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Financial Services Act 2010

New section 139C – Rules about resolution plans

89.Subsection (1) places a duty on the FSA to make rules requiring persons authorised under FSMA to produce and maintain a resolution plan in accordance with the requirements set out in the rules. Subject to subsection (9), this requirement can apply to all authorised persons or the FSA can exercise discretion over which authorised persons are required to produce a recovery plan by specifying the firms to which the rules apply. This will allow for gradual implementation, focusing on the largest, most complex and systemically significant firms in the first instance.

90.Subsections (2), (3) and (4) define a ‘resolution plan’. They clarify that a “resolution plan” should cover both action to be taken in the event of failure of all or any part of the business occurring, and action to be taken by a firm where failure is likely.

91.Subsection (4) clarifies that a resolution plan may require a firm to identify obstacles to the application of possible resolution tools by the authorities or to the carrying out of the functions of an insolvency official in the event of the authorised person’s failure and to set out what action that may be required to facilitate the application of those tools or carrying out of those functions. This could include provisions to ensure that a ‘data room’ can be set up quickly and effectively. It could also mean information about the simplification of legal structures ahead of a resolution being triggered.

92.Subsection (5) makes clear that information that would facilitate planning by the Treasury or Bank of England in relation to the possible exercise of their powers under Part 1, 2 or 3 of the Banking Act 2009 may be required by rules to be included in a resolution plan.

93.Subsection (6) requires the FSA to consider whether each resolution plan makes satisfactory provision in relation to those matters that the plan is required to cover.

94.Subsection (7) provides that where the FSA considers that a resolution plan fails to make satisfactory provision in relation to those matters, the FSA must take such steps as it considers appropriate to deal with the failure. Subsection (8) makes clear that the steps the FSA may take include requiring the revision of the relevant resolution plan.

95.Subsection (9requires the FSA to make general rules about resolution plans that apply to authorised persons in relation to whom any power under Part 1 of the Banking Act 2009 may be exercised. The FSA is required by subsection (10) to consult the Treasury and Bank of England before preparing a draft of those general rules.

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