Banking Act 2009

Changes over time for: Section 81AA

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Banking Act 2009, Section 81AA is up to date with all changes known to be in force on or before 30 April 2024. There are changes that may be brought into force at a future date. Changes that have been made appear in the content and are referenced with annotations.

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Whole provisions yet to be inserted into this Act (including any effects on those provisions):

s. 4(8A) (8B) inserted by 2012 c. 21 s. 96(3)
s. 8(2)(d) and word inserted by 2012 c. 21 s. 96(4)(b)

[F181AA.Cases where mandatory write-down, conversion etc applies: banking group companiesU.K.

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(1)Section 6B (mandatory write-down, conversion, etc. of capital instruments [F2and relevant internal liabilities]) applies in relation to a banking group company in the cases set out in subsections (2), (4) [F3, (8) and (8A)].

(2)Case 1 is where—

(a)the conditions imposed by section 81B or 81ZBA on the exercise of a stabilisation power in accordance with section 11(2), 12(2) or 12ZA(3) are met in respect of the banking group company,

(b)the Bank of England has decided to exercise the stabilisation power,

(c)if the banking group company—

(i)is a financial institution which is a subsidiary of an institution (within the meaning of [F4Article 4.1A of the capital requirements regulation]) (“the parent institution”), but

(ii)is not an entity within [F5subsection (2A)],

the requirements of subsection (3) are met, and

(d)section 12AA (mandatory write-down etc in bail-in cases) does not apply in relation to the banking group company by virtue of the exercise of a power under section 81BA (bail-in: banking group company).

[F6(2A)The entities covered by subsection (2)(c)(ii) are—

(a)an entity of any of the following kinds which is established in the United Kingdom—

(i)a financial holding company;

(ii)a mixed financial holding company;

(iii)a mixed-activity holding company;

(b)a UK parent financial holding company or a UK parent mixed financial holding company,

and expressions used in this subsection have the same meaning as in the capital requirements regulation.]

(3)For the purposes of subsection (2)(c)—

(a)the first requirement is that—

(i)the appropriate authority is satisfied that Condition 1 in section 7 is met in relation to the banking group company, and

(ii)the Bank of England is satisfied that Conditions 2, 3 and 4 of that section are met in relation to that company;

(b)the second requirement is that—

(i)where the parent institution is a bank, the PRA is satisfied that Condition 1 in section 7 is met, and the Bank of England is satisfied that Conditions 2, 3 and 4 in that section are met in relation to the parent institution,

(ii)F7... and

(iii)where the parent institution is a third-country institution, subsection (7) applies in relation to the banking group company by reason of that third country institution.

(4)Case 2 is where—

(a)the appropriate authority is satisfied that Condition 1 in section 7 is met in respect of the banking group company,

(b)the Bank of England is satisfied that—

(i)(ignoring section 6B) Condition 2 in section 7 is met, and

(ii)that Condition will continue to be met unless the action required by section 6B is taken in respect of the banking group company, and

(c)one of subsections (5) F8... or (7) apply in relation to the banking group company.

(5)This subsection applies in relation to the banking group company if—

(a)the PRA is satisfied that Condition 1 in section 7 is met in respect of a bank to which section 81D(1)(a) applies, and

(b)the Bank of England is satisfied that (ignoring section 6B) Condition 2 in section 7 is met in relation to that bank.

F9(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7)This subsection applies in relation to the banking group company if the relevant third-country authority has determined that any conditions required by the law of the third country to be met before—

(a)any power for the relevant third country authority to write down or convert capital instruments [F10or relevant internal liabilities] provided for under the law of that third country may be exercised, or

(b)third-country resolution action may be taken,

are met in relation to a third-country institution to which section 81D(1)(a) applies.

(8)Case 3 is where—

(a)extraordinary public financial support is required by the banking group company other than in circumstances where subsection (5E) of section 7 applies by virtue of paragraph (c) of that subsection, and

(b)the Bank of England is satisfied F11... that, in order for a bank F12... which is a member of the same group as the banking group company to fulfil its own funds requirements, relevant capital instruments [F13or relevant internal liabilities] of the banking group company need to be written down or converted into Common Equity Tier 1 instruments (or both).

[F14(8A)Case 4 is where—

(a)the banking group company is (or, but for the exercise of a stabilisation power, would be) a parent undertaking of a bank from which it has purchased (directly or indirectly) relevant capital instruments or relevant internal liabilities,

(b)the banking group company is not a resolution entity,

(c)the relevant capital instruments or relevant internal liabilities of the banking group company have been purchased (directly or indirectly) by a resolution entity in the same resolution group as the banking group company,

(d)any of the cases provided for in section 6A applies to the bank referred to in paragraph (a) above, and

(e)none of cases 1 to 3 in this section applies to the banking group company.]

(9)For the purposes of determining if the matters set out in subsections (3) to (7) are satisfied, the FCA, PRA, Bank of England F15... or relevant third-country authority (as the case may be) may ignore any transfer of losses or capital made between members of the group.

(10)For the purposes of subsections (3)(a) and (b), (4), (5) and (8)—

(a)references in section 7 to the bank are to be read—

(i)in the case of subsections (3)(a) and (b), (4) and (5), as references to the banking group company, and

(ii)in the case of subsection (8), as references to the banking group company or the parent institution (as the case may be), and

(b)section 7(5C)(a) is to be ignored in determining whether Condition 1 in that section is met in relation to the banking group company where that company is not a UK authorised person.

(11)For the purposes of subsections (3), (4) and (5), the “appropriate authority” means—

(a)in the case of a banking group company which is a PRA-authorised person, the PRA;

(b)in the case of a banking group company which is a UK authorised person but not a PRA-authorised person, the FCA;

(c)in the case of a banking group company which is not an UK authorised person—

F16(i). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F16(ii). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(iii)if [F17the parent undertaking of the group is not a UK authorised person and] there is a PRA-authorised person in the group, the PRA; and

(iv)in all other cases, the Bank of England.

(12)Where the PRA is the “appropriate authority” under subsection (11) in relation to a banking group company in the same group as a UK authorised person which is not a PRA-authorised person, the PRA must consult the FCA before making any decision as to whether the conditions referred to in subsection (3)(a), (4)(a) or (5)(a) (the “relevant conditions”) are satisfied.

(13)Where the FCA is the “appropriate authority” under subsection (11) in relation to a banking group company in the same group as a PRA-authorised person, the FCA must consult the PRA before making any decision as to whether the relevant conditions are satisfied.

(14)For the purposes of this section—

F18...
F18...
F18...
F18...
“financial institution” has the [F19same meaning as in the capital requirements regulation];
[F20“parent undertaking” has the meaning given in Article 4.1(15)(a) of the capital requirements regulation;]
“PRA-authorised person” has the meaning given in section 2B(5) of the Financial Services and Markets Act 2000;
“relevant third-country authority” [F21means an authority in a country or territory other than the United Kingdom which has functions corresponding to those of the Bank of England, the FCA or the PRA, in relation to bank recovery and resolution];
“third-country institution” has the meaning given in section 89H(7);
“third-country resolution action” has the meaning given in section 89H(7);
“UK authorised person” has the same meaning as in section 105(8) of the Financial Services and Markets Act 2000.]