Banking Act 2009

Changes over time for: Section 6C

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Banking Act 2009, Section 6C is up to date with all changes known to be in force on or before 02 June 2024. There are changes that may be brought into force at a future date. Changes that have been made appear in the content and are referenced with annotations.

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Whole provisions yet to be inserted into this Act (including any effects on those provisions):

s. 4(8A) (8B) inserted by 2012 c. 21 s. 96(3)
s. 8(2)(d) and word inserted by 2012 c. 21 s. 96(4)(b)

[F16C.Mandatory reduction instruments: implementation of requirements of section 6BU.K.

This section has no associated Explanatory Notes

(1)Where the principal amount of a relevant capital instrument [F2or a relevant internal liability] is reduced under section 6B—

(a)the reduction must be permanent, subject to any provision made by virtue of section 48Y(1)(a);

(b)no liability to the holder of the relevant capital instrument [F3or the relevant internal liability] remains under, or in connection with, so much of the amount of the instrument [F4or relevant internal liability] as constitutes the reduction, except for—

(i)any liability already accrued in a case where the principal amount of the instrument [F4or the relevant internal liability] is not reduced or converted (or both) to the full extent of its capacity, and

(ii)any liability for damages that may arise as a result of any challenge to the legality of the exercise of the power of reduction;

(c)no compensation is to be paid to any holder of the relevant capital instrument [F5or the relevant internal liability] other than in accordance with subsection (4).

(2)Nothing in subsection (1)(b) prevents the provision of Common Equity Tier 1 instruments to a holder of relevant capital instruments [F6or relevant internal liabilities] in accordance with subsection (4).

(3)In order to effect a conversion of relevant capital instruments [F7or relevant internal liabilities] under section 6B, the Bank of England may require the bank, or a UK parent undertaking, to issue Common Equity Tier 1 instruments to the holders of the relevant capital instruments [F7or relevant internal liabilities].

(4)The relevant capital instruments [F8or relevant internal liabilities] may only be so converted if—

(a)the Common Equity Tier 1 instruments are issued by the bank, or by a [F9UK parent] undertaking of the bank with the agreement of the [F10Bank of England],

(b)the Common Equity Tier 1 instruments are issued prior to the issue of any shares by the bank, or by a parent undertaking of the bank, for the purposes of provision of own funds by the [F11Treasury],

(c)the Common Equity Tier 1 instruments are awarded and transferred without delay following the exercise of the conversion power, and

(d)the conversion rate that determines the number of Common Equity Tier 1 instruments that are provided in respect of each relevant capital instrument [F12or relevant internal liability] [F13represents appropriate compensation to the affected creditor for any loss incurred in consequence of the conversion of that instrument or liability.]

[F14(4A)Where different conversion rates are applied to different classes of instrument or liability, a lower conversion rate must be applied to subordinated debt than is applied to debts ranking higher in the hierarchy of claims in normal insolvency proceedings.]

(5)For the purposes of the provision of Common Equity Tier 1 instruments in accordance with subsections (2), (3) and (4), the Bank of England may require the bank or a UK parent undertaking of the bank to maintain at all times the necessary prior authorisation to issue the relevant number of Common Equity Tier 1 instruments.

(6)Before making a mandatory reduction instrument, the Bank must consult—

(a)the PRA,

(b)the FCA, and

(c)the Treasury.

(7)In this section—

“parent undertaking” has the meaning given by Article 4.1(15)(a) of the capital requirements regulation,
F15...
“UK parent undertaking” means a parent undertaking that is incorporated in, or formed under the law of, any part of the United Kingdom.]

Textual Amendments

F1Ss. 6A-6D and cross-heading inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 10

F2Words in s. 6C(1) inserted (28.12.2020) by The Bank Recovery and Resolution (Amendment) (EU Exit) Regulations 2020 (S.I. 2020/1350), regs. 1(2), 8(a)

F3Words in s. 6C(1)(b) inserted (28.12.2020) by The Bank Recovery and Resolution (Amendment) (EU Exit) Regulations 2020 (S.I. 2020/1350), regs. 1(2), 8(b)

F4Words in s. 6C(1)(b) inserted (28.12.2020) by The Bank Recovery and Resolution (Amendment) (EU Exit) Regulations 2020 (S.I. 2020/1350), regs. 1(2), 8(c)

F5Words in s. 6C(1)(c) inserted (28.12.2020) by The Bank Recovery and Resolution (Amendment) (EU Exit) Regulations 2020 (S.I. 2020/1350), regs. 1(2), 8(b)

F6Words in s. 6C(2) inserted (28.12.2020) by The Bank Recovery and Resolution (Amendment) (EU Exit) Regulations 2020 (S.I. 2020/1350), regs. 1(2), 8(d)

F7Words in s. 6C(3) inserted (28.12.2020) by The Bank Recovery and Resolution (Amendment) (EU Exit) Regulations 2020 (S.I. 2020/1350), regs. 1(2), 8(e)

F8Words in s. 6C(4) inserted (28.12.2020) by The Bank Recovery and Resolution (Amendment) (EU Exit) Regulations 2020 (S.I. 2020/1350), regs. 1(2), 8(f)

F9Words in s. 6C(4)(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. 10(2)(a); 2020 c. 1, Sch. 5 para. 1(1)

F10Words in s. 6C(4)(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. 10(2)(b); 2020 c. 1, Sch. 5 para. 1(1)

F11Word in s. 6C(4)(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. 10(3); 2020 c. 1, Sch. 5 para. 1(1)