PART 7Intra-group financial support
CHAPTER 1Authorisation of agreement for group financial support where the PRA or FCA is the consolidating supervisor
Application and interpretation of Chapter 1
83.—(1) This Chapter applies where, in relation to a relevant group—
(a)the PRA or FCA is the consolidating supervisor; and
(b)the PRA or FCA (or each of them) receives from the EEA parent undertaking an application for authorisation of a group financial support agreement (“the application”).
(2) In this Chapter—
“conditions for early intervention” means the conditions referred to in Article 27.1 of the recovery and resolution directive (early intervention measures) for which a competent authority is to have at its disposal the measures specified in sub-paragraphs (a) to (h) of that Article;
“conditions for financial support” means the conditions laid down in Chapter 3 of Title 2 of the recovery and resolution directive (intra-group financial support);
“financial support” includes—
a loan, a guarantee, the provision of assets for use as collateral or any combination of these forms of support; and
provision for support (in any form) in one or more transactions or in a transaction entered into by the group institution which is the intended recipient of the support and any other person;
“group entity” means a relevant parent undertaking or group subsidiary which proposes to enter into the group financial support agreement;
“group financial support agreement” means an agreement—
which is proposed for the provision of financial support to a group institution which, at any time after the agreement has been concluded, meets the conditions for early intervention; and
the parties to which include a relevant parent undertaking and one or more group subsidiaries set up in any country other than the EEA State in which the relevant parent undertaking is set up;
“group institution” means a group entity which is an institution;
“group subsidiary” means an undertaking which is—
a subsidiary of a relevant parent undertaking; and
an institution or financial institution;
“relevant competent authority” means a competent authority, other than the consolidating supervisor, which has authorised a group entity; and
“relevant parent undertaking” means a parent institution in an EEA State, an EEA parent institution, a financial holding company, a mixed financial holding company or a mixed activity holding company.
Review of group financial support agreement and decision on authorisation
84.—(1) The appropriate regulator must review the group financial support agreement jointly with the relevant competent authorities.
(2) The purpose of the review is to determine whether—
(a)the terms of the agreement are compatible with the conditions for financial support, including whether they make provision to ensure that financial support would be given in accordance with those conditions; and
(b)any group institution already meets the conditions for early intervention.
(3) The matter referred to in paragraph (2)(a) is to be determined having regard to the potential impact of the agreement, if it is concluded, on the financial stability of any EEA State in which a group entity conducts business.
(4) The appropriate regulator must refuse the application and prohibit the conclusion of the group financial support agreement if it is determined on review that—
(a)the terms of the agreement are not compatible with the conditions for financial support; or
(b)a group institution already meets the conditions for early intervention.
(5) The appropriate regulator must otherwise grant the application.
Duty to transmit a copy of application
85.—(1) The appropriate regulator must send a copy of the application or, where paragraph (2) has effect in relation to any information, of the application without that information, without delay to each relevant competent authority.
(2) This article does not require any information contained in the application to be disclosed if its disclosure would be contrary to section 348 of FSMA.
Joint decision with other competent authorities
86.—(1) The appropriate regulator must endeavour to reach a joint decision on the outcome of the review within four months beginning with the date on which it receives the application (“the four month period”).
(2) Where a joint decision cannot be reached within the four month period, the appropriate regulator must decide the outcome of the review having regard to the views and reservations of the relevant competent authorities.
(3) The appropriate regulator must give the EEA parent undertaking and each relevant competent authority written notice of a decision on the outcome of the review, including a reasoned account of the decision.
References to EBA
87.—(1) Where, before the end of the four month period, a relevant competent authority has referred to EBA in accordance with Article 19 of the EBA Regulation any matter relating to the review of the group financial support agreement, the appropriate regulator must—
(a)defer a decision on the outcome of the review for one month beginning with the date on which the four month period ends; and
(b)ensure that the decision conforms with any decision taken by EBA before the end of that month under Article 19.3 of the EBA Regulation.
(2) For the purposes of a reference to EBA of a matter to which this article refers the four month period is deemed to be the conciliation phase referred to in Article 19.2 of the EBA Regulation.
Requesting the assistance of EBA
88. The appropriate regulator may ask EBA to assist the competent authorities in accordance with Article 31(c) of the EBA Regulation to reach a joint decision on the outcome of the review.
Duty to transmit a copy of authorised agreement
89. The appropriate regulator must send a copy of the group financial support agreement, if it is authorised, to the Bank and to the resolution authority for each group entity which proposes to enter into the agreement and is set up in another EEA State.
Amendment of authorised agreement
90.—(1) This article applies where—
(a)the parties to an agreement authorised under this Chapter wish to amend the agreement; and
(b)rules made by the PRA or FCA under FSMA require the amendment to be authorised before it is made.
(2) If the EEA parent undertaking submits to the appropriate regulator an application for authorisation of the amendment (“the amendment application”), the appropriate regulator must treat the amendment application as if it were an application for authorisation of a group financial support agreement.
(3) Articles 84 to 89 apply for that purpose, but have effect in relation to the amendment application as if—
(a)each reference to a group financial support agreement were a reference to the amendment set out in the amendment application; and
(b)each reference to the application were a reference to the amendment application.
CHAPTER 2Authorisation of agreement for group financial support where neither the PRA nor the FCA is the consolidating supervisor
Application and interpretation of Chapter 2
91.—(1) This Chapter applies where, in relation to a relevant group—
(a)neither the PRA nor the FCA is the consolidating supervisor; and
(b)the consolidating supervisor receives an application for authorisation of a group financial support agreement (“the application”) from the EEA parent undertaking.
(2) In this Chapter—
“conditions for financial support” and “conditions for early intervention” have the same meaning as in Chapter 1; and
“financial support”, “group entity”, “group financial support agreement”, “group institution” and “relevant competent authority” have the same meaning for the relevant group as they have for a relevant group in Chapter 1.
Review of group financial support agreement and decision on authorisation
92.—(1) The appropriate regulator must review the group financial support agreement jointly with other relevant competent authorities and the consolidating supervisor.
(2) The purpose of the review is to determine whether—
(a)the terms of the agreement are compatible with the conditions for financial support, including whether they make provision to ensure that financial support would be given in accordance with those conditions; and
(b)any group institution already meets the conditions for early intervention.
(3) The matter referred to in paragraph (2)(a) is to be determined having regard to the potential impact of the agreement, if it is concluded, on the financial stability of any EEA State in which a group entity conducts business.
Joint decision with other competent authorities
93. The appropriate regulator must endeavour to reach a joint decision on the outcome of the review within four months beginning with the date on which the consolidating supervisor received the application (“the four month period”).
References to EBA
94. The appropriate regulator may, within the four month period, refer to EBA in accordance with Article 19 of the EBA Regulation any matter relating to the review of the group financial support agreement.
Requesting the assistance of EBA
95. The appropriate regulator may ask EBA to assist the competent authorities in accordance with Article 31(c) of the EBA Regulation to reach a joint decision on the outcome of the review.
Amendment of authorised agreement
96.—(1) This article applies where—
(a)the parties to an agreement authorised by the consolidating supervisor wish to amend the agreement; and
(b)the amendment has to be authorised before it is made.
(2) If the consolidating supervisor notifies the appropriate regulator that the EEA parent undertaking has submitted an application for authorisation of the amendment (“the amendment application”), the appropriate regulator must treat the amendment application as if it were an application submitted to the consolidating supervisor for authorisation of a group financial support agreement.
(3) Articles 92 to 95 apply for that purpose, but have effect in relation to the amendment application as if—
(a)each reference to a group financial support agreement were a reference to the amendment set out in the amendment application; and
(b)in article 93 the reference to the application were a reference to the amendment application.
CHAPTER 3Approval of authorised agreements by the members of a UK group entity
Interpretation of Chapter 3
97.—(1) In this Chapter—
“authorised agreement” means a group financial support agreement (within the meaning given in Chapter 1) authorised by the PRA, FCA or other competent authority, and includes any amendment authorised by the competent authority;
“director” includes—
a director of a company;
a member of a limited liability partnership; and
a director of a building society established under the Building Societies Act 1986(1);
“member” includes—
a shareholder of a company;
a member of a limited liability partnership; and
a shareholding or borrowing member of a building society established under the Building Societies Act 1986 (“shareholding member” and “borrowing member” have the meaning given in paragraph 5(2) of Schedule 2 to that Act);
“ordinary resolution”—
in relation to a resolution passed at a meeting on a show of hands, means a resolution passed by a simple majority of the votes cast by those entitled to vote;
in relation to a resolution passed on a poll taken at a meeting, means a resolution passed by members representing a simple majority of the total voting rights of the members who (being entitled to do so) vote on the resolution;
in relation to a written resolution, means a resolution passed by members representing a simple majority of the total voting rights of those eligible to vote on a written resolution; and
“UK group entity”, in relation to an authorised agreement, means—
the relevant parent undertaking, if it is set up in the United Kingdom;
a group subsidiary set up in the United Kingdom.
(2) In this article, for the interpretation of “UK group entity”, the expressions “group subsidiary” and “relevant parent undertaking” have the meaning given in Chapter 1.
Requirement for approval of authorised agreement
98.—(1) An authorised agreement entered into by a UK group entity is only valid in respect of that entity if its members have approved the agreement in accordance with this article.
(2) An authorised agreement is deemed to be approved by the members of a UK group entity if an ordinary resolution approving the agreement is passed by the members—
(a)present and voting either in person or by proxy at a meeting; or
(b)by way of a written resolution proposed by the directors of the entity.
(3) An ordinary resolution may not be passed unless the directors of the entity make available to its members a memorandum setting out the proposed resolution and the terms of the authorised agreement—
(a)in the case of a written resolution, by sending the memorandum to every member at or before the time at which the proposed resolution is submitted to the members;
(b)in the case of a resolution at a meeting, by making the memorandum available for inspection by the members—
(i)at the entity’s registered office for not less than fifteen days ending with the date of the meeting; and
(ii)at the meeting itself.
Revocation of authorised agreement
99.—(1) This article applies where a UK group entity has entered into an authorised agreement which has been approved in accordance with article 98.
(2) The authorised agreement remains valid in respect of the UK group entity for as long as the members of the entity have not revoked their approval in accordance with this article.
(3) Paragraph (4) applies where at least five per cent. of the members of the entity require the directors to—
(a)call a general meeting of the entity to determine whether their approval of the authorised agreement should be revoked; or
(b)circulate a written resolution proposing that the approval should be revoked.
(4) The members’ approval of the authorised agreement is revoked if an ordinary resolution revoking it is passed by the members—
(a)present and voting either in person or by proxy at a general meeting; or
(b)by way of a written resolution proposed by the directors.
(5) An ordinary resolution may not be passed unless the directors of the entity make available to its members a memorandum setting out the proposed resolution—
(a)in the case of a written resolution, by sending the memorandum to every member at or before the time at which the proposed resolution is submitted to the members;
(b)in the case of a resolution at a general meeting, by making the memorandum available for inspection by the members—
(i)at the entity’s registered office for not less than fifteen days ending with the date of the meeting; and
(ii)at the meeting itself.
Obligation to provide annual report
100.—(1) The directors of the UK group entity which has entered into an authorised agreement must prepare an annual report on the performance of the agreement and the implementation of any decision taken pursuant to it.
(2) The directors must deliver a copy of the annual report to every member of the entity, electronically or by other means, no later than the first and each subsequent anniversary of the date on which the entity enters into the agreement.
CHAPTER 4Provision of group financial support
Interpretation of Chapter 4
101.—(1) In this Chapter—
“college members” means the members of the college and of the supervisory college(2) established for the group;
“conditions for financial support” has the same meaning as in Chapter 1;
“financial support” has the same meaning as in Chapter 1;
“group entity” means a relevant parent undertaking or group subsidiary which has entered into a group financial support agreement authorised by the PRA, FCA or other competent authority (“the agreement”);
“intended recipient” means the group institution named in a relevant notice as the recipient of the financial support referred to in the notice;
“notifying group entity” means the group entity which has given a relevant notice;
“relevant competent authority” means a competent authority, other than the consolidating supervisor, which has authorised a group entity;
“relevant notice” means notice given by a group entity in accordance with Article 25 of the recovery and resolution directive (right of opposition of competent authorities) of an intention to provide financial support under the agreement; and
“UK group entity” means a group entity set up in the United Kingdom.
(2) In this article, for the interpretation of “group entity” and “intended recipient”, the expressions “group subsidiary”, “group financial support agreement”, “group institution” and “relevant parent undertaking” have the meaning given in Chapter 1.
Relevant notice from UK group entity: decision by the PRA or FCA
102.—(1) Where the PRA or FCA receives a relevant notice from a UK group entity, it must, within five business days beginning with the date on which it receives the notice, decide whether to—
(a)agree the provision of the financial support to which the notice refers; or
(b)prohibit or restrict the provision of that financial support on the ground that the conditions for financial support have not been met.
(2) The regulator must give written notice of its decision, including a reasoned account of the decision—
(a)to the notifying group entity;
(b)to EBA;
(c)unless the regulator is the consolidating supervisor, to the consolidating supervisor;
(d)unless the regulator is the competent authority for the intended recipient, to that authority; and
(e)where the regulator has authorised the intended recipient, to the intended recipient.
(3) In this article “the regulator”—
(a)where the relevant notice is received from a PRA-authorised person, means the PRA; and
(b)where the relevant notice is received from any other UK group entity, means the FCA.
Duties of consolidating supervisor where financial support agreed, prohibited or restricted
103.—(1) This article applies where the PRA or FCA is the consolidating supervisor.
(2) Where the appropriate regulator receives notice of a decision by a relevant competent authority to agree, prohibit or restrict the provision of financial support to which a relevant notice refers, the appropriate regulator must inform the other college members of that decision without delay.
(3) Paragraph (4) applies where—
(a)a competent authority prohibits or restricts the provision of financial support to which a relevant notice refers;
(b)the group recovery plan refers to the provision of group financial support; and
(c)either—
(i)the relevant competent authority for the intended recipient asks the appropriate regulator for a re-assessment of the plan; or
(ii)the appropriate regulator is the competent authority for the intended recipient.
(4) The appropriate regulator—
(a)must consider whether to require the group recovery plan to be reviewed under article 34; and
(b)if the appropriate regulator is the competent authority for the intended recipient and the intended recipient has drawn up a recovery plan on an individual basis, must consider whether to require that plan to be reviewed under article 33.
(5) Where the appropriate regulator receives notice of a notifying group entity’s decision to provide financial support pursuant to the relevant notice, the appropriate regulator must inform the other college members of that decision without delay.
Re-assessment of recovery plans by the PRA or FCA where it is not the consolidating supervisor
104.—(1) This article applies where—
(a)the PRA or FCA (“the regulator”) is a relevant competent authority;
(b)a competent authority other than the regulator prohibits or restricts the provision of financial support to which a relevant notice refers; and
(c)the regulator is the competent authority for the intended recipient.
(2) Where the group recovery plan refers to the provision of group financial support, the regulator may ask the consolidating supervisor for a re-assessment of the plan.
(3) Where the intended recipient has drawn up a recovery plan on an individual basis, the regulator must consider whether to require that plan to be reviewed under article 33.
Requesting the assistance of EBA
105.—(1) This article applies where the PRA or FCA (“the regulator”)—
(a)is the consolidating supervisor or the competent authority for the intended recipient; and
(b)has objections to a decision by the competent authority for the notifying group entity to prohibit or restrict the provision of financial support to which a relevant notice refers.
(2) The regulator may, within two days beginning with the date on which it receives notice of that decision, ask EBA to assist the competent authorities in accordance with Article 31(c) of the EBA Regulation to resolve their disagreement about that decision.
Reciprocal support
106. Where the PRA or FCA agrees the provision, with or without restrictions, of the financial support to which a relevant notice refers, the notifying group entity may agree with the intended recipient of that support to receive financial support from the intended recipient.
For the meaning of “supervisory college” see the recovery and resolution directive, Article 2.1, point (52).