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) , 5(3)(a)
F4 Sch. 19 para. 20(10)(c) 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) , 5(3)(b)
F5 Sch. 19 para. 20(10)(d) 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) , 5(3)(c)
F6 Words in Sch. 19 para. 20(10)(e)(i) 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) , 5(3)(d)
F7 Words after Sch. 19 para. 20(10)(e) 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) , 5(3)(e)
F8 Sch. 19 para. 20(11) 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) , 5(4)