On the legislation.gov.uk website there has been published a draft version of the Bank Recovery and Resolution Order 2016 (the draft Order) together with a draft explanatory memorandum.
The draft Order amends the special resolution regime for banks and investment firms to strengthen and clarify the UK’s transposition of the Bank Recovery and Resolution Directive (BRRD). The UK transposed the BRRD on 1 January 2015 through amendments to the Banking Act 2009, the Financial Services and Markets Act 2000 (FSMA) (made in the Bank Recovery and Resolution Order 2014, the Bank Recovery and Resolution (No.2) Order 2014) and a series of other statutory instruments. The draft Order makes amendments to these pieces of legislation.
In particular the draft Order:
- amends section 48Z of the Banking Act 2009 to ensure that certain instruments can take effect in accordance with their terms, to the extent specified by the resolution authority (the Bank of England or the Treasury as the case may be), to support the stabilisation of the firm as this will be appropriate for a narrow range of contracts;
- gives stand-alone powers to the PRA and FCA to require the removal and replacement of directors and senior managers in accordance with Article 28 of the BRRD, and to appoint temporary managers in accordance with Article 29. While regulators already have the power to undertake these early intervention measures, the stand alone powers provide clarity on scope. New powers are also given to the PRA and FCA to call a shareholder meeting if the management body had been required to call a meeting, but had not done so;
- gives the Bank of England bank-stop powers independently to resolve the UK branch of a third country (non-EEA) institution, if the bank has refused to recognise the actions of the third country resolution authority or the third country resolution authority fails to act, in accordance with Article 96 of the BRRD. The draft Order also extends the safeguards that apply in connection with the exercise of the property transfer and bail-in powers for firms established in the UK to the case of branch resolution;
- gives the Bank of England powers to convert a failing building society into a company, enabling the shares of this company to be transferred to a bridge bank, in order to ensure the bridge bank tool can be applied by way of a share transfer instrument for building societies as required by Article 40 of the BRRD.
HM Treasury has also published a document that briefly summarises the responses submitted to its December 2015 consultation on BRRD implementation.
View Draft Bank Recovery and Resolution Order 2016 published, 3 November 2016
View Explanatory note to the Draft Bank Recovery and Resolution Order 2016, 3 November 2016
View Consultation on the implementation of the BRRD, 3 November 2016