22(1)Before the Bank exercises a stabilisation power in respect of a CCP, it must ensure that the assets and liabilities of the CCP are valued.
(2)The purpose of a valuation carried out under sub-paragraph (1) is to—
(a)inform the decision as to—
(i)whether the conditions for the exercise of a stabilisation power are satisfied,
(ii)which stabilisation option should be employed,
(iii)the extent to which any liabilities should be cancelled, modified, converted or deferred through the use of a write-down instrument,
(iv)the extent to which any securities should be cancelled, diluted, modified, converted or deferred through the use of a write-down instrument,
(v)what assets, liabilities or securities (if any) are to be transferred by a property transfer instrument, share transfer instrument or write-down instrument, and
(vi)the value of any consideration to be paid to the CCP or the owners of the securities for any assets, liabilities or securities so transferred, and
(b)ensure that the full extent of any losses on the assets of that CCP are appreciated at the time that the Bank exercises a stabilisation power.
(3)Unless sub-paragraph (4) applies, the Bank must arrange for the appointment of an independent valuer in accordance with paragraph 24 to carry out a valuation for the purposes of sub-paragraph (1).
(4)Where the Bank considers that the urgency of the case makes it appropriate to exercise the stabilisation power before a valuation can be carried out by a person appointed in accordance with sub-paragraph (3), the Bank may carry out a provisional valuation of the assets and liabilities of the CCP for the purposes of sub-paragraph (1).
(5)In carrying out a valuation required under sub-paragraph (1), the person carrying out the valuation must—
(a)make prudent assumptions as to possible rates of default and the severity of losses suffered by the CCP,
(b)disregard potential financial assistance which may be provided by the Bank or the Treasury after the Bank has exercised the stabilisation power (except for ordinary market assistance offered by the Bank on its usual terms),
(c)take account of the fact that the Bank and the Treasury may charge interest or fees in respect of any loans or guarantees provided to the CCP after the Bank has exercised the stabilisation power,
(d)apply any relevant methodology specified in regulations made under this paragraph.
(6)A provisional valuation carried out under sub-paragraph (4) must in particular make provision in respect of additional losses by the CCP in accordance with any regulations made under this paragraph.
(7)A valuation under sub-paragraph (1) must be accompanied by—
(a)a balance sheet of the CCP as at the date of the valuation,
(b)a report on the financial position of the CCP,
(c)an analysis and an estimate of the accounting value of the assets of the CCP,
(d)a list of the outstanding liabilities of the CCP (including any off-balance sheet liabilities), with the creditors subdivided into classes according to the priority their claims would receive in insolvency proceedings, and
(e)an estimate of the amount that each class of creditors and shareholders might be expected to receive if the CCP went into insolvent liquidation.
(8)Where appropriate, the information in sub-paragraph (7)(c) may be supplemented by an analysis and estimate of the value of the assets and liabilities of the CCP on a market value basis.
(9)Where a provisional valuation is carried out under sub-paragraph (4), the Bank need only comply with sub-paragraph (7) as far as it is reasonable to do so in the circumstances.
(10)The Treasury may by regulations make provision for the purposes of a valuation under this paragraph specifying—
(a)the methodology for assessing the value of the assets and liabilities of a CCP;
(b)the methodology for calculating and including a buffer for additional losses in the provisional valuation.
(11)Before making regulations under sub-paragraph (10) the Treasury must consult the Bank.
(12)Regulations under this paragraph are subject to the negative procedure.
Commencement Information
I1Sch. 11 para. 22 not in force at Royal Assent, see s. 86(3)
I2Sch. 11 para. 22(1)-(9) in force at 31.12.2023 by S.I. 2023/1382, reg. 8(b)
I3Sch. 11 para. 22(10)-(12) in force at 29.8.2023 by S.I. 2023/779, reg. 4(ddd)(v)