Section 89JA(8)

For section 48B (special bail-in provision), substitute— “Special bail-in provision”, for the purposes of section 44B(1), means any of the following (or any combination of the following)— provision modifying, or changing the form of, a relevant liability; provision that a contract under which the relevant institution has a relevant liability is to have effect as if a specified right had been exercised under it. “Special bail-in provision”, for the purposes of section 44B, also includes any associated provision (see subsection (3)) that the Bank of England may think it appropriate to make in consequence of any provision under subsection (1) that— is made in the same property transfer instrument, or has been made in another property transfer instrument in respect of the UK branch, or (where the institution in relation to which special bail-in provision is made is a resolution company) in respect of the resolution company. “Associated provision” means provision modifying a contract under which a company which is a banking group company in relation to the third-country institution has a liability (whether or not the institution in relation to which special bail-in provision is made is the third-country institution). A power to make special bail-in provision— may be exercised only for the purpose of, or in connection with, reducing or deferring a relevant liability of the relevant institution; may not be exercised so as to affect any excluded liability. The following rules apply to the interpretation of subsection (1). 1 The reference to modifying a relevant liability includes a reference to modifying the terms (or the effect of the terms) of a contract under which the relevant institution has a liability. 2 The reference to changing the form of a relevant liability, includes, for example— converting an instrument under which the relevant institution owes a relevant liability from one form or class to another, replacing such an instrument with another instrument of a different form or class, or converting those liabilities into securities issued by a bridge bank or a UK parent undertaking. For the purposes of rule 2 in subsection (5)— “parent undertaking” has the meaning given by Article 4.1(15)(a) of the capital requirements regulation, and “UK parent undertaking” means a parent undertaking that is incorporated in, or formed under the law of, any part of the United Kingdom. Examples of special bail-in provision include— provision that transactions or events of any specified kind have or do not have (directly or indirectly) specified consequences or are to be treated in a specified manner for specified purposes; provision discharging persons from further performance of obligations under a contract and dealing with the consequences of persons being so discharged. The form and class of the instrument (“the resulting instrument”) into which an instrument is converted, or with which it is replaced, do not matter for the purposes of paragraphs (a) and (b) of rule 2 in subsection (5); for instance, the resulting instrument may (if it is a security) fall within Class 1 or any other Class in section 14. Liabilities of the relevant institution are “excluded liabilities” if they are— liabilities listed in subsection (10), or liabilities which the Bank of England has excluded under subsection (12) from the application of special bail-in provision. The following liabilities of the relevant institution are the excluded liabilities referred to in subsection (9)(a)— liabilities representing protected deposits; any liability, so far as it is secured; liabilities that the relevant institution has by virtue of holding client assets; liabilities with an original maturity of less than 7 days owed by the relevant institution to a credit institution or investment firm; liabilities with a remaining maturity of less than 7 days arising from participation in designated settlement systems and owed to such systems or to operators of, or participants in, such systems; liabilities with a remaining maturity of less than 7 days owed by the relevant institution to a recognised central counterparty ... or a third country central counterparty; liabilities owed to an employee or former employee in relation to salary or other remuneration, except— variable remuneration that is not regulated by a collective bargaining agreement, and variable remuneration of material risk takers within the meaning of rule 3 of Part 152 (remuneration) of the PRA rulebook (other than persons deemed by virtue of rule 3.2 not to be material risk takers and notified to the PRA in accordance with rule 3.2); liabilities owed to a pension scheme, except for liabilities owed in connection with variable remuneration of the kind mentioned in paragraph (f)(i) or (ii); liabilities owed to creditors arising from the provision to the relevant institution of goods or services (other than financial services) that are critical to the daily functioning of the operations of the third-country institution or of its UK branch (or in the case of an instrument made in relation to a resolution company, of the resolution company); liabilities owed by the relevant institution to the scheme manager of the FSCS in relation to levies imposed by the scheme manager under section 213(3)(b) or (4) of the Financial Services and Markets Act 2000; liabilities owed by the relevant institution to another institution or a banking group company which (in either case)— where the liabilities do not rank below ordinary non-preferential debts under the hierarchy of claims in normal insolvency proceedings. is part of the same resolution group as the relevant institution, and is not itself a resolution entity, The following special rules apply in cases involving banking group companies (whether or not the institution in relation to which special bail-in provision is made is the third-country institution)— a liability is not within subsection (10)(d) if the credit institution or investment firm to which the liability is owed is a banking group company in relation to the third-country institution (see section 81D); in subsection (10)(h) the reference to creditors does not include companies which are banking group companies in relation to the third-country institution. The Bank of England may, in a property transfer instrument, exclude any bail-in liability or class of bail-in liabilities from the application of any special bail-in provision in relation to a relevant institution under section 44B if, and only if, the Bank of England— thinks the exclusion is justified on one or more of the grounds set out in subsection (14), ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The power conferred by subsection (12) may be exercised to exclude only part of a bail-in liability, or part of each of the bail-in liabilities of a particular class; and where it is so exercised that part is treated as a bail-in liability excluded under that subsection and the remainder is treated as a bail-in liability which has not been so excluded. The grounds are— that it is not reasonably possible to give effect to special bail-in provision in relation to the liability or class within a reasonable time; that the exclusion is necessary and proportionate to achieve the continuity of critical functions and core business lines in a manner that maintains the ability of the third-country institution or its UK branch (or in the case of an instrument made in relation to a resolution company, of the resolution company) to continue key operations, services and transactions; that the exclusion is necessary and proportionate to avoid giving rise to widespread contagion, in particular as regards protected deposits held by natural persons or micro, small and medium-sized enterprises, which would severely disrupt the functioning of financial markets, including financial market infrastructures, in a manner that could cause a serious disturbance to the economy of the United Kingdom; that the making of special bail-in provision in relation to the liability would cause a reduction in value such that the losses borne by other creditors would be higher than if the liability were excluded. When deciding whether to exclude liabilities under subsection (12) or (13), the Bank of England must give due consideration to— and for the purposes of this subsection “insolvency proceedings” means such insolvency proceedings (whether or not under the law of a country or territory outside the United Kingdom) as the Bank of England, after consultation with the Treasury, considers relevant. the principle that all the relevant liabilities of the relevant institution ought to be treated in accordance with the priority they would enjoy if the relevant institution went into insolvency proceedings, and the principle that any creditors who would have equal priority in insolvency proceedings ought to bear losses on an equal footing with each other, For the purposes of subsection (14)— “core business lines” means business lines and associated services which represent material sources of revenue, profit or franchise value for the third-country institution or its UK branch (or in the case of an instrument made in relation to a resolution company, of the resolution company); “protected deposit” has the meaning given by section 48C, and “micro, small and medium-sized enterprises” means micro, small and medium-sized enterprises as defined with regard to the annual turnover criterion referred to in Article 2(1) of the Annex to Commission Recommendation 2003/361/EC. For the purposes of the definition of “core business lines” Article 7 of Commission Delegated Regulation (EU) 2016/778 (criteria relating to the determination of core business lines) applies. The Treasury may by regulations made by statutory instrument specify criteria for the determination of the business lines and associated services referred to in the definition of “core business lines”. The power conferred by subsection (16) includes— power to amend or revoke Article 7 of Commission Delegated Regulation (EU) 2016/778; and power to amend or repeal subsection (17A). A statutory instrument containing regulations under subsection (17B) is subject to annulment in pursuance of a resolution of either House of Parliament. For the purposes of this section— “relevant liability” means a liability of a third-country institution or resolution company which is transferred in the property transfer instrument which makes special bail-in provision, “relevant institution” means the third-country institution or resolution company whose liabilities are so transferred.

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Source: legislation.gov.uk · retrieved 2026-09-04