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

CHAPTER 4 U.K. Removal of impediments to resolvability of group entities where the PRA or FCA is the consolidating supervisor

Application and interpretation of Chapter 4 U.K.

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

(a) the PRA or FCA is the consolidating supervisor; and

(b) the Bank, having made an assessment of group resolvability in accordance with Chapter 2, has identified substantive impediments to the resolvability of a group entity (“the impediments”).

(2) In this Chapter—

“group entity” means the [F1 UK parent undertaking] or a subsidiary within the relevant group which is—

(a)

an institution

(b)

a financial institution; or

(c)

a parent undertaking of an institution which is F2 ...—

(i)

F2 ...

(ii)

a qualifying parent undertaking;

“measures for structural change” means—

(a)

measures for changing the legal or operational structure of a group entity in order to ensure, through the application of resolution tools and the exercise of resolution powers, that critical functions can be separated, legally or operationally, from the performance of other functions;

(b)

measures for establishing [F3 a UK] parent financial holding company; or

(c)

where an institution is a subsidiary of a relevant MAHC, measures for establishing a financial holding company as a parent undertaking of the institution for the purpose of—

(i)

facilitating the application of resolution tools and the exercise of resolution powers to achieve any of the resolution objectives; or

(ii)

ensuring that applying the resolution tools and exercising the resolution powers does not have an adverse effect on the non-financial part of the group of the relevant MAHC;

“the plan” means the group resolution plan being drawn up for the relevant group (or the group resolution plan which has been adopted for the group and is being reviewed);

“pre-resolution powers” has the same meaning as in Chapter 3;

“qualifying parent undertaking” has the meaning given by section 192B of FSMA M1 (meaning of “qualifying parent undertaking”); and

“remedial measures” means measures to address or remove the impediments.

[F4 “response period” means—

(a)

in a case [F5 where the institution does not, as applicable, meet the requirements referred to in Articles 92a and 494 of the capital requirements regulation or the minimum requirement for own funds and eligible liabilities in accordance with section 3A(4B) of the Banking Act], two weeks beginning with the date on which the institution received the notice; and

(b)

in any other case, four months beginning with that date.]

(3) “Relevant MAHC”, in the definition of “measures for structural change”, means a mixed activity holding company which has at least one subsidiary which—

(a) is an institution; and

(b) is not a subsidiary of a financial holding company which is also a subsidiary of the mixed activity holding company.

Textual Amendments

F1 Words in art. 68(2) substituted (31.12.2020) by The Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1394), reg. 1(2), Sch. 3 para. 41(2)(a)(i); 2020 c. 1, Sch. 5 para. 1(1)

F2 Words in art. 68(2) omitted (31.12.2020) by virtue of The Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1394), reg. 1(2), Sch. 3 para. 41(2)(a)(ii); 2020 c. 1, Sch. 5 para. 1(1)

F3 Words in art. 68(2) substituted (31.12.2020) by The Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1394), reg. 1(2), Sch. 3 para. 41(2)(b); 2020 c. 1, Sch. 5 para. 1(1)

F4 Words in art. 68(2) inserted (28.12.2020) by The Bank Recovery and Resolution (Amendment) (EU Exit) Regulations 2020 (S.I. 2020/1350), regs. 1(2), 39

F5 Words in art. 68 substituted (31.12.2020) by The Bank Recovery and Resolution (Amendment) (EU Exit) Regulations 2020 (S.I. 2020/1350), regs. 1(3), 74(4)

Marginal Citations

M1 Section 192B was inserted by the Financial Services Act 2012, section 27, which inserted Part 12A of FSMA.

Report on substantive impediments to the resolvability of group entities U.K.

69.—(1) The Bank, in co-operation with F6 ... the appropriate regulator F6 ..., must prepare a report which—

(a) contains an analysis of the impediments;

(b) proposes remedial measures for the impediments; and

(c) examines the impact of the remedial measures on the business of the group entities.

[F7 (2) The Bank must submit its report to the UK parent undertaking and the appropriate regulator.]

Textual Amendments

F6 Words in art. 69(1) omitted (31.12.2020) by virtue of The Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1394), reg. 1(2), Sch. 3 para. 42(2); 2020 c. 1, Sch. 5 para. 1(1)

F7 Art. 69(2) substituted (31.12.2020) by The Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1394), reg. 1(2), Sch. 3 para. 42(3); 2020 c. 1, Sch. 5 para. 1(1)

Suspension of requirement to draw up or review group resolution plan U.K.

70.—(1) F8 ... The submission of the Bank's report under article 69 has the effect of suspending the Bank's duty to draw up or review the plan until the Bank determines remedial measures under article 71(3)(c).

F9 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F9 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F8 Words in art. 70(1) omitted (31.12.2020) by virtue of The Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1394), reg. 1(2), Sch. 3 para. 43(2); 2020 c. 1, Sch. 5 para. 1(1)

F9 Art. 70(2)(3) omitted (31.12.2020) by virtue of The Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1394), reg. 1(2), Sch. 3 para. 43(3); 2020 c. 1, Sch. 5 para. 1(1)

Determining remedial measures U.K.

71.—(1) The [F10 UK] parent undertaking may, within [F11 the response period] beginning with the date on which it receives the Bank's report, submit to the Bank its observations on the report and a proposal to take alternative remedial measures (“alternative proposal”).

(2) The Bank must send such observations and any alternative proposal to [F12 the appropriate regulator].

(3) F13 ... The Bank must—

(a) confirm the impediments with or without modification;

(b) assess any alternative proposal; and

(c) determine remedial measures in the exercise of pre-resolution powers—

(i) where the Bank concludes that the measures set out in an alternative proposal would adequately address or effectively remove the impediments, by approving that proposal (with or without modification);

(ii) otherwise, by specifying the measures which are to be taken.

F14 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) The Bank must consult the appropriate regulator and, where appropriate, the Financial Policy Committee before determining remedial measures under paragraph (3)(c).

(6) In considering any matter referred to in paragraph (3) or (4) the Bank must take account of—

(a) the threat to financial stability posed by the impediments; and

(b) the effect of the measures on—

(i) the business and financial stability of each group entity and its ability to contribute to the economy of the United Kingdom F15 ...

(ii) the [F16 market in the United Kingdom] for financial services;

(iii) the financial stability of [F17 the United Kingdom].

(7) Paragraphs (8) and (9) apply where remedial measures determined under paragraph (3) F18 ... are to be implemented by a group entity set up in the United Kingdom.

(8) The Bank must exercise pre-resolution powers with the object of requiring the entity to take the remedial measures.

(9) In a direction given for that purpose, the Bank—

(a) if it has specified the measures which are to be taken, must demonstrate how the measures set out in an alternative proposal would not adequately address or effectively remove the impediments;

(b) must demonstrate how the remedial measures will adequately address or effectively remove the impediments in a manner proportionate to the burden or restriction imposed by the direction; and

(c) must require the entity to—

(i) prepare a plan showing how it will comply with the remedial measures; and

(ii) submit that plan within one month beginning on the date of the direction.

Textual Amendments

F10 Word in art. 71(1) substituted (31.12.2020) by The Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1394), reg. 1(2), Sch. 3 para. 44(2); 2020 c. 1, Sch. 5 para. 1(1)

F11 Words in art. 71(1) substituted (28.12.2020) by The Bank Recovery and Resolution (Amendment) (EU Exit) Regulations 2020 (S.I. 2020/1350), regs. 1(2), 40

F12 Words in art. 71(2) substituted (31.12.2020) by The Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1394), reg. 1(2), Sch. 3 para. 44(3); 2020 c. 1, Sch. 5 para. 1(1)

F13 Words in art. 71(3) omitted (31.12.2020) by virtue of The Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1394), reg. 1(2), Sch. 3 para. 44(4); 2020 c. 1, Sch. 5 para. 1(1)

F14 Art. 71(4) omitted (31.12.2020) by virtue of The Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1394), reg. 1(2), Sch. 3 para. 44(5); 2020 c. 1, Sch. 5 para. 1(1)

F15 Words in art. 71(6)(b)(i) omitted (31.12.2020) by virtue of The Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1394), reg. 1(2), Sch. 3 para. 44(6)(a); 2020 c. 1, Sch. 5 para. 1(1)

F16 Words in art. 71(6)(b)(ii) substituted (31.12.2020) by The Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1394), reg. 1(2), Sch. 3 para. 44(6)(b); 2020 c. 1, Sch. 5 para. 1(1)

F17 Words in art. 71(6)(b)(iii) substituted (31.12.2020) by The Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1394), reg. 1(2), Sch. 3 para. 44(6)(c); 2020 c. 1, Sch. 5 para. 1(1)

F18 Words in art. 71(7) omitted (31.12.2020) by virtue of The Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1394), reg. 1(2), Sch. 3 para. 44(7); 2020 c. 1, Sch. 5 para. 1(1)

Joint decision on impediments to group resolvability and remedial measures U.K.

F19 72.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F19 Art. 72 omitted (31.12.2020) by virtue of The Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1394), reg. 1(2), Sch. 3 para. 45; 2020 c. 1, Sch. 5 para. 1(1)

References to EBA U.K.

F20 73.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F20 Art. 73 omitted (31.12.2020) by virtue of The Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1394), reg. 1(2), Sch. 3 para. 45; 2020 c. 1, Sch. 5 para. 1(1)

Requesting the assistance of EBA U.K.

F21 74.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F21 Art. 74 omitted (31.12.2020) by virtue of The Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1394), reg. 1(2), Sch. 3 para. 45; 2020 c. 1, Sch. 5 para. 1(1)