Schedule 11, Part 5, paragraph 34

The seventh stabilisation option is for the Bank to make one or more write-down instruments. A write-down instrument is an instrument that makes any of the following provision (or any combination of the following)— provision cancelling an unsecured liability owed by the CCP; provision modifying or changing the form of an unsecured liability owed by the CCP; provision that a contract under which the CCP has an unsecured liability is to have effect as if a specified right had been exercised under it; provision under paragraph 35(1). The power under this paragraph may be exercised only for the purpose of recovering losses arising otherwise than as a result of a clearing member defaulting on the member’s obligations to the CCP. The power under sub-paragraph (2) may not be exercised so as to affect the following liabilities— liabilities to employees or workers, including liabilities owed to a pension scheme in respect of those persons; liabilities to commercial or trade creditors arising from the provision to the CCP of goods or services that are critical to the continuity of the CCP’s critical clearing services; HMRC debts which are preferential debts within the meaning of section 386 of the Insolvency Act 1986; liabilities to designated systems, operators of designated systems, or participants in such systems to the extent that the liabilities arise from their participation in the system; liabilities to interoperable CCPs; liabilities to central banks; liabilities to clearing members so far as these relate to initial margin requirements; liabilities to small enterprises. The reference to modifying a liability owed by the CCP includes a reference to modifying the terms (or the effect of the terms) of a contract under which the CCP has a liability. The reference to changing the form of a liability owed by the CCP includes, for example— converting an instrument under which a CCP owes a liability from one form or class to another, replacing such an instrument with another instrument of a different form or class, creating a new security (of any form or class) in connection with the modification of such an instrument, or converting those liabilities into securities issued by the CCP or a bridge central counterparty or UK parent of the CCP. The Treasury may by regulations amend sub-paragraph (4) by— adding to the list of liabilities; amending or omitting any liability listed. Regulations under this paragraph are subject to the affirmative procedure. In this paragraph— “designated system” has the meaning given by regulation 2 of the Financial Markets and Insolvency (Settlement Finality) Regulations 1999 (S.I. 1999/2979) as amended from time to time; “initial margin requirements” means margins provided by clearing members to a CCP to cover the CCP’s potential future exposure in the event of default by those members; “small enterprise” means an enterprise which employs fewer than 50 people and whose annual turnover or annual balance sheet total does not exceed £10 million.

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