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

PART 13 Preparation of business reorganisation plans after application of bail-in tool

CHAPTER 1 Assessment of business reorganisation plan drawn up by an institution

Application and interpretation of Chapter 1

159.—(1) This Chapter applies where—

(a) an institution is authorised by the PRA or FCA and is not part of a group subject to supervision on a consolidated basis in accordance with Article 111 of the capital requirements directive;

(b) the Bank has made a resolution instrument under section 12A of the Banking Act 2009(1) (bail-in option) in respect of the institution; and

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

(2) In this Chapter—

“business reorganisation plan” means a plan which sets out measures to restore the long-term viability of the institution or of part of its business;

“management body” means the institution’s management body (within the meaning given by point (7) of Article 3.1 of the capital requirements directive); and

“resolution administrator” means the individual or body corporate appointed by the Bank under section 62B of the Banking Act 2009(2) as the resolution administrator of the institution.

Assessment of business reorganisation plan

160.  The Bank must assess the business reorganisation plan jointly with the appropriate regulator within one month beginning with the date on which it receives the plan.

Purpose of assessment

161.—(1) The purpose of the assessment of the business reorganisation plan is to determine whether the plan meets the criteria for assessment.

(2) The Bank must approve the plan when the Bank and the appropriate regulator 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 the institution is required to submit to the European Commission under the Union State aid framework(3); and

(c) the arrangements proposed in the plan would, if implemented, be reasonably likely to restore the long-term viability of the institution or of part of its business.

Revision of plan

162.—(1) The Bank—

(a) must notify the management body or resolution administrator if the business reorganisation plan is found on assessment to contain any material deficiency or measure which would impede its implementation or the object of restoring the long-term viability of the institution or of part of its business; and

(b) may not require the management body or resolution administrator to revise the plan without giving it an opportunity to state its opinion on that requirement.

(2) If the Bank requires the management body or resolution administrator 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 management body or resolution administrator 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 management body or resolution administrator to make specific changes to the plan.

CHAPTER 2 Assessment of business reorganisation plan drawn up by a single group entity

Application and interpretation of Chapter 2

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

(a) the Bank has made a resolution instrument under section 12A of the Banking Act 2009 in respect of a single group entity which is not an institution (“the relevant entity”); and

(b) the management body (within the meaning given by point (7) of Article 3.1 of the capital requirements directive) or resolution administrator 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” and “resolution administrator” have the same meaning for the relevant entity as they have for an institution in Chapter 1.

Assessment etc of business reorganisation plan

164.  Chapter 1 applies for the purpose of the assessment and approval of the business reorganisation plan, but has effect for that purpose with the modifications specified in the table—

Article	Modification
Article 159	Ignore this article.
Articles 160,161 and 162	Each reference to an institution is a reference to the relevant entity. Where the relevant entity is not a UK authorised person, each reference to the appropriate regulator— (a) if the consolidating supervisor is the PRA or FCA, is a reference to the consolidating supervisor; (b) if neither the PRA nor the FCA is the consolidating supervisor and there is a PRA-authorised person in the relevant group, is a reference to the PRA; and (c) if neither the PRA nor the FCA is the consolidating supervisor and there is a UK authorised person in the relevant group (but not a PRA-authorised person), is a reference to the FCA. Where neither the PRA nor the FCA is the consolidating supervisor and there is no UK authorised person in the relevant group, the Bank is solely responsible for assessing and approving the business reorganisation plan.

CHAPTER 3 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

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(4).

Duty to transmit a copy of business reorganisation plan

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(5).

(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(6) (restrictions on disclosure of confidential information by FCA, PRA etc).

Assessment of business reorganisation plan

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

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

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

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

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

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

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

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.

CHAPTER 4 Assessment of business reorganisation plan drawn up for relevant group where neither the PRA nor the FCA is the consolidating supervisor

Application and interpretation of Chapter 4

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

(a) neither the PRA nor the FCA is the consolidating supervisor;

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

(c) the Bank receives a copy of a business reorganisation plan submitted to the group-level resolution authority(7) for assessment in accordance with Article 52 of the recovery and resolution directive.

(2) In this Chapter—

“business reorganisation plan”, “relevant bail-in power”, “relevant matters” and “UK group entity” have the same meaning for the relevant group as they have for a relevant group in Chapter 3; and

“four month period” means four months beginning with the date on which the Bank receives a copy of the business reorganisation plan.

Purpose of assessment

176.—(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 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.

Joint assessment of plan

177.—(1) The Bank must assess the business reorganisation plan jointly with other resolution authorities for group entities.

(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 concludes a joint assessment of the business reorganisation plan, 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.

(4) Where the Bank and the group-level resolution authority—

(a) are able to conclude a joint assessment of the business reorganisation plan, but

(b) are unable to reach a joint decision on whether to require group entities to draw up and submit business reorganisation plans on an individual basis,

the Bank must decide the matter referred to in sub-paragraph (b) for group entities for which it is the resolution authority.

(5) Where the Bank and the group-level resolution authority are unable to conclude a joint assessment of the business reorganisation plan, the Bank must either—

(a) require group entities for which it is the resolution authority to draw up and submit business reorganisation plans on an individual basis; or

(b) require those entities to draw up and submit a single business reorganisation plan for all of them.

(6) Where the Bank requires a single business reorganisation plan to be drawn up and submitted under paragraph (5)(b), the Bank must assess the plan submitted as if it were a business reorganisation plan which the Bank was required to assess jointly with the regulator under Chapter 3.

Assessment of business reorganisation plans drawn up on an individual basis

178.  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

179.—(1) The Bank may, within the four month period, refer to EBA in accordance with Article 19 of the EBA Regulation any matter relating to the assessment of the business reorganisation plan.

(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

180.  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.

(1)

Section 12A was inserted by the Financial Services (Banking Reform) Act 2013, Schedule 2, paragraphs 1 and 2; and was amended by S.I. 2014/3329.

(2)

Section 62B was inserted by S.I. 2014/3329.

(3)

For the meaning of “Union State aid framework” see the recovery and resolution directive, Article 2.1, point (53).

(4)

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.

(5)

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

(6)

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.

(7)

For the meaning of “group-level resolution authority” see the recovery and resolution directive, Article 2.1, point (44).