15(1) This paragraph applies if the relevant group is a UK banking group or a building society group. U.K.
(2)To determine the amount of the relevant group's chargeable equity and liabilities—
(a)determine the amount of the group's equity and liabilities (other than excluded equity and liabilities) as at the end of the chargeable period,
(b)adjust that amount in accordance with paragraphs 16 and 44 (so far as applicable), and
(c)finally, reduce that amount (but not below nil) by—
(i)the amount of the 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 16(4) applies, and
(ii)where sub-paragraph (4) applies, the amount determined under that sub-paragraph.
(3)Sub-paragraph (4) applies where—
(a)as at the end of the chargeable period, the assets of the group include a financial asset in respect of an advance of cash made by a member of the group,
(b)that financial asset is not an asset which, for the purposes of an adjustment under sub-paragraph (2)(b), is an asset to which paragraph 16(4) applies, and
(c)underlying that asset, as collateral, is an item (“the collateral”) owned by that member which would form part of the 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 group.
(4)The amount within sub-paragraph (2)(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.
(5)For the purposes of this paragraph and paragraph 16 the relevant group's assets, equity and liabilities are to be determined by reference to—
(a)the amounts recognised in the group's consolidated 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 consolidated financial statements for the group been prepared for the chargeable period under international accounting standards.
(6)In reducing the amount of any equity or liabilities under sub-paragraph (2)(c), long term equity and liabilities are to be reduced before short term liabilities.
16(1)This paragraph applies for the purposes of paragraph 15(2) if—U.K.
(a) a member (“M”) of the relevant group has liabilities to an entity (“N”) which is not a member of the group F1 . . . (“M's liabilities”),
[F2(b)M, or another member of the relevant group, recognises, as assets, amounts due from N or another entity which is not a member of the group (“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 members of the group to N or another entity which is not a member of the group, (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)For the purposes of sub-paragraph (1)—
(a) “ agreement ” includes an agreement which forms part of a multi-lateral agreement, arrangement or trading facility,
[F3(b)references to amounts due from N or another entity which is not a member of the relevant group include securities provided by M, or another member of the relevant group, to N or another entity which is not a member of the relevant group as collateral, but only where M or another member of the relevant group recognises those securities in its balance sheet or statement of financial position, and]
(c)F4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(d)“the netting event occurs” if the insolvency or bankruptcy of—
(i) M, or another member of the relevant group which has F5 . . . a liability covered by the provision mentioned in sub-paragraph (1)(c), or
(ii)N, or another entity which is not a member of the group and which has such a liability,
gives rise to the termination of any arrangements under which such a liability 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.]
(3)F7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4)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.
(5) “ M's net settlement liabilities ” means M's liabilities so far as they—
(a)are covered by the provision mentioned in sub-paragraph (1)(c), and
(b)are not excluded liabilities.
(6) “ M's net settlement assets ” means the assets of M, or of another member of the relevant group, so far as corresponding to N's net settlement liabilities.
(7)But if this paragraph applies in relation to more than one member of the relevant group, no part of an asset may be included in the net settlement assets of more than one such member.
(8) “ N's net settlement liabilities ” means N's liabilities so far as they are covered by the provision mentioned in sub-paragraph (1)(c).
(9)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 (4)—
(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. 16(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) , 3(2)(a)
F2 Sch. 19 para. 16(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) , 3(2)(b)
F3 Sch. 19 para. 16(2)(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) , 3(3)(a)
F4 Sch. 19 para. 16(2)(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) , 3(3)(b)
F5 Words in Sch. 19 para. 16(2)(d)(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) , 3(3)(c)
F6 Words after Sch. 19 para. 16(2)(d) inserted (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) , 3(3)(d)
F7 Sch. 19 para. 16(3) 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) , 3(4)