22(1)This paragraph applies for the purposes of paragraph 21(2) if—U.K.
(a) the relevant entity has liabilities to another entity F1 . . . (“the relevant entity's liabilities”),
[F2(b)the relevant entity recognises, as assets, amounts due from that other entity (“N”) to the relevant entity (“N's liabilities”),]
(c)there is in place an agreement between the relevant entity and N which makes provision for there to be a single net settlement of all the relevant entity's liabilities (so far as covered by the provision) and all N's liabilities (so far as covered by the provision) if the netting event occurs, and
(d)the provision mentioned in paragraph (c) is legally effective and enforceable.
(2)For the purposes of sub-paragraph (1)—
(a) “ agreement ” includes an agreement which forms part of a multi-lateral agreement, arrangement or trading facility,
[F3(b)references to amounts due from N include securities provided by the relevant entity to N as collateral, but only where the relevant entity recognises those securities in its balance sheet or statement of financial position, and]
(c)F4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(d)“the netting event occurs” if the insolvency or bankruptcy of the relevant entity or N gives rise to the termination of any arrangements under which any liability covered by the provisions mentioned in sub-paragraph (1)(c) arises.
[F5Section 556 of CTA 2009 (meaning of securities and similar securities) applies for the purposes of this sub-paragraph as it applies for the purposes of Chapter 10 of Part 6 of that Act.]
(3)F6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4)The amount of the relevant entity's net settlement liabilities is to be reduced (but not below nil) by the amount of the relevant entity's net settlement assets.
(5)The relevant entity's “net settlement liabilities” are the relevant entity's liabilities so far as they—
(a)are covered by the provision mentioned in sub-paragraph (1)(c), and
(b)are not excluded liabilities.
(6)The relevant entity's “net settlement assets” are its assets so far as corresponding to N's net settlement liabilities.
(7) “ N's net settlement liabilities ” means N's liabilities so far as they are covered by the provision mentioned in sub-paragraph (1)(c).
(8)If the relevant entity's net settlement liabilities exceed the entity's net settlement assets, and a proportion (A%) of those liabilities is long term liabilities and a proportion (B%) of those liabilities is short term liabilities, under sub-paragraph (4)—
(a)the long term liabilities are reduced by A% of the entity's net settlement assets, and
(b)the short term liabilities are reduced by B% of those assets.
Textual Amendments
F1 Words in Sch. 19 para. 22(1)(a) omitted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by virtue of The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 6(2)(a)
F2 Sch. 19 para. 22(1)(b) substituted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 6(2)(b)
F3 Sch. 19 para. 22(2)(b) substituted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 6(3)(a)
F4 Sch. 19 para. 22(2)(c) and following word omitted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by virtue of The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 6(3)(b)
F5 Words after Sch. 19 para. 22(2)(d) inserted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 6(3)(c)
F6 Sch. 19 para. 22(3) omitted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by virtue of The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 6(4)