The Bank Recovery and Resolution ( No. 2) Order 2014

PART 10 U.K. Requirement to write down or convert capital instruments

Application and interpretation of Part U.K.

149.—(1) This Part applies in relation to a relevant group.

(2) In this Part—

“alternative measure” means—

(a)

a measure for early intervention within the meaning given in Chapter 1 of Part 8;

(b)

[F1 a power of the FCA or PRA by or under legislation upon which the United Kingdom relied immediately before IP completion day to meet its obligations with respect to] Article 104.1 of the capital requirements directive (supervisory powers); or

(c)

a transfer of funds or capital from a parent undertaking;

F2 ...

“Case 2”—

(a)

in relation to a bank, means Case 2 set out in subsection (3) of section 6A of the Banking Act 2009 (cases where mandatory write-down, conversion, etc applies);

(b)

in relation to a banking group company, means Case 2 set out in subsection (4) of section 81AA of that Act M1 (cases where mandatory write-down, conversion, etc applies: banking group companies);

“Case 3”, in relation to a bank, means Case 3 set out in section 6A(4) of that Act;

“Case 4”, in relation to a bank, means Case 4 set out in section 6A(5) of that Act;

“Case 5”—

(a)

in relation to a bank, means Case 5 set out in section 6A(6) of that Act;

(b)

in relation to a banking group company, means Case 3 set out in section 81AA(8) of that Act;

F2 ...

“recognised capital instruments” means Common Equity Tier 1 instruments, Additional Tier 1 instruments or Tier 2 instruments which have been recognised for the purpose of meeting the own funds requirements (within the meaning given in section 3(1) of the Banking Act 2009 M2 ) of institutions on an individual and a consolidated basis; and

“UK group entity” means a group entity which is a bank or banking group company and has issued recognised capital instruments.

(3) In this article, for the interpretation of expressions defined in paragraph (2)—

• “Additional Tier 1 instruments”, “Common Equity Tier 1 instruments” and “Tier 2 instruments” have the meaning given in section 3(1) of the Banking Act 2009 M3 (interpretation: other expressions);

• “bank” has the meaning given by section 2 of the Banking Act 2009 M4 (interpretation: “bank”), but includes—

  (a)

  a building society within the meaning given in section 119 of the Building Societies Act 1986; and

  (b)

  an investment firm within the meaning given in section 258A of the Banking Act M5 (“investment firm”);

• “banking group company” has the meaning given by section 81D of that Act M6 ; and

• “group entity” includes an undertaking which is—

  (a)

  F3 ...

  (b)

  a mixed activity holding company.

Textual Amendments

F1 Words in art. 149(2) 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. 3 para. 83(2)(a) (as amended by S.I. 2020/1301, regs. 1, 3, Sch. para. 10(c)(iii)); 2020 c. 1, Sch. 5 para. 1(1)

F2 Words in art. 149(2) 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. 3 para. 83(2)(b); 2020 c. 1, Sch. 5 para. 1(1)

F3 Words in art. 149(3) 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. 3 para. 83(3); 2020 c. 1, Sch. 5 para. 1(1)

Marginal Citations

M1 Sections 6A and 81AA were inserted by S.I. 2014/3329.

M2 Section 3 was amended by the Financial Services Act 2012, section 96(2) and Schedule 17, paragraphs 1 and 4, and by S.I. 2014/3329, which inserted the definition of “own funds requirements”.

M3 These definitions were inserted by S.I. 2014/3329.

M4 Section 2 was amended by the Financial Services Act 2012, sections 101(1) and (3) and 102(1) and (3) and Schedule 17, paragraph 3, and by S.I. 2011/2832.

M5 Section 258A was inserted by the Financial Services Act 2012, section 101(1) and (7). See S.I. 2014/1832, which was made under subsection (2)(b). No other order has been made under that subsection.

M6 Section 81D was inserted by the Financial Services Act 2012, section 100(5); and was amended by the Financial Services (Banking Reform) Act 2013, Schedule 2, paragraphs 1 and 7(3), and by S.I. 2014/3329.

Determinations [F4 under section 6A and 81AA of the Banking Act 2009]: preliminary steps for UK group entities U.K.

150.—(1) Before the Bank makes a determination that Case 2, 4 or 5 is satisfied in relation to a UK group entity, the Bank must give notice that it is considering whether to make that determination (“a Case 2, 4 or 5 notice”) without delay [F5 to the appropriate regulator].

(2) Before the Bank makes a determination F6 ... that Case 3 is satisfied in relation to a UK group entity, the Bank must give notice that it is considering whether to make that determination (“a Case 3 notice”) without delay [F7 to the appropriate regulator].

(3) Where the Bank gives a Case 2, 4 or 5 notice or a Case 3 notice, it must—

(a) send with the notice an explanation of its reasons for considering whether to make the determination concerned; and

(b) after consulting the authorities to which the notice has been given assess whether—

(i) any alternative measure is available;

(ii) any alternative measure which is available could feasibly be taken; and

(iii) there is any reasonable prospect that any alternative measure which is available and could feasibly be taken would, within a reasonable time, avoid the need for the determination.

F8 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F8 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F4 Words in art. 150 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. 3 para. 84(2); 2020 c. 1, Sch. 5 para. 1(1)

F5 Words in art. 150(1) 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. 3 para. 84(3); 2020 c. 1, Sch. 5 para. 1(1)

F6 Words in art. 150(2) 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. 3 para. 84(4)(a); 2020 c. 1, Sch. 5 para. 1(1)

F7 Words in art. 150(2) 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. 3 para. 84(4)(b); 2020 c. 1, Sch. 5 para. 1(1)

F8 Art. 150(4)(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. 3 para. 84(5); 2020 c. 1, Sch. 5 para. 1(1)

Regulator to take alternative measures U.K.

151.—(1) Where, in the Bank's assessment, there is a reasonable prospect that an alternative measure which is available and could feasibly be taken would, within a reasonable time, avoid the need for the determination referred to in a Case 2, 4 or 5 notice or a Case 3 notice—

(a) the Bank must notify the regulator of that fact; and

(b) except where the measure is a transfer of funds from a parent undertaking, the regulator must take the alternative measure in exercise of its powers under FSMA.

(2) In this article “the regulator”—

(a) where there is a PRA-authorised person and any other UK authorised person in the relevant group, means the PRA and the FCA;

(b) where there is a PRA-authorised person and no other UK authorised person in the relevant group, means the PRA;

(c) where there is no PRA-authorised person in the relevant group, means the FCA.

Determination that Case 2, 3, 4 or 5 is satisfied U.K.

152.—(1) This article applies where, in the Bank's assessment, there is no reasonable prospect that any alternative measure which is available and could feasibly be taken would, within a reasonable time, avoid the need for the determination referred to in a Case 2, 4 or 5 notice or a Case 3 notice.

(2) F9 ... The Bank must decide whether to make the determination referred to in the notice.

F10 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F10 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F9 Words in art. 152(2) 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. 3 para. 85(2); 2020 c. 1, Sch. 5 para. 1(1)

F10 Art. 152(3)(4) 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. 3 para. 85(3); 2020 c. 1, Sch. 5 para. 1(1)

Joint determination under Article 59(3)(c) of the recovery and resolution directive in relation to a non-UK group entity U.K.

F11 153.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F11 Art. 153 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. 3 para. 86; 2020 c. 1, Sch. 5 para. 1(1)