The Bank Recovery and Resolution (No. 2) Order 2014

CHAPTER 3 U.K. Assessment of business reorganisation plan drawn up for relevant group where the PRA or FCA is the consolidating supervisor

Application and interpretation of Chapter 3 U.K.

165.—(1) This Chapter applies where, in relation to a relevant group—

(a) the PRA or FCA is the consolidating supervisor;

(b) a relevant bail-in power has been exercised in respect of two or more group entities; and

(c) a group entity submits a business reorganisation plan to the Bank for assessment in accordance with Article 52 of the recovery and resolution directive.

(2) In this Chapter—

“business reorganisation plan” means a plan which sets out measures to restore the long-term viability of the group entities, or parts of the business of the group entities, in respect of which a relevant bail-in power has been exercised and of the whole or part of the relevant group;

“four month period” means four months beginning with the date on which the Bank transmits a copy of the business reorganisation plan under article 166;

“group institution” means—

(a)

the EEA parent undertaking, if it is an institution;

(b)

a group subsidiary which is an institution;

“impediment”, in relation to the business reorganisation plan, means any material deficiency or measure in the plan which would impede its implementation or the object of restoring the long-term viability of any group entity (or of part of its business) or of the whole or part of the relevant group;

“relevant bail-in power”—

(c)

in relation to a UK group entity, means the power in section 12A(2) of the Banking Act 2009;

(d)

in relation to a group entity set up in another EEA State, means power to apply the bail-in tool in respect of that entity for the purpose described in sub-paragraph (a) of Article 43.2 of the recovery and resolution directive (the bail-in tool: recapitalisation);

“the regulator”—

(a)

where there is a PRA-authorised person and any other UK authorised person in the relevant group, means the PRA and the FCA;

(b)

where there is a PRA-authorised person and no other UK authorised person in the relevant group, means the PRA;

(c)

where there is no PRA-authorised person in the relevant group, means the FCA;

“relevant matters”, in relation to the assessment of the business reorganisation plan, means the following matters for decision—

(a)

whether the plan meets the criteria for assessment;

(b)

whether group entities should be required to draw up and submit business reorganisation plans on an individual basis;

(c)

whether the plan contains an impediment;

(d)

whether a group entity should be required to revise the plan;

(e)

whether an impediment has been adequately addressed in a revision of the plan; and

(f)

where an impediment has not been adequately addressed in a revision of the plan, how it can be adequately addressed by directing a group entity to make specific changes to the plan; and

“UK group entity”—

(a)

where the EEA parent undertaking is set up in the United Kingdom, means that undertaking; and

(b)

where the EEA parent undertaking is set up in another EEA State, means a group subsidiary which is a UK authorised person or a qualifying parent undertaking within the meaning given by section 192B of FSMA M1 .

Marginal Citations

M1 Section 192B was inserted by the Financial Services Act 2012, section 27. For Condition C (a parent undertaking must be a financial institution of a prescribed kind (section 192B(4)) see S.I. 2013/165.

Duty to transmit a copy of business reorganisation plan U.K.

166.—(1) The Bank must send a copy of the business reorganisation plan or, where paragraph (2) has effect in relation to any information, of the plan without that information, to—

(a) EBA;

(b) the resolution authority for any group entity set up in another EEA State; and

(c) the resolution authority established in any EEA State in which a group institution has a significant branch M2 .

(2) This article does not require any information contained in the business reorganisation plan to be disclosed if its disclosure would be contrary to section 348 of FSMA M3 (restrictions on disclosure of confidential information by FCA, PRA etc).

Marginal Citations

M2 For the meaning of “significant branch” see the recovery and resolution directive, Article 2.1, point (34).

M3 Section 348 was amended by the Financial Services Act 2010, section 24(1) and (2) and Schedule 2, paragraphs 1 and 26, by the Financial Services Act 2012, section 41 and Schedule 12, paragraph 18, and by the Financial Services (Banking Reform) Act 2013, section 129 and Schedule 8, paragraph 5.

Assessment of business reorganisation plan U.K.

167.—(1) Where every group entity is set up in the United Kingdom, the Bank must assess the business reorganisation plan jointly with the regulator.

(2) Where any group entity is set up in another EEA State, the Bank must assess the business reorganisation plan jointly with the resolution authority for that entity.

(3) Where a group institution has a significant branch in another EEA State, the assessment must be made, so far as information contained in the plan is relevant to the branch, in consultation with the resolution authority established in that State.

Purpose of assessment U.K.

168.—(1) The purpose of the assessment of the business reorganisation plan is to determine whether the plan meets the criteria for assessment and decide other relevant matters.

(2) The Bank must approve the plan when the Bank and the regulator or the Bank and other resolution authorities with which the Bank has made a joint assessment of the plan are satisfied that the plan meets the criteria for assessment.

(3) The criteria for assessment are that—

(a) the plan must satisfy the requirements set out in paragraphs 4 and 5 of Article 52 of the recovery and resolution directive;

(b) the plan must be compatible with the restructuring plan that must be submitted to the European Commission with respect to the relevant group under the Union State aid framework; and

(c) the arrangements proposed in the plan would, if implemented, be reasonably likely to restore the long-term viability of the group entities, or parts of the business of the group entities, in respect of which a relevant bail-in power has been exercised and of the whole or part of the relevant group.

Assessment of plan where every group entity is set up in the United Kingdom U.K.

169.  Where the Bank assesses the business reorganisation plan jointly with the regulator, the assessment must be concluded within the four month period.

Joint assessment of plan U.K.

170.—(1) This article applies where the Bank assesses the business reorganisation plan jointly with one or more other resolution authorities.

(2) The Bank must endeavour to conclude the assessment within the four month period, and must for this purpose endeavour to reach a joint decision on relevant matters.

(3) Where the Bank and another resolution authority (“authority A”) are unable to reach a joint decision on a relevant matter, the Bank—

(a) where the matter concerned is whether to require group entities to draw up and submit business reorganisation plans on an individual basis, must decide that matter for the group entities for which it is the resolution authority;

(b) must decide any other matter, which it may do either alone or jointly with any other resolution authority with which it is able to reach a joint decision; and

(c) must ensure that a decision under this paragraph takes account of the views and reservations of authority A.

(4) When the Bank concludes the assessment of the business reorganisation plan, whether alone or jointly with another resolution authority, it must exercise its powers under the Banking Act 2009, so far as necessary, for the purpose of implementing each decision on relevant matters, including a decision to direct a UK group entity to—

(a) submit a revision of the plan; or

(b) make specific changes to the plan.

(5) The Bank must give written notice of each decision under this article to the group entity which submitted the business reorganisation plan for assessment and the other resolution authorities.

Revision of plan U.K.

171.  The Bank—

(a) must notify a UK group entity if the business reorganisation plan is found on assessment to contain an impediment; and

(b) may not require a UK group entity to revise the plan without giving it an opportunity to state its opinion on that requirement.

(2) If the Bank requires a UK group entity to revise the plan, the Bank—

(a) must allow two weeks for the preparation of a plan which demonstrates that the impediment has been addressed;

(b) within one week beginning with the date on which a revised plan is submitted, must notify the entity whether the impediment has been adequately addressed in the revised plan; and

(c) if the impediment has not been adequately addressed in the revised plan, must direct the entity to make specific changes to the plan.

Assessment of business reorganisation plans drawn up on an individual basis U.K.

172.  Where the Bank requires a group entity to draw up and submit a business reorganisation plan on an individual basis, Chapter 1 applies for the purpose of the assessment of the plan, but has effect for that purpose as if each reference to an institution were a reference to the group entity.

References to EBA U.K.

173.—(1) Where, before the end of the four month period, another resolution authority has referred to EBA in accordance with Article 19 of the EBA Regulation any matter relating to the assessment of the business reorganisation plan, the Bank must—

(a) defer a decision on the matter referred for one month beginning with the date on which the four month period ends; and

(b) ensure that the decision conforms with any decision taken by EBA before the end of that month under Article 19.3 of the EBA Regulation.

(2) For the purposes of a reference to EBA of a matter to which this article refers the four month period is deemed to be the conciliation phase referred to in Article 19.2 of the EBA Regulation.

Requesting the assistance of EBA U.K.

174.  The Bank may ask EBA to assist the resolution authorities in accordance with Article 31(c) of the EBA Regulation to reach a joint decision on—

(a) the assessment of the business reorganisation plan;

(b) whether to require group entities to draw up and submit business reorganisation plans on an individual basis; or

(c) whether to direct a UK group entity to submit a revision of the business reorganisation plan or make specific changes to the plan.