The Financial Services and Markets Act 2000 (Contribution to Costs of Special Resolution Regime) Regulations 2009

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations are made under section 214B of the Financial Services and Markets Act 2000 and provide for the Treasury to notify the Financial Services Compensation Scheme (“the scheme”) if it requires the scheme to contribute to expenses incurred in connection with the exercise of a stabilisation tool in respect of a banking institution under Part 1 of the Banking Act 2009 (“the 2009 Act”).

Regulation 3 sets out payments in connection with the exercise of a stabilisation power under Part 1 of the 2009 Act which the Treasury may require the scheme to make.

Regulation 4 provides that where section 214B (1) applies and payments are required, the Treasury will notify the scheme manager as to the payments it is to make and when such payments are to be made. The Treasury may revise the notification from time to time.

Regulation 5 applies when the notification requires the scheme to make payments after all expenses and liabilities have been ascertained and verified. The scheme then will calculate what it would have had to pay out to eligible depositors if, at the time at which the stabilisation power was exercised, the bank had instead gone into default. If this amount is less than the scheme’s liability under the notification, then the scheme’s liability is reduced to this amount. The scheme’s liability is also reduced by the amount of recovery it would have expected to recover from the insolvent estate of the banking institution.

Regulation 6 applies when the notification requires the scheme to make a payment before all expenses and liabilities have been ascertained and verified. If, after all the costs have been ascertained, the scheme has paid too much money then the Treasury will refund any excess paid.

Regulation 7 requires the Treasury to appoint an independent valuer. This may be the same person appointed under certain orders made under the 2009 Act. If not, then Part 1 of the Schedule, which sets out provisions concerning the appointment of the valuer, applies.

Regulation 8 sets out the functions of the independent valuer. The independent valuer may apply to court for an order requiring the provision of information. Part 2 of the Schedule sets out provisions concerning this information.

Regulation 9 provides for the determination of the independent valuer to be reconsidered and appealed to court.

Regulation 10 provides for applications to be made to court for the resolution of disputes arising under the Regulations, other than a dispute over the independent valuer’s determination.

Regulation 11 provides that qualifying claimants under the scheme, who have had their deposits dealt with under the exercise of the stabilisation power, are deemed to have made claims under the scheme and cannot make a claim against the scheme for compensation.