Banking Act 2009

Exercise of powers: general U.K.

7 General conditions U.K.

[F1 (1) A stabilisation power may be exercised in respect of a bank only if—

(a) the PRA is satisfied that Condition 1 is met, and

(b) the Bank of England is satisfied that Conditions 2, 3 and 4 are met.

(2) Condition 1 is that the bank is failing or likely to fail.

(3) Condition 2 is that, having regard to timing and other relevant circumstances, it is not reasonably likely that (ignoring the stabilisation powers) action will be taken by or in respect of the bank that will result in Condition 1 ceasing to be met.

(4) Condition 3 is that the exercise of the power is necessary having regard to the public interest in the advancement of one or more of the special resolution objectives.

(5) Condition 4 is that one or more of the special resolution objectives would not be met to the same extent by the winding up of the bank (whether under Part 2 or otherwise).

(5A) The PRA must treat Condition 1 as met if satisfied that it would be met but for financial assistance provided by—

(a) the Treasury, or

(b) the Bank of England,

disregarding ordinary market assistance offered by the Bank on its usual terms.

(5B) The Bank of England must treat Condition 2 as met if satisfied that it would be met but for financial assistance of the kind mentioned in subsection (5A).

(5C) For the purposes of Condition 1, a bank is failing or likely to fail if—

(a) it is failing, or is likely to fail, to satisfy the threshold conditions in circumstances where that failure would justify the variation or cancellation by the PRA under section 55J of the Financial Services and Markets Act 2000 of the bank’s permission under Part 4A of that Act to carry on one or more regulated activities,

(b) the value of the assets of the bank determined [F2 is less than the amount of its liabilities,]

(c) the bank is unable to pay its debts or other liabilities as they fall due,

(d) [F3 paragraph (b) or (c) (or both)] will, in the near future, apply to the bank, or

(e) extraordinary public financial support is required in respect of the bank and subsection (5E) does not apply to that support.

(5D) “The threshold conditions” means the threshold conditions, as defined by subsection (1) of section 55B of the Financial Services and Markets Act 2000, for which the PRA is treated as responsible under subsection (2) of that section.

(5E) This subsection applies where, in order to remedy a serious disturbance in the economy of the United Kingdom and preserve financial stability, the extraordinary public financial support takes any of the following forms—

(a) a State guarantee to back liquidity facilities provided by [F4 the Bank of England],

(b) a State guarantee of newly issued liabilities,

(c) an injection of own funds, or purchase of capital instruments, at prices and on terms that do not confer an advantage upon the bank, where none of the circumstances referred to in subsection (5C)(a), (b), (c) or (d) are present at the time the public support is granted and none of Cases 1 to 4 in section 6A apply.

(5F) Before determining that Condition 1 is met, the PRA must consult the Bank of England.

(5G) Before determining whether or not Condition 2 is met, the Bank of England must consult—

(a) the PRA,

(b) the FCA, and

(c) the Treasury.

(5H) Before determining that Conditions 3 and 4 are met, the Bank must consult—

(a) the PRA,

(b) the FCA, and

(c) the Treasury.]

(6) The special resolution objectives are not relevant to Conditions 1 and 2.

(7) The conditions for applying for and making a bank insolvency order are set out in sections 96 and 97.

(8) The conditions for applying for and making a bank administration order are set out in sections 143 and 144.

Textual Amendments

F1 S. 7(1)-(5H) substituted for s. 7(1)-(5) (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 12

F2 Words in s. 7(5C)(b) substituted (16.12.2016) by The Bank Recovery and Resolution Order 2016 (S.I. 2016/1239), arts. 1(2), 7(a)

F3 Words in s. 7(5C)(d) substituted (16.12.2016) by The Bank Recovery and Resolution Order 2016 (S.I. 2016/1239), arts. 1(2), 7(b)

F4 Words in s. 7(5E)(a) 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. 1 para. 12; 2020 c. 1, Sch. 5 para. 1(1)

Commencement Information

I1 S. 7 in force at 21.2.2009 by S.I. 2009/296, art. 3, Sch. para. 1

[F5 7A. Effect on other group members, financial stability in [F6 UK] etc U.K.

(1) Where the Bank of England is considering the imposition of a requirement under section 3A(2), [F7 (4), (4B)(b),] (5) or (6), the Bank must consult the PRA and the FCA, and have regard to the potential impact of the requirement on—

(a) the institution in question,

(b) the market for financial services within the [F8 United Kingdom], and

(c) the financial stability of the [F9 United Kingdom].

[F10 (1A) Subsection (1) does not apply in relation to a requirement under section 3A(4) for a person to maintain (but not issue) a particular kind of bail-in liability.]

(2) Where the Bank of England is considering the exercise of a stabilisation power in respect of a bank which is a member of a group, the Bank must have regard to—

(a) the need to minimise the effect of the exercise of the power on other undertakings in the same group,

(b) the need to minimise any adverse effects on the financial stability of the [F11 United Kingdom], and

(c) the potential effect of the exercise of the power on the financial stability of [F12 countries other than the United Kingdom] (particularly those F13 ... countries in which any member of that group is operating).

(3) In this section “group” has the meaning given by section 474 of the Companies Act 2006.]

Textual Amendments

F5 S. 7A inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 13

F6 Word in s. 7A heading 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. 1 para. 13(2); 2020 c. 1, Sch. 5 para. 1(1)

F7 Words in s. 7A(1) substituted (29.8.2023) by Financial Services and Markets Act 2023 (c. 29), ss. 75(2)(a), 86(3); S.I. 2023/779, reg. 4(ww)

F8 Words in s. 7A(1)(b) 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. 1 para. 13(3)(a); 2020 c. 1, Sch. 5 para. 1(1)

F9 Words in s. 7A(1)(c) 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. 1 para. 13(3)(b); 2020 c. 1, Sch. 5 para. 1(1)

F10 S. 7A(1A) inserted (29.8.2023) by Financial Services and Markets Act 2023 (c. 29), ss. 75(2)(b), 86(3); S.I. 2023/779, reg. 4(ww)

F11 Words in s. 7A(2)(b) 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. 1 para. 13(4)(a); 2020 c. 1, Sch. 5 para. 1(1)

F12 Words in s. 7A(2)(c) 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. 1 para. 13(4)(b)(i); 2020 c. 1, Sch. 5 para. 1(1)

F13 Word in s. 7A(2)(c) 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. 1 para. 13(4)(b)(ii); 2020 c. 1, Sch. 5 para. 1(1)

[F14 8 Specific Condition: private sector purchaser, bridge bank or asset management vehicle U.K.

(1) In a financial assistance case, the Bank may exercise a stabilisation power in respect of the bank concerned in accordance with section 11(2), 12(2) or 12ZA(3) only with the approval of the Treasury.

(2) “Financial assistance case” means a case where the Treasury notify the Bank of England that they have provided financial assistance in respect of a bank for the purpose of resolving or reducing a serious threat to the stability of the financial systems of the United Kingdom.

(3) The condition in this section is in addition to the conditions in sections 7 and 8ZA.]

Textual Amendments

F14 S. 8 substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 14

[F15 8ZA. Specific conditions: asset management vehicle U.K.

(1) The Bank of England may exercise a stabilisation power in respect of a bank in accordance with section 12ZA(3) only if satisfied that Conditions A and B are met.

(2) Condition A is that the power is exercised in connection with the exercise of one or more stabilisation powers in respect of the bank, or a company which is a banking group company in relation to the bank, otherwise than for the purposes of the third stabilisation option.

(3) Condition B is that the Bank of England is satisfied that—

(a) the situation of the market for the assets which it is proposed to transfer by the exercise of the stabilisation power is of such a nature that the liquidation of those assets under normal insolvency proceedings could have an adverse effect on one or more financial markets,

(b) the transfer is necessary to ensure the proper functioning of the bank or bridge bank from which the transfer is to be made, or

(c) the transfer is necessary to maximise the proceeds available for distribution.

(4) Before determining whether Conditions A and B are met, and if so how to react, the Bank of England must consult—

(a) the PRA,

(b) the FCA, and

(c) the Treasury.

F16 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) The conditions in this section are in addition to the conditions in sections 7 and 8.]

Textual Amendments

F15 S. 8ZA inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 15

F16 S. 8ZA(5) 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. 1 para. 14; 2020 c. 1, Sch. 5 para. 1(1)

F17 8A Specific condition: bail-in U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F17 S. 8A omitted (1.1.2015) by virtue of The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 16

9 Specific conditions: temporary public ownership U.K.

(1) The Treasury may exercise a stabilisation power in respect of a bank in accordance with section 13(2) only if satisfied that one of the following conditions is met.

(2) Condition A is that the exercise of the power is necessary to resolve or reduce a serious threat to the stability of the financial systems of the United Kingdom.

(3) Condition B is that exercise of the power is necessary to protect the public interest, where the Treasury have provided financial assistance in respect of the bank for the purpose of resolving or reducing a serious threat to the stability of the financial systems of the United Kingdom [F18 or the Bank of England has provided extraordinary public financial support in respect of the bank].

(4) Before determining whether a condition is met the Treasury must consult—

[F19 (a) the PRA,

(aa) the FCA, and]

(b) the Bank of England.

(5) The conditions in this section are in addition to the conditions in section 7.

Textual Amendments

F18 Words in s. 9(3) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 17

F19 S. 9(4)(a)(aa) substituted for s. 9(4)(a) (1.4.2013) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 17 para. 10 (with Sch. 20); S.I. 2013/423, art. 3, Sch.

Commencement Information

I2 S. 9 in force at 21.2.2009 by S.I. 2009/296, art. 3, Sch. para. 1

10 Banking Liaison Panel U.K.

(1) The Treasury shall make arrangements for a panel to advise the Treasury about the effect of the special resolution regime on—

(a) banks,

(b) persons with whom banks do business, and

(c) the financial markets.

(2) In particular, the panel may advise the Treasury about—

(a) the exercise of powers to make statutory instruments under or by virtue of this Part, Part 2 or Part 3 (excluding the stabilisation powers, compensation scheme orders, resolution fund orders, third party compensation orders and orders under section 75(2)(b) and (c)),

(b) the code of practice under section 5, and

(c) anything else referred to the panel by the Treasury.

(3) The Treasury shall ensure that the panel includes—

(a) a member appointed by the Treasury,

(b) a member appointed by the Bank of England,

[F20 (c) a member appointed by the PRA,

(ca) a member appointed by the FCA,]

(d) a member appointed by the scheme manager of the Financial Services Compensation Scheme,

(e) one or more persons who in the Treasury's opinion represent the interests of banks,

(f) one or more persons who in the Treasury's opinion have expertise in law relating to the financial systems of the United Kingdom, and

(g) one or more persons who in the Treasury's opinion have expertise in insolvency law and practice.

Textual Amendments

F20 S. 10(3)(c)(ca) substituted for s. 10(3)(c) (1.4.2013) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 17 para. 11 (with Sch. 20); S.I. 2013/423, art. 3, Sch.

Commencement Information

I3 S. 10 in force at 17.2.2009 for specified purposes by S.I. 2009/296, arts. 2, 3, Sch. para. 1

I4 S. 10 in force at 21.2.2009 in so far as not already in force by S.I. 2009/296, arts. 2, 3, Sch. para. 1