F1PART 9BRing-fencing
Ring-fencing rules
142HRing-fencing rules
1
In the exercise of its power to make general rules, the appropriate regulator must in particular make rules—
a
requiring a ring-fenced body to make arrangements to ensure the effective provision to the ring-fenced body of services and facilities that it requires in relation to the carrying on of a core activity, and
b
making provision for the group ring-fencing purposes applying to ring-fenced bodies and to authorised persons who are members of a ring-fenced body's group.
2
Section 142E(1)(c) does not affect the power of the appropriate regulator to make general rules imposing restrictions on the extent of the shares or voting power that a ring-fenced body may hold in another company, except where a restriction on the extent of the shares or voting power that the ring-fenced body may hold in the company is imposed by order under section 142E(1)(c).
3
General rules that are required by this section or make provision falling within subsection (2) are in this Act referred to as “ring-fencing rules”.
4
The “group ring-fencing purposes” are—
a
ensuring as far as reasonably practicable that the carrying on of core activities by a ring-fenced body is not adversely affected by the acts or omissions of other members of its group;
b
ensuring as far as reasonably practicable that in carrying on its business a ring-fenced body—
i
is able to take decisions independently of other members of its group, and
ii
does not depend on resources which are provided by a member of its group and which would cease to be available to the ring-fenced body in the event of the insolvency of the other member;
c
ensuring as far as reasonably practicable that the ring-fenced body would be able to continue to carry on core activities in the event of the insolvency of one or more other members of its group.
5
Ring-fencing rules made for the group ring-fencing purposes must include—
a
provision restricting the power of a ring-fenced body to enter into contracts with other members of its group otherwise than on arm's length terms;
b
provision restricting the payments that a ring-fenced body may make (by way of dividend or otherwise) to other members of its group;
c
provision requiring the disclosure to the appropriate regulator of information relating to transactions between a ring-fenced body and other members of its group;
d
provision requiring a ring-fenced body to ensure that its board of directors (or if there is no such board, the equivalent management body) includes to a specified extent—
i
members who are treated by the rules as being independent of other members of the ring-fenced body's group,
ii
members who are treated by the rules as being independent of the ring-fenced body itself, and
iii
non-executive members;
e
provision requiring a ring-fenced body to act in accordance with a remuneration policy meeting specified requirements;
f
provision requiring a ring-fenced body to act in accordance with a human resources policy meeting specified requirements;
g
provision requiring arrangements made by the ring-fenced body for the identification, monitoring and management of risk to meet specified requirements;
h
such other provision as the appropriate regulator considers necessary or expedient for any of the purposes in subsection (4).
6
The reference in subsection (5)(e) to a remuneration policy is a reference to a policy about the remuneration of officers, employees and other persons who (in each case) are of a specified description.
7
The reference in subsection (5)(f) to a human resources policy is a reference to a policy about the appointment and management of officers, employees and other persons who (in each case) are of a specified description.
8
In this section—
“the appropriate regulator” means—
- a
in relation to a PRA-authorised person, the PRA;
- b
in relation to any other authorised person, the FCA;
- a
“shares” has the meaning given in section 422;
“specified” means specified in the rules;
“voting power” has the meaning given in section 422.
Pt. 9B inserted (1.3.2014 for the insertion of ss. 142A-142F, 142I, 142W-142Z1 for specified purposes, 21.4.2016 for the insertion of s. 142H) by Financial Services (Banking Reform) Act 2013 (c. 33), ss. 4(1), 148(5); S.I. 2014/377, art. 2(1)(b), Sch. Pt. 2; S.I. 2016/512, art. 2(a)