Treasury publishes Insurance Bill: Treasury has published a new Insurance Bill to take account of the recommendations of the Law Commission on insurance law reform. The Bill has three primary purposes:

  • to reform disclosure and misrepresentation in business and other non-consumer insurance contracts. The Bill will introduce a duty of "fair presentation" on policyholders to disclose risk information to insurers before entering into an insurance contract, and remedies for the insurer for breach of that duty;
  • to abolish “basis of the contract” clauses, which have the effect of converting pre-contractual information supplied to insurers into warranties without further discussion. Further, it suspends an insurer's liability in the event of a breach of warranty, where the current law discharges it. The change means the policyholder can remedy the breach and restore cover; and
  • to give insurers remedies for fraudulent claims.

The first reading of the Bill took place on 17 July. (Source: Treasury Publishes Insurance Bill)

Treasury updates sanctions policy: Treasury has published updated guidance to firms on complying with the sanctions regime. From midnight on 31 July, any funds arriving in the UK, or in a UK bank anywhere in the world, which have come from, or via, a designated person based outside the EU, will be required to be frozen in a suspense account, or other separate account, on arrival in the UK bank. The UK bank must apply for a licence to release them. Treasury had previously taken the view that when funds are received by a non-designated person in the UK from a designated person outside the EU, they did not need to be frozen and a licence was not required. (Source: Treasury Updates Sanctions Policy)

Treasury consults on BRRD implementation: Treasury has published a consultation paper on UK implementation of the Bank Recovery and Resolution Directive (BRRD). The UK must transpose the BRRD by the end of 2014, so there is not much time. PRA and FCA will publish separate, complementary consultations. Treasury's consultation focuses on:

  • necessary amendments to the Financial Services and Markets Act 2000 (FSMA) to use BRRD terminology accurately;
  • giving new powers to the BoE in conjunction with PRA's and FCA's powers. The BoE will have information-gathering powers and will have to carry out resolvability assessments. It will also gain powers in relation to removing impediments to resolvability;
  • legislating for an appeals process that will allow appeals against decisions to take crisis prevention measures. Treasury specifically seeks views on the appeals process and regulatory enforcement powers;
  • giving PRA and FCA more power over a greater array of holding companies in respect of financial support issues;
  • making minor changes to the largely compliant law which gives regulators power to take early intervention action. It specifically seeks views on the meaning of "senior management" for this purpose;
  • updating the Banking Act in relation to resolution objectives, although it feels the current law is largely consistent with the BRRD;
  • making minor changes to the law and regulatory powers relating to conditions for entry into resolution;
  • amending the Banking Act to add the asset separation tool as a new stabilisation option. Treasury specifically seeks comments on transposition of the BRRD provisions relating to the Asset Management Vehicle;
  • confirming that the Government will not implement the UK's bail-in legislation ahead of the BRRD's provisions, and will change the (as yet uncommenced) provisions of the Financial Services (Banking Reform) Act to make them fully consistent with the BRRD. It is also adamant it will commence the bail-in provisions on 1 January 2015 and will not take advantage of the one-year grace period the BRRD allows. It asks several specific questions on aspects of the bail-in provisions and their interpretation;
  • discussing arrangements for safeguarding. On partial property transfers, the Government believes the Banking Act 2009 (Restriction of Partial Property Transfers) Order 2009 will continue to be appropriate but will amend its original proposals on safeguards in bail-in to reflect comments on earlier consultations, in particular in respect of what should be excluded from the protected arrangements;
  • confirming it will proceed with its original proposals on "no shareholder or creditor worse off";
  • confirming the BoE will have power to refuse resolutions proceedings from third country regulators in defined circumstances. The Government believes there is no point giving share transfer powers over third country branches in the UK as in practice it believes the circumstances will not arise. It seeks views generally on how to deal with third country issues and what powers the BoE should have;
  • how to meet the ex-post funding requirements in the BRRD. It believes the existing bank levy in the Finance Act meets the ex-ante requirements;
  • how to implement the depositor protection requirements of the BRRD; and
  • how to address the inclusion of European Economic Area Member States that are not yet EU Members.

Treasury has also published for comment two draft Statutory Instruments, dealing with depositor protection and priorities, and setting out required amendments to the Banking Act. Treasury asks for comment by 28 September. (Source: Treasury Consults on BRRD Implementation)