The Kaupthing Singer & Friedlander Limited Transfer of Certain Rights and Liabilities Order 2008

Explanatory Note

(This note is not part of the Order)

This Order is made under the Banking (Special Provisions) Act 2008 (c.2) and provides for certain rights and liabilities to be transferred from Kaupthing Singer & Friedlander Limited (“Kaupthing”) to Deposits Management (Edge) Limited (“DMEL”).

The Order then provides for the transfer of the liabilities transferred to DMEL to be transferred to ING Direct N.V. and for the operation of the Financial Services Compensation Scheme in relation to that transfer.

The first transfer is given effect by article 3, which transfers the liabilities of Kaupthing to holders of Edge accounts to DMEL, and confers associated rights on DMEL.

The remainder of the articles in Part 2 make provision associated with the transfer, including in relation to interests, rights and liabilities of third parties relating to rights and liabilities transferred (article 6) and exemption of DMEL from the general prohibition in the Financial Services and Markets Act 2000 in respect of accepting deposits (article 7).

Part 3 provides for the second transfer from DMEL to ING Direct N.V. It also includes provision for information obligations in relation to Kaupthing (article 9), that no consent or concurrence is required (article 10), no associated liabilities or interferences arise (article 11) and makes provision in relation to interests, rights and liabilities of third parties relating to rights and liabilities transferred in the second transfer (article 12).

Part 4 concerns the Financial Services Compensation Scheme and applies where before the transfer Kaupthing is in default for the purposes of that Scheme. It provides for certain sums to be paid to ING Direct N.V. by the Financial Services Compensation Scheme and the Treasury (article 14).

Article 15 provides that, for the purposes of the provisions which govern that Scheme, the payments made by the FSCS under article 14 constitute the payment of compensation to each qualifying claimant under that Scheme.

Article 16 provides for certain liabilities of Kaupthing to the FSCS, and requires the FSCS to account to the Treasury for certain amounts recovered by it from Kaupthing.

Part 5 makes provision in relation to the administrator and applies if Kaupthing is placed into administration after the transfer.

Article 21 imposes overriding objectives on the administrator relating to Kaupthing's obligations under the Order and the provision of services by Kaupthing to ING to enable it to operate the transferred accounts.

Article 26 imposes obligations and restrictions in relation to contracts to which Kaupthing is a party.

Article 27 imposes a moratorium on payments by Kaupthing to a related company.

Part 5 contains miscellaneous provisions, including as to construction of references in documents relating to Kaupthing (article 28) and a bar on proceedings against directors of Kaupthing and DMEL in relation to the transfers (article 32).

An Impact Assessment of the effect of this instrument on the costs to business has been prepared. It may be obtained from the Financial Stability Team, HM Treasury, 1 Horse Guards Road, London SW1A 2HQ. It is also available on HM Treasury's website (www.hm-treasury.gov.uk). Copies of the document have been placed in the libraries of both Houses of Parliament.