Valid from 31/12/2023
34(1)The seventh stabilisation option is for the Bank to make one or more write-down instruments.
(2)A write-down instrument is an instrument that makes any of the following provision (or any combination of the following)—
(a)provision cancelling an unsecured liability owed by the CCP;
(b)provision modifying or changing the form of an unsecured liability owed by the CCP;
(c)provision that a contract under which the CCP has an unsecured liability is to have effect as if a specified right had been exercised under it;
(d)provision under paragraph 35(1).
(3)The power under this paragraph may be exercised only for the purpose of recovering losses arising otherwise than as a result of a clearing member defaulting on the member’s obligations to the CCP.
(4)The power under sub-paragraph (2) may not be exercised so as to affect the following liabilities—
(a)liabilities to employees or workers, including liabilities owed to a pension scheme in respect of those persons;
(b)liabilities to commercial or trade creditors arising from the provision to the CCP of goods or services that are critical to the continuity of the CCP’s critical clearing services;
(c)HMRC debts which are preferential debts within the meaning of section 386 of the Insolvency Act 1986;
(d)liabilities to designated systems, operators of designated systems, or participants in such systems to the extent that the liabilities arise from their participation in the system;
(e)liabilities to interoperable CCPs;
(f)liabilities to central banks;
(g)liabilities to clearing members so far as these relate to initial margin requirements;
(h)liabilities to small enterprises.
(5)The reference to modifying a liability owed by the CCP includes a reference to modifying the terms (or the effect of the terms) of a contract under which the CCP has a liability.
(6)The reference to changing the form of a liability owed by the CCP includes, for example—
(a)converting an instrument under which a CCP owes a liability from one form or class to another,
(b)replacing such an instrument with another instrument of a different form or class,
(c)creating a new security (of any form or class) in connection with the modification of such an instrument, or
(d)converting those liabilities into securities issued by the CCP or a bridge central counterparty or UK parent of the CCP.
(7)The Treasury may by regulations amend sub-paragraph (4) by—
(a)adding to the list of liabilities;
(b)amending or omitting any liability listed.
(8)Regulations under this paragraph are subject to the affirmative procedure.
(9)In this paragraph—
“designated system” has the meaning given by regulation 2 of the Financial Markets and Insolvency (Settlement Finality) Regulations 1999 (S.I. 1999/2979) as amended from time to time;
“initial margin requirements” means margins provided by clearing members to a CCP to cover the CCP’s potential future exposure in the event of default by those members;
“small enterprise” means an enterprise which employs fewer than 50 people and whose annual turnover or annual balance sheet total does not exceed £10 million.
Commencement Information
I1Sch. 11 para. 34 not in force at Royal Assent, see s. 86(3)