The Banking Act 2009 (Restriction of Partial Property Transfers) Order 2009

• Citation: S.I. 2009/322
• Sections: 15

Section 1 Citation, commencement and interpretation

(1) This Order may be cited as the Banking Act 2009 (Restriction of Partial Property Transfers) Order 2009.

(2) This Order comes into force on 21st February 2009.

(3) In this Order—

“ the Act ” means the Banking Act 2009;

“ Annex 1 activity ” has the meaning given in point (26A) of Article 4.1 of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26th June 2013 on prudential requirements for credit institutions and investment firms;

“ the Bank ” means the Bank of England;

...

“ banking institution ” means—

a bank (within the meaning of Part 1 of the Act) ;

an investment firm;

an undertaking which was a bank or an investment firm immediately before the making of a share transfer order under section 13(2) of the Act;

a bridge bank ;

a building society (within the meaning of section 119 of the Building Societies Act 1986 ); ...

a banking group company; or

a third-country institution (within the meaning of section 89JA of the Act (resolution of UK branches of third-country institutions)).

...

“ continuity powers ” means the powers conferred by section 64(2) of the Act ... and section 67(2) of the Act ...;

“ deposit ” has the meaning given by article 5 of the Regulated Activities Order (disregarding the exclusions in articles 6 to 9AA of that Order );

“eligible claimant” has the meaning given by rules made by the Financial Conduct Authority or the Prudential Regulation Authority under section 213 of the Financial Services and Markets Act 2000;

“ excluded rights ” means rights—

which relate to a retail deposit made with a banking institution;

which relate to a retail liability owed to a banking institution;

which relate to a contract which was entered into by or on behalf of a banking institution otherwise than in the course of carrying on of an activity which relates ... to relevant financial instruments or an Annex 1 activity ;

which relate to a claim for damages, an award of damages or a claim under an indemnity which arose in connection with the carrying on by a banking institution of an activity which relates ... to relevant financial instruments or an Annex 1 activity ; ...

which relate to subordinated debt; or

which relate to transferable securities (other than transferable securities referred to or described in a set-off arrangement, netting arrangement or title transfer financial collateral arrangement referred to in article 3(1));

and “excluded liabilities” shall be interpreted accordingly;

“ financial instrument ” means—

any instrument listed in Part 1 of Schedule 2 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 , read with Articles 5 to 8, 10 and 11 of the Commission Delegated Regulation (EU) C(2016) 2398 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council ;

any option, future, swap, forward, contract for differences or other derivative contract not falling within paragraph (a); and

any combination of any of the foregoing;

...

“ Regulated Activities Order ” means the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 );

“ relevant authority ” means—

in relation to Case 1, 2, 4 , 5 or 6 (as specified in article 2(2), (3), (4A) , (4B) and (4C) ) , the Bank;

in relation to Case 3 (as specified in article 2(4)), the Treasury;

“ relevant financial instrument ” means—

a financial instrument;

a deposit;

a loan; ...

an instrument which falls within article 77 of the Regulated Activities Order (disregarding the exclusions in article 77(2)(b) to (d)); or

any contract for the sale, purchase or delivery of—

transferable securities;

the currency of the United Kingdom or any other country, territory or monetary union;

palladium, platinum, gold, silver or any other precious metal; or

any other commodity;

“ retail deposit ” means a deposit in relation to which the condition in paragraph (a) or (b) is satisfied—

the depositor is an eligible claimant; or

the deposit is held in an account of a particular class or brand provided by a particular banking institution which either—

is mainly used by eligible claimants; or

has been mainly marketed by the banking institution to eligible claimants;

“ retail liability ” means a liability which is owed to a banking institution by an eligible claimant;

“ title transfer financial collateral arrangements ” has the meaning given by regulation 3 of the Financial Collateral Arrangements (No 2) Regulations 2003 ;

“transferable securities” has the meaning given by point (24) of Article 2.1 of Regulation (EU) No. 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Regulation (EU) No 648/2012.

(4) References in this Order to netting arrangements include—

(a) arrangements which provide for netting (within the meaning given by regulation 2(1) of the Financial Markets and Insolvency (Settlement Finality) Regulations 1999 ); and

(b) arrangements which include a close-out netting provision (within the meaning given by regulation 3 of the Financial Collateral Arrangements (No 2) Regulations 2003).

(5) References in this Order to sections of the Banking Act 2009 include, as the context requires, references to those provisions as applied with or without modifications by that Act, as that Act has effect on the day on which the Bank Recovery and Resolution (Amendment) (EU Exit) Regulations 2018 come into force.

(6) In this Order any reference to an EU regulation or EU tertiary legislation within the meaning of the European Union (Withdrawal) Act 2018 is to be read as a reference to the instrument as it forms part of assimilated law .

Section 2 Application of this Order

(1) This Order applies in the following cases.

(2) Case 1 is where a partial property transfer has been made by the Bank in accordance with section 11(2) , 12(2) or 12ZA(3) of the Act.

(3) Case 2 is where—

(a) the Bank has made a property transfer instrument in accordance with section 11(2) , 12(2) or 12ZA(3) of the Act (whether or not that instrument is a partial property transfer); and

(b) a property transfer instrument under section 42, 43 or 44 of the Act has been made by the Bank which is a partial property transfer.

(4) Case 3 is where—

(a) the Treasury have made a share transfer order in accordance with section 13(2) of the Act ...; and

(b) a property transfer instrument has been made by the Treasury under section 45 or 46 of the Act ... which by virtue of section 45(5)(b) or 46(5)(b) of the Act is to be treated as a partial property transfer.

(4A) Case 4 is where—

(a) the Bank has made a resolution instrument in accordance with section 12A(2) of the Act (bail-in option), and

(b) a property transfer instrument has been made under section 41A(2) (transfer of property subsequent to resolution instrument), 42 (supplemental instruments) or 44A (bail in: reverse property transfer) of the Act which is a partial property transfer.

(4B) Case 5 is where—

(a) the Bank has made a third-country instrument in accordance with section 89H of the Act (recognition of third-country resolution actions), and

(b) either—

(i) that third-country instrument or

(ii) any further third-country instrument made under section 89I(4)(b),

makes provision which would otherwise be made in a property transfer instrument and which, if made in a property transfer instrument, would be a partial property transfer.

(4C) Case 6 is where—

(a) the Bank has made a share transfer instrument in accordance with section 12(2) of the Act; and

(b) a property transfer instrument has been made by the Bank in accordance with section 44D(2) (bridge bank: supplemental property transfer powers) or section 44E(2) (bridge bank: supplemental reverse property transfer powers) of the Act which is a partial property transfer.

(5) For the purposes of this Order, a property transfer instrument or order which purports to transfer all of the property, rights and liabilities of a banking institution shall be treated as having done so effectively (and so shall not be treated as a partial property transfer), notwithstanding the possibility that any of the property, rights or liabilities are foreign property and may not have been effectively transferred by the property transfer instrument or order or by virtue of steps taken under section 39 of the Act.

(6) This Order does not apply in the case of a partial property transfer made under Part 1 of the Act as applied by section 89B of the Act.

Section 3 Set-off and netting

(1) A partial property transfer to which this Order applies may not provide for the transfer of some, but not all, of the protected rights and liabilities between a particular person (“P”) and a banking institution under a particular set-off arrangement , netting arrangement or title transfer financial collateral arrangement.

(2) A partial property transfer to which this Order applies may not include provision under the continuity powers which terminates or modifies the protected rights or liabilities between P and a banking institution.

(3) For the purposes of paragraphs (1) and (2), rights and liabilities between P and a banking institution are protected if they are rights and liabilities which either P or the banking institution is entitled to set-off or net under a set-off arrangement, netting arrangement or title transfer financial collateral arrangement which P has entered into with the banking institution so long as they are not excluded rights or excluded liabilities.

(4) For the purposes of paragraph (1), a property transfer instrument or order which purports to transfer all of the protected rights and liabilities between P and a banking institution under a particular set-off arrangement, netting arrangement or title transfer financial collateral arrangement shall be treated as having done so effectively (and so not give rise to a contravention of paragraph (1)), notwithstanding the possibility that any of the protected rights or liabilities are foreign property and may not have been effectively transferred by the property transfer instrument or order or by virtue of steps taken under section 39 of the Act.

(5) For the purposes of paragraph (3), it is immaterial whether—

(a) the arrangement which permits P or the banking institution to set-off or net rights and liabilities also permits P or the banking institution to set-off or net rights and liabilities with another person; or

(b) the right of P or the banking institution to set-off or net is exercisable only on the occurrence of a particular event.

(6) In this article, “excluded rights” and “excluded liabilities” have the meanings given in article 1 except that the reference to subordinated debt and the references to transferable securities in paragraph (f) of the definition of “excluded rights” shall be treated as if they were respectively a reference to subordinated debt or transferable securities issued by P or by the banking institution.

Section 4 Community law

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Section 5 Secured liabilities

(1) Subject to paragraph (5), paragraphs (2), (2A), (3) and (4) apply where an arrangement has been entered into under which one party owes a liability to the other and that liability is secured against property or rights; and it is immaterial that—

(a) the liability is secured against all or substantially all of the property or rights of a person;

(b) the liability is secured against specified property or rights; or

(c) the property or rights against which the liability is secured are not owned by the person who owes the liability.

(2) A partial property transfer to which this Order applies may not transfer the property or rights against which the liability is secured unless that liability and the benefit of the security are also transferred.

(2A) A partial property transfer to which this Order applies may not transfer the benefit of the security unless the liability which is secured is also transferred.

(3) A partial property transfer to which this Order applies may not transfer the liability unless the benefit of the security is also transferred.

(4) A partial property transfer to which this Order applies may not include provision under the continuity powers which terminates or modifies the arrangement if the effect of that provision is to provide that the liability is no longer secured against the property or right.

(5) Paragraphs (2), (2A), (3) and (4) do not apply if the arrangement has been entered into by a banking institution in contravention of a rule prohibiting such arrangements made by the Financial Conduct Authority or the Prudential Regulation Authority under the Financial Services and Markets Act 2000 or otherwise than in accordance the Part 4 permission (within the meaning of that Act) of the banking institution.

(6) For the purposes of paragraphs (2) , (2A) and (3), a property transfer instrument or order which purports to transfer any property, rights or liabilities shall be treated as having done so effectively (and so not give rise to a contravention of paragraph (2) , (2A) or (3)), notwithstanding the possibility that any of those property, rights or liabilities are foreign property and may not have been effectively transferred by the property transfer instrument or order or by virtue of steps taken under section 39 of the Act.

Section 5A Secured liabilities: eligible deposits

(1) This article applies where the property or rights against which a liability is secured consist of, or include, eligible deposits.

(2) Article 5 does not apply if the Bank of England considers that, in order to ensure that eligible deposits are available to depositors, it is necessary—

(a) to transfer the eligible deposits without the other property or rights against which the liability is secured, or without the liability which they are securing, or

(b) to transfer the other property or rights against which the liability is secured, or the liability, without the eligible deposits.

(3) For the purposes of this article, “ eligible deposit ” means a deposit in respect of which the person, or any of the persons, to whom it is owed would be eligible for compensation under the Financial Services Compensation Scheme.

Section 6 Capital market arrangements

(1) Subject to paragraph (3), a partial property transfer to which this Order applies may not provide for the transfer of some, but not all, of the property, rights and liabilities which are or form part of a capital market arrangement to which the banking institution is a party.

(2) Subject to paragraph (3), a partial property transfer to which this Order applies may not include provision under the continuity powers which terminates or modifies property, rights or liabilities which are or form part of a capital market arrangement to which the banking institution is a party.

(3) Paragraphs (1) and (2) do not apply where the only property, rights and liabilities transferred or not transferred, or terminated or modified (as the case may be) are property, rights and liabilities which relate to deposits.

(4) For the purposes of paragraph (1), a property transfer instrument or order which purports to transfer all of the property, rights and liabilities which are or form part of a capital market arrangement to which the banking institution is a party shall be treated as having done so effectively (and so not give rise to a contravention of paragraph (1)), notwithstanding the possibility that any of those property, rights or liabilities are foreign property and may not have been effectively transferred by the property transfer instrument or order or by virtue of steps taken under section 39.

(5) For the purposes of this article, “ capital market arrangement ” has the meaning given by paragraph 1 of Schedule 2A to the Insolvency Act 1986 .

Section 7 Financial markets

(1) A property transfer order to which this Order applies may not transfer property, rights or liabilities or include provision under the continuity powers to the extent that to do so would have the effect of modifying, modifying the operation of or rendering unenforceable—

(a) a market contract;

(b) the default rules of a recognised investment exchange , recognised clearing house or recognised CSD ; or

(c) the rules of a recognised investment exchange , recognised clearing house or recognised CSD as to the settlement of market contracts not dealt with under its default rules.

(2) For the purposes of this article—

“ default rules ” has the meaning given by section 188 of the Companies Act 1989 ;

“ market contract ” has the meaning given by section 155 of the Companies Act 1989;

“recognised clearing house” , “recognised CSD and “recognised investment exchange” have the meanings given by section 285 of the Financial Services and Markets Act 2000.

Section 7A Trusts

A partial property transfer to which this Order applies which makes provision under section 34(7)(a) of the Act may remove or alter the terms of the trust (howsoever arising) only to the extent necessary or expedient for the purpose of transferring from the banking institution to the transferee—

(a) the legal or beneficial interest of the banking institution in the property held on trust;

(b) any powers, rights or obligations of the banking institution in respect of the property held on trust.

Section 8 Additional restrictions on reverse transfers

(1) This article applies to a partial property transfer to which this Order applies which is made—

(a) by the Bank under section 44 , 44A or 44E of the Act; or

(b) by the Treasury under section 46 of the Act.

(2) Subject to paragraph (3), a partial property transfer to which this article applies may not provide for the transfer of—

(a) any property, rights or liabilities which were not transferred under the original instrument or order;

(b) any liability which was not, at the time immediately before the original instrument or order was made, a liability owed by the banking institution; or

(c) rights or liabilities under a relevant financial instrument.

(3) Paragraph (2) does not apply to—

(a) a transfer of property, rights or liabilities which have accrued, become or ceased to become payable, changed or lapsed as a result of the application of a default event provision which applies by virtue of the original instrument or order;

(b) a transfer of property, rights or liabilities to which consent has been given by the transferee, the transferor and any other person whose consent for the transfer would be required were the transfer not being effected by a property transfer instrument or order;

(c) a transfer of a claim for damages or an award of damages against the banking institution which was in existence immediately before the original instrument or order was made;

(d) a transfer to an undertaking which has not entered insolvency; or

(e) a transfer under article 12(6).

(4) In this article—

(a) “ original instrument ” has the meaning given by section 44 , 44A or 44E (as the case may be) of the Act and “ original order ” has the meaning given by section 46 of the Act; and

(b) the reference to insolvency includes a reference to (i) liquidation, (ii) bank insolvency, (iii) administration, (iv) bank administration, (v) receivership, (vi) a composition with creditors, and (vii) a scheme of arrangement.

Section 9 Termination rights

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Section 9A Banking Group Companies

(1) A partial property transfer—

(a) to which this Order applies, and

(b) under which the transferor is a relevant company,

may not transfer property, rights or liabilities of the company unless the property, rights or liabilities are necessary for the carrying on of relevant business.

(2) For these purposes it does not matter whether relevant business has been transferred by a property transfer instrument.

(3) In this article—

“ financial institution ” has the meaning given by point (26) of Article 4(1) of Regulation (EU) No. 575/2013 of the European Parliament and of the Council of 26th June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No. 648/2012;

“ relevant business ” means the business, or any part of the business, of a banking institution, recognised central counterparty or other banking group company which is (or, but for the exercise of a stabilisation power, would be) in the same group as the relevant company; and

“ relevant company ” means a company, other than a financial institution, which—

is a banking group company in relation to which this Order has effect by virtue of section 81C of the Act ; and

is not a parent undertaking of the banking institution in the same group in respect of which the PRA is satisfied for the purpose of section 81B(2) of the Act that the general conditions for the exercise of a stabilisation power are met.

(4) For the purpose of the definition of “relevant business” undertakings are in the same group if they are group undertakings in respect of each other.

(5) Expressions defined in the Companies Act 2006 have the same meaning in this article as in that Act.

Section 10 Financial markets, termination rights and continuity power

(1) This article applies where a partial property transfer has been made in contravention of article 7 ...or any other provision of this Order which relates to the exercise of the continuity powers.

(2) The partial property transfer is void in so far as it is made in contravention of those provisions of the Order.

Section 11 Set-off and netting

(1) This article applies where a partial property transfer has been made in contravention of—

(a) article 3; or

(b) article 4, to the extent that the contravention relates to set-off arrangements, netting arrangements or title transfer financial collateral arrangements,

unless the contravention relates to the exercise of the continuity powers (in which case article 10 applies).

(2) The partial property transfer does not affect the exercise of the right to set-off or net.

Section 12 Contravention of other provisions of the Order

(1) Subject to paragraph (2), this article applies where any person (“P”) considers that a partial property transfer has been made in contravention of any provision of this Order and that as a result the property, rights or liabilities of P have been affected.

(2) This article does not apply to the extent that article 10 or 11 applies.

(3) P may give notice to the relevant authority of the alleged contravention of this Order.

(4) The notice under paragraph (3) must—

(a) be given within 60 days of the day on which the partial property transfer took effect;

(b) be in writing;

(c) specify the provision of this Order which is alleged to have been contravened and the manner in which that contravention has occurred;

(d) identify the property, rights or liabilities to which the alleged contravention relates; and

(e) contain or be accompanied by such information as the relevant authority may reasonably require.

(5) Subject to paragraph (8), within 60 days of receipt of a notice under paragraph (3), the relevant authority must—

(a) if it agrees that a provision of this Order has been contravened in the manner specified in the notice given under paragraph (3), take the steps specified in paragraph (6);

(b) if it does not agree that a provision of this Order has been contravened in the manner specified in the notice given under paragraph (3), take the steps specified in paragraph (7).

(6) The steps are to remedy the contravention by transferring property, rights or liabilities to the transferee or the transferor under the partial property transfer (whether by means of an onward property transfer instrument under section 43 of the Act, a reverse property transfer under section 44 , 44A or 44E , a property transfer order under section 45, a reverse property transfer under section 46 or by other means).

(7) The steps are to give reasons to P as to why it considers that no provision of this Order has been contravened in the manner specified in the notice under paragraph (3).

(8) If the relevant authority considers that the matters raised in the notice under paragraph (3) are of such complexity that it is impracticable to take a decision under paragraph (5) within 60 days of receipt of the notice, the relevant authority may extend the period of 60 days by no more than 60 days; in such cases it must, within 60 days of receipt of the notice under paragraph (3), inform P of the extension and the duration of the extension.

(9) The property, rights or liabilities which are transferred under paragraph (6) may be the same property, rights or liabilities which were, in contravention of this Order, transferred or not transferred (as the case may be) or, if the transfer of such property, rights or liabilities is not practicable, property, rights or liabilities which, in the opinion of the relevant authority, are equivalent to those property, rights or liabilities.