# The Financial Services and Markets Act 2000 (Excluded Activities and Prohibitions) Order 2014

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U.K.

Statutory Instruments

# 2014 No. 2080

Banks And Banking

# The Financial Services and Markets Act 2000 (Excluded Activities and Prohibitions) Order 2014

Made

23rd July 2014

Coming into force in accordance with article 1(2) and (3)

In accordance with section 142Z of the Financial Services and Markets Act 2000, a draft of this Order has been laid before                           Parliament and approved by a resolution of each House of Parliament.                        

The Treasury make the following Order in the exercise of the powers conferred on them by sections 142D, 142E and 142F of the                           Financial Services and Markets Act 2000 F1.                        

F12000 c. 8. Sections 142A to 142Z1 were inserted into the Act by the Financial Services (Banking Reform) Act 2013 (c.33), **section 4**.

## **PART 1**U.K.GENERAL

### Citation, commencement and interpretationU.K.

1.—(1) This Order may be cited as the Financial Services and Markets Act 2000 (Excluded Activities and Prohibitions) Order 2014.                  

(2) This article, articles 2 and 3 and the Schedule to this Order come into force on 1st January 2015.

(3) The other provisions of this Order come into force on 1st January 2019.

(4) In this Order—

“account holder” means any person, other than a relevant financial institution, who has an account with a ring-fenced body F2;                  

“the Act” means the Financial Services and Markets Act 2000;                  

“alternative investment fund” means an AIF within the meaning of Article 4(1)(a) of the Directive of the European Parliament and of the Council of 8 June                     2011 on alternative investment fund managers F3;                  

“alternative investment fund manager” means an AIFM within the meaning of Article 4(1)(b) of the Directive of the European Parliament and of the Council of 8                     June 2011 on alternative investment fund managers;                  

“building society” means a building society incorporated (or deemed to be incorporated) under the Building Societies Act 1986 F4;                  

“capital market arrangement” has the meaning given in paragraph 1 of Schedule 2A to the Insolvency Act 1986 F5;                  

[F6“charity” has the meaning given in section 1 of the Charities Act 2011, section 1 of the Charities Act (Northern Ireland)                        2008 or section 106 of the Charities and Trustee Investment (Scotland) Act 2005;                  

“CIO” means a body constituted and registered as a charitable incorporated organisation under Part 11 of the Charities Act 2011                        or Part 11 of the Charities Act (Northern Ireland) 2008, or as a Scottish charitable incorporated organisation under Part                        1 of the Charities and Trustee Investment (Scotland) Act 2005;]                   

“commodity” means any goods of a fungible nature that are capable of being delivered including metals and their ores and alloys, agricultural                     products, and energy such as electricity;                  

“conduit vehicle” of a ring-fenced body means an undertaking which satisfies the conditions set out in article 17(2) for the                     relevant financial institution described as D;                  

[F7“core deposit” has the meaning given in article 2(2) of the Financial Services and Markets Act 2000 (Ring-fenced Bodies and                        Core Activities) Order 2014;]                   

“correspondent banking” means an arrangement between two credit institutions pursuant to which one credit institution provides payment services                     to the clients of the other credit institution on behalf of that credit institution;                  

“covered bond vehicle” means a body corporate, partnership or unincorporated association—                  

which is a party to a capital market arrangement, or a transaction in pursuance of a capital market arrangement, and

whose business consists (apart from incidental activities) only of—

providing guarantees, and

acquiring, owning and managing assets directly or indirectly forming the whole or part of the security for a capital market                                       arrangement;                                    

“credit institution” has the meaning given in Article 4.1(1) of the prudential requirements regulation;                  

“credit institutions directive” means the Directive of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions                     and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/ECF8;                  

“credit union” means a credit union as defined by section 31 of the Credit Unions Act 1979 F9 or a credit union as defined by Article 2(2) of the Credit Unions (Northern Ireland) Order 1985 F10;                  

“debentures” include any investment of the kind specified by article 77 of the Regulated Activities Order 2001 F11;                  

“default risk”, in relation to a ring-fenced body, means the risk that—                  

one or more persons will default under a transaction with a ring-fenced body or with a subsidiary undertaking of the ring-fenced                              body or will become unlikely, unwilling or unable to pay or repay sums owing at law or in equity to the ring-fenced body or                              to a subsidiary undertaking of the ring-fenced body,                           

an obligation to pay or repay sums owing at law or in equity to the ring-fenced body or to a subsidiary undertaking of the                              ring-fenced body will be restructured so as to reduce or postpone the payments due as principal, interest or fees resulting                              in a loss to the ring-fenced body or to its subsidiary undertaking, or                           

the value of any security or collateral taken by the ring-fenced body or a subsidiary undertaking of the ring-fenced body                              in connection with one or more transactions entered into by the ring-fenced body or its subsidiary undertaking will be insufficient                              to meet the obligations of the counterparty to the transaction when the security is enforced or the collateral is sold;                           

and for the purposes of paragraph (b), “restructuring” includes restructuring through a voluntary arrangement made with creditors, by court order or through the exercise of powers                     under the Banking Act 2009 or in equivalent legislation in other countries)                  

“derivative instrument” includes any of the instruments listed in paragraphs (4) to (10) of Section C of Annex 1 to the markets in financial instruments                     directive;                  

“exposure” means—                  

an asset referred to in Part Three, Title II, Chapter 2 of the prudential requirements regulation, or

an off-balance sheet item listed in Annex I to the prudential requirements regulation F12,                           

without applying the risk weights or degrees of risk set out in the prudential requirements regulation;

“financial holding company” means a financial institution which is not a mixed financial holding company, the subsidiary undertakings of which are either                     exclusively or mainly credit institutions, investment firms or financial institutions and which has at least one subsidiary                     undertaking which is a credit institution or investment firm, and for the purposes of this definition, a financial institution                     is an undertaking other than a credit institution, the principal activity of which is to acquire holdings or to pursue one                     or more of the activities listed in points 2 to 12 and 15 of Annex I to the credit institutions directive;                  

“financial institution exposure” means an exposure to a relevant financial institution or an exposure to securities or other financial instruments issued                     by a relevant financial institution, but does not include an exposure where the sole or main purpose for which the ring-fenced                     body incurs the exposure to the relevant financial institution is to provide for—                  

the safeguarding and administration of assets of the ring-fenced body by that financial institution, or

client money or client assets to be held for the ring-fenced body by that relevant financial institution;

“global systemically important insurer” means an insurance undertaking, third country insurance undertaking, reinsurance undertaking or third country reinsurance                     undertaking which is included on the list of global systemically important insurers published by the Financial Stability Board                     on 18 July 2013, or on any updated version of that list or supplementary list of such undertakings published by the Financial                     Stability Board[F13, and any subsidiary undertaking of any such undertaking provided that the subsidiary undertaking is also an insurance undertaking,                        third country insurance undertaking, reinsurance undertaking or third country reinsurance undertaking];                  

“instruments giving an entitlement to shares or debentures” includes any instrument of the kind specified by article 79 (instruments giving entitlements to investments) of the Regulated                     Activities Order 2001 F14 which relates to shares or, as the case may be, debentures;                  

“insurance undertaking” has the meaning given in Article 13.1 of the solvency II directive F15;                  

“interest rate swap” has the meaning given in article 10(2)(c);                  

“liquid assets” means assets which qualify towards the liquidity coverage requirement provided for in Article 412 of the prudential requirements                     regulation as further specified in delegated acts adopted by the European Commission under Article 460 of that regulation;                  

“liquidity risk” means the risk that [F16the undertaking] does not have, or is unable to obtain, sufficient financial resources to enable it to meet its financial obligations as they                     fall due;                  

“management company” has the meaning given in Article 2.1(b) of the UCITS directive F17;                  

“mixed financial holding company” means an undertaking which is not a credit institution, an insurance undertaking or an investment firm, which has at least                     one subsidiary undertaking which is a credit institution, an insurance undertaking or an investment firm and which, together                     with its subsidiary undertakings, constitutes a financial conglomerate (within the meaning given by Article 2.14 of Directive                     2002/87/EC of the European Parliament and of the Council of 16 December 2002 F18 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate                     (disregarding any decision taken under Article 3(3) of that directive);                  

“own funds” means own funds as defined in Article 4.1(118) of the prudential requirements regulation;                  

“payment exposures” means—                  

in the case of foreign exchange transactions, exposures incurred in the ordinary course of settlement;

in the case of transactions for the purchase or sale of securities, exposures incurred in the ordinary course of settlement;

exposures arising from the provision of money transmission including—

the execution of payment services,

clearing and settlement in any currency, and

correspondent banking; and

exposures incurred by the ring-fenced body to satisfy a condition required for participation by it in an inter-bank payment                              system (as defined in section 182 of the Banking Act 2009) F19 or in the services provided by a recognised clearing house F20, an EEA central counterparty F21 or a third country central counterparty F22 provided that such exposures are only to a relevant financial institution which is F23... a member or operator of the inter-bank payment system or a member of the relevant recognised clearing house, EEA central                              counterparty or third country central counterparty;                           

“payment services” has the same meaning as in regulation 2(1) of the Payment Services Regulations 2009 F24;                  

“prudential requirements regulation” means the Regulation of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit                     institutions and investment firms F25;                  

“Regulated Activities Order 2001” means the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 F26;                  

[F27“related undertaking” means any subsidiary undertaking of a parent undertaking where the parent undertaking is subject to                        rules made by the appropriate regulator pursuant to section 192JA of the Act, but does not include a subsidiary undertaking                        that is a ring-fenced body;]                   

“reinsurance undertaking” has the meaning given in article 13(4) of the solvency II directive;                  

“relevant financial institution” has the meaning given in article 2;                  

“securitisation undertaking” has the meaning given in article 3(1)(a);                  

“securities” means, any investments of the kind specified by any of articles 76 to 82 of the Regulated Activities Order 2001 F28, or so far as relevant to any such investment, article 89 of that Order F29;                  

“security interest” means any legal or equitable interest created or otherwise arising by way of security including—                  

a pledge,

a mortgage,

a fixed charge,

a floating charge,

a lien;

“sell”, in relation to any investment, includes disposing of the investment for valuable consideration, and for these purposes                     “disposing of” includes—                  

in the case of an investment consisting of rights under a contract—

surrendering, assigning or converting those rights, or

assuming the corresponding liabilities under the contract,

in the case of an investment consisting of other arrangements, assuming the corresponding liabilities under the arrangements,

in the case of any other investment, issuing or creating the investment or granting the rights or interests of which it consists;

“shares” include any investment of the kind specified by article 76 of the Regulated Activities Order 2001;

“solvency II directive” means the Directive of the European Parliament and Council of 25 November 2009 on the taking up and pursuit of the business                     of Insurance and Reinsurance F30;                  

“sponsored structured finance vehicle” means a structured finance vehicle which satisfies the conditions in article 3(2);                  

“structured finance vehicle” means a securitisation undertaking or a covered bond vehicle;                  

“third country insurance undertaking” has the meaning given in Article 13(3) of the solvency II directive;                  

“third country reinsurance undertaking” has the meaning given in Article 13(6) of the solvency II directive;                  

“title transfer collateral arrangement” means an agreement or arrangement, including a repurchase agreement, evidenced in writing, where—                  

the collateral provider transfers legal and beneficial ownership in the collateral to a collateral-taker on terms that when                              the relevant financial obligations are discharged the collateral-taker must transfer legal and beneficial ownership of the                              collateral (or equivalent collateral) to the collateral provider, and                           

the purpose of the agreement or arrangement is to secure or otherwise cover the relevant financial obligations owed to the                              collateral-taker;                           

“UCITS” has the meaning given in Article 1.2 of the UCITS directive;                  

[F31“UK deposit-taker” means a body corporate incorporated in the United Kingdom which carries on the regulated activity of accepting                        deposits in relation to which it has a permission under Part 4A of the 2000 Act;]                   

“undertaking” includes a company, body corporate, partnership or unincorporated association.                  

F2“Ring-fenced body” is defined in section 142A of the Act.

F3Directive 2011/61/EU, OJ L174, 1.7.2011, p1.

F41986 c. 53.

F51986 c.45. Schedule 2A was inserted by the Enterprise Act 2002 (c.40) s. 250(2) and Schedule 18. Paragraph 1 of that Schedule was amended by SI 2003/1468.

F6Words in art. 1 inserted (1.12.2016) by The Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment)                                 Order 2016 (S.I. 2016/1032), arts. 1(2), **3(2)(a)**

F7Words in art. 1 inserted (1.12.2016) by The Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment)                                 Order 2016 (S.I. 2016/1032), arts. 1(2), **3(2)(b)**

F8Directive 2013/36/EU, OJ L 174 27.6.2013, p338.

F91979 c. 34. Section 31 has been amended by the Co-operative and Community Benefit Societies and Credit Unions Act 2010 (c.7), **section 2**.

F10S.I. 1985/1205 (N.I. 12).

F11SI 2001/544. Article 77 was amended by S.I. 2010/86; 2011/133.

F12OJ L 176, 27.6.2013, p1.

F13Words in art. 1 inserted (1.12.2016) by The Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment)                                 Order 2016 (S.I. 2016/1032), arts. 1(2), **3(2)(c)**

F14Article 79 of the Regulated Activities Order 2001 was amended by S.I. 2010/86.

F15OJ L 335, 17.12.2009, p1.

F16Words in art. 1 substituted (1.12.2016) by The Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment)                                 Order 2016 (S.I. 2016/1032), arts. 1(2), **3(2)(d)**

F17OJ L 302, 17.11.2009, p32. “UCITS directive” is defined in paragraph 4B of Schedule 3 to the Act.

F18OJ L 35, 11.02.2003, p1.

F192009 c.1.

F20Defined in section 285(1)(b) of the Act. Paragraphs (b) to (d) of section 285(1) were substituted for the original paragraphs                              by S.I. 2013/504.

F21Defined in section 285(1)(c) of the Act.

F22Defined in section 285(1)(d) of the Act.

F23Word in art. 1 omitted (1.12.2016) by virtue of The Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment)                                 Order 2016 (S.I. 2016/1032), arts. 1(2), **3(2)(e)**

F24S.I. 2009/209. There are amendments to regulation 2(1), but none are relevant to this Order.

F25Regulation (EU) No 575/2013/EU, OJ L 176, 27.6.2013, p1.

F26S.I. 2001/544.

F27Words in art. 1 inserted (1.12.2016) by The Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment)                                 Order 2016 (S.I. 2016/1032), arts. 1(2), **3(2)(f)**

F28These articles were amended by S.I 2006/1969; 2010/86; 2011/133; 2011/2687, and article 77A was inserted by S.I. 2010/86.

F29Article 89 was amended by S.I. 2006/2383.

F30Directive 2009/138/EC, OJ L 335, 17.12.2009, p1.

F31Words in art. 1 inserted (1.12.2016) by The Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment)                                 Order 2016 (S.I. 2016/1032), arts. 1(2), **3(2)(g)**

### Relevant financial institutionU.K.

2.—(1) For the purposes of this Order, a “relevant financial institution” is an institution which falls within one of the classes                     listed in paragraph (2), and which is not within one of the exceptions set out in paragraph (3).                  

(2) The classes are—

(a)credit institutions;                  

(b)investment firms;                  

(c)structured finance vehicles;                  

(d)global systemically important insurers;                  

(e)UCITS (wherever established) and alternative investment funds;                  

(f)management companies or alternative investment fund managers; and                  

(g)financial holding companies and mixed financial holding companies.                  

(3) The exceptions are—

(a)ring-fenced bodies;                  

(b)building societies;                  

(c)bodies corporate—                  

(i)whose purpose, or principal purpose, is that of making loans which are secured on residential property and which are funded                        substantially by their members, and                  

(ii)which are incorporated under the law of an EEA state other than the United Kingdom;                  

(d)credit unions and other institutions referred to in Article 2.5 of the credit institutions directive (other than investment                        firms);                  

(e)recognised clearing houses F32, EEA central counterparties F33 and third country central counterparties F34;                  

(f)investment firms which are not authorised to carry on by way of business (in the United Kingdom or the EEA) the activities                        specified by either article 14 (dealing in investments as principal) or article 21 (dealing in investments as agent) of the                        Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 F35;                  

(g)a credit institution which is a UK institution or an EEA firm F36, and which is not permitted—                  

(i)to carry on any excluded activities (and for these purposes “excluded activities” do not include anything which does not fall                        within the definition of excluded activities in relation to a ring-fenced body by virtue of articles 4 to 12 of this Order)                        or                  

(ii)to do anything that a ring-fenced body is prohibited from doing under articles 14 to 20 of this Order,                  

by reason of requirements, limitations or other conditions imposed on the credit institution by the FCA or the PRA or (in                     the case of an EEA firm) by its home state regulator; or by EU law or the national law to which the credit institution is                     subject;                  

(h)each of the institutions listed in the Schedule to this Order.                  

F32Defined in section 285(1)(b) of the Act. Paragraphs (b) to (d) of section 285(1) were substituted for the original paragraphs                              by S.I. 2013/504.

F33Defined in section 285(1)(c) of the Act.

F34Defined in section 285(1)(d) of the Act.

F35S.I. 2001/544. Article 14 was amended by S.I. 2006/3384. Article 21 was amended by S.I. 2003/1476; 2006/3384.

F36Defined in paragraph 5 of Schedule 3 to the Act.

### Securitisation companies and structured finance vehicles: definitionsU.K.

3.—(1) In this Order—                  

(a)“securitisation undertaking” means—                  

(i)an asset holding company,                  

(ii)a commercial paper funded company,                  

(iii)an intermediate borrowing company,                  

(iv)a note-issuing company, or                  

(v)a warehouse company; and                  

(b)“asset holding company”, “commercial paper funded company”, “intermediate borrowing company”, “note-issuing company” and “warehouse company” means a company of the kind mentioned in paragraph (a), (b), (c), (d) or (e) of section 83(2) of the Finance Act 2005 F37 or in paragraph (a), (b), (c), (d) or (e) of regulation 4(2) of the Taxation of Securitisation Companies Regulations 2006                        F38, except that for these purposes—                  

(i)“company” includes any body corporate, partnership or unincorporated association, and                  

(ii)the requirements in section 83(3)(b) of the Finance Act 2005 and regulation 5(3) of the Taxation of Securitisation Companies                        Regulations 2006 shall not apply.                  

(2) For the purposes of this Order, a structured finance vehicle is a sponsored structured finance vehicle of a ring-fenced body                     where the only assets held by the structured finance vehicle consist of any of—                  

(a)money provided by the ring-fenced body or a subsidiary of the ring-fenced body;                  

(b)assets, or an interest in assets, created by, F39... or comprising claims against, any one or more of the following—                  

(i)the ring-fenced body,                  

(ii)a securitisation undertaking, provided that the only assets held by the securitisation undertaking are assets created F40...by the ring-fenced body or any of its subsidiary undertakings [F41(provided that the assets concerned are assets that the ring-fenced body itself could hold)], and assets within sub-paragraphs (c) to (h) below,F42...                  

(iii)a subsidiary undertaking of the ring-fenced body, provided that the assets concerned are assets which the ring-fenced body                        itself could hold[F43, or]                  

[F44(iv)a member of the group of companies to which the ring-fenced body (“A”) belongs (other than one falling within paragraph (i),                           (ii) or (iii)) provided that—                  

(aa)the assets concerned were created no later than two years before A became a ring-fenced body,                  

(bb)the assets were transferred to the structured finance vehicle before A became a ring-fenced body, and                  

(cc)the assets concerned are assets that A itself could hold;]                  

(c)liquid assets, investments or facilities acquired by or made available to the structured finance vehicle to enable it to limit                        the extent to which its business may be adversely affected by any of the factors referred to in article 6(2);                  

(d)sums lent by the structured finance vehicle in connection with a capital market arrangement;                  

(e)rights arising under derivative instruments entered into with any person for the purpose of the protection of the structured                        finance vehicle against any difference between any rate, index or price and any other rate, index or price;                  

(f)rights arising under contracts with the ring-fenced body or with any other person for the provision of services to[F45, or in connection with the transfer of assets to,] the structured finance vehicle;                  

(g)rights arising under a contract with another sponsored structured finance vehicle of the ring-fenced body;                  

[F46(ga)assets, or an interest in assets, that—                  

(i)were created by, or comprised of claims against, a company outside the group of companies to which the ring-fenced body (“B”)                           belongs,                  

(ii)were transferred to the structured finance vehicle from—                  

(aa)B,                  

(bb)a subsidiary undertaking of B, or                  

(cc)any other member of the group of companies to which B belongs,                  

(iii)were acquired by the company from which the transfer was made no later than two years before B became a ring-fenced body,                  

(iv)in the case of assets transferred by a company falling within paragraph (ii)(cc), were transferred to the structured finance                           vehicle before B became a ring-fenced body, and                  

(v)are assets that B itself could hold;                  

(gb)assets that—                  

(i)have at any time been transferred to the ring-fenced body pursuant to a ring-fencing transfer scheme within the meaning of                           section 106B of the Act, and                  

(ii)are assets that the ring-fenced body itself could hold;                  

(gc)assets, or an interest in assets, that were—                  

(i)created or owned at any time by—                  

(aa)a company (“C”) in respect of which an order has been made under the Banking (Special Provisions) Act 2008, or                  

(bb)a subsidiary undertaking of C (“D”), and                  

(ii)transferred to the structured finance vehicle from C or D pursuant to any agreement for that purpose, whether directly or                           through an intermediary—                  

(aa)at a time when all of the shares in C were owned by a nominee of the Treasury or a company wholly owned by the Treasury,                  

(bb)in the case of assets created or owned by D, at a time when D was a subsidiary undertaking of C,                  

(cc)in connection with a capital market arrangement to which the structured finance vehicle was a party, and                  

(dd)where the capital market arrangement referred to in sub-paragraph (cc) was established to finance, wholly or in part, the                           consideration payable to C or D in connection with the transfer of the relevant assets;                  

(gd)assets, or an interest in assets, that—                  

(i)have at any time been subject to any transfer effected pursuant to Part 1 of the Banking Act 2009, and                  

(ii)are assets that the ring-fenced body itself could hold;]                  

(h)sums derived from any of the assets referred to in sub-paragraphs [F47(a) to (gd)] above, including rights in relation to any current account, payment account or deposit account to which such sums are credited                        or paid.                  

F372005 c. 7. Section 83 has been amended by the Finance Act 2006 (c.25), **s.101**; the Finance 2007 (c.11), s. 59 and the Corporation Tax Act 2009 (c.4), **schedule 1**, Part 2, paragraphs 648, 662.

F38S.I. 2006/3296.

F39Words in art. 3(2)(b) omitted (1.12.2016) by virtue of The Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment)                                 Order 2016 (S.I. 2016/1032), arts. 1(2), **3(3)(a)(i)**

F40Words in art. 3(2)(b)(ii) omitted (1.12.2016) by virtue of The Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment)                                 Order 2016 (S.I. 2016/1032), arts. 1(2), **3(3)(a)(ii)(aa)**

F41Words in art. 3(2)(b)(ii) inserted (1.12.2016) by The Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment)                                 Order 2016 (S.I. 2016/1032), arts. 1(2), **3(3)(a)(ii)(bb)**

F42Word in art. 3(2)(b)(ii) omitted (1.12.2016) by virtue of The Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment)                                 Order 2016 (S.I. 2016/1032), arts. 1(2), **3(3)(a)(ii)(cc)**

F43Word in art. 3(2)(b)(iii) inserted (1.12.2016) by The Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment)                                 Order 2016 (S.I. 2016/1032), arts. 1(2), **3(3)(a)(iii)**

F44Art. 3(2)(b)(iv) inserted (1.12.2016) by The Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment)                                 Order 2016 (S.I. 2016/1032), arts. 1(2), **3(3)(a)(iv)**

F45Words in art. 3(2)(f) inserted (1.12.2016) by The Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment)                                 Order 2016 (S.I. 2016/1032), arts. 1(2), **3(3)(b)**

F46Art. 3(2)(ga)-(gd) inserted (1.12.2016) by The Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment)                                 Order 2016 (S.I. 2016/1032), arts. 1(2), **3(3)(c)**

F47Words in art. 3(2)(h) substituted (1.12.2016) by The Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment)                                 Order 2016 (S.I. 2016/1032), arts. 1(2), **3(3)(d)**

## **PART 2**U.K.EXCLUDED ACTIVITIES AND EXCEPTIONS

### Excluded activities: dealing in investments as principalU.K.

### Excluded activities: commodities tradingU.K.

### Excluded activities: general exceptionsU.K.

### Excluded activities: securitisation and covered bondsU.K.

### Excluded activities: central bank exemptionU.K.

### Excluded activities: derivativesU.K.

### Derivatives: forward contracts and swapsU.K.

### Derivatives: options and swaptionsU.K.

## **PART 3**U.K.PROHIBITIONS AND EXCEPTIONS

Prospective

### Prohibitions: inter-bank payment systemsU.K.

13.—(1) A ring-fenced body (“A”) is prohibited from entering into any transaction enabling it to use services provided through an                        inter-bank payment system unless—                     

(a)A is a direct participant in the system, or                     

(b)where A is not a direct participant in the system, at least one of the conditions set out in paragraph (2) is satisfied.                     

(2) The conditions set out in this paragraph are—

(a)the intermediary through which A accesses the services provided by the inter-bank payment system is another ring-fenced body                           which—                     

(i)is a direct participant in that payment system, and                     

(ii)is a member of the same group as A;                     

(b)A is not eligible to become a direct participant in the inter-bank payment system concerned under the rules governing that                           payment system;                     

(c)should the intermediary through which A accesses the services of the inter-bank payment system concerned cease to be able                           to provide access to those services, A would be able to make the payments it proposes to make through that inter-bank payment                           system—                     

(i)through another intermediary, or                     

(ii)through another inter-bank payment system or by other means; or                     

(d)the PRA has, following an application made by A in accordance with paragraph (3), granted permission in accordance with paragraph                           (4) for A to access the services provided by the inter-bank payment system in question through the intermediary proposed by                           A.                     

(3) An application by A for permission under paragraph (2)(d) must be made in such manner and accompanied by such information                        as the PRA may direct.                     

(4) The PRA may only grant permission under paragraph (2)(d)—

(a)where it considers that the ring-fenced body needs to be able to access the services provided by the inter-bank payment system                           in question due to exceptional circumstances; and                     

(b)after it has published a statement under paragraph (9).                     

(5) The PRA shall keep any permission granted under paragraph (2)(d) under review, and shall withdraw that permission if it considers                        that the exceptional circumstances in question no longer apply, after following the procedure set out in paragraphs (6) and                        (7).                     

(6) If the PRA proposes—

(a)to refuse an application for permission under paragraph (2)(d), or                     

(b)to withdraw a permission granted under paragraph (2)(d),                     

it must give the ring-fenced body a warning notice, stating why it considers that the exceptional circumstances do not apply                        (if sub-paragraph (a) applies), or no longer apply (if sub-paragraph (b) applies).                     

(7) If the PRA has decided, after consideration of any representations received in writing from the ring-fenced body in response                        to the warning notice—                     

(a)to refuse an application for permission under paragraph (2)(d), or                     

(b)to withdraw permission granted under paragraph (2)(d),                     

it must give the ring-fenced body a decision notice.

(8) If the PRA decides—

(a)to refuse an application for permission under paragraph (2)(d), or                     

(b)to withdraw permission granted under paragraph (2)(d),                     

the ring-fenced body may refer the matter to the Tribunal, and Part 9 of the Act applies to any proceedings before the Tribunal                        in relation to the matter.                     

(9) The PRA must, before 1st July 2019, publish a statement containing guidance on what is meant by “exceptional circumstances” for the purposes of granting a permission under paragraph (2)(d) in a way appearing to the PRA to be best calculated to                        bring it to the attention of the public.                     

(10) Part 26 of the Act applies to any notices given by the PRA under this article.

(11) In this article—

“direct participant” means an institution which is able to provide services for the purpose of enabling the transfer of funds using the inter-bank                        payment system as a result of an arrangement made between the institution and the operator of the payment system;                     

“inter-bank payment system” F67...does not include—                     

a payment system the operator of which is—

a recognised clearing house within the meaning of section 285(1) of the Act F68, or                                       

the operator of a relevant system approved by the Bank of England under regulation 5 of the Uncertificated Securities Regulations                                          2001 F69;                                       

arrangements made by A with another credit institution for correspondent banking;

arrangements made to facilitate the physical transfer of money between financial institutions, including the Note Circulation                                 Scheme set up by the Bank of England.                              

F67Words in art. 13(11) omitted (30.11.2017) by virtue of The Banking Act 2009 (Service Providers to Payment Systems) Order 2017 (S.I. 2017/1167), arts. 1(2), **5(4)**

F68Section 285 has been amended by the Financial Services Act 2012 (c.21), **section 28** and S.I. 2013/504.

F69S.I. 2001/3755. Regulation 5 was amended by S.I. 2013/632.

### Prohibitions: financial institution exposuresU.K.

14.—(1) A ring-fenced body is prohibited from incurring a financial institution exposure unless at least one of the exemptions set                     out in paragraphs (2) to (6) or in articles 15 to [F7019B] applies, and, for the avoidance of doubt, provided that one of these exemptions applies in relation to a particular exposure,                     it is irrelevant whether the conditions for any other exemption are satisfied by that exposure.                  

(2) A ring-fenced body may incur a financial institution exposure if the sole or main purpose of the transaction giving rise to                     the exposure (by itself or in combination with other transactions) is to limit the extent to which—                  

(a)the ring-fenced body,                  

(b)any subsidiary undertaking of the ring-fenced body,                  

[F71(ba)another ring-fenced body within the same group as the ring-fenced body,                  

(bb)a related undertaking within the same group as the ring-fenced body,]                  

(c)any sponsored structured finance vehicle of the ring-fenced body,                  

(d)any conduit vehicle of the ring-fenced body, or                  

(e)any combination of the undertakings referred to in sub-paragraphs (a), (b), [F72(ba), (bb),] (c) and (d),                  

will be adversely affected by any of the factors specified in paragraph (3).

(3) The specified factors are—

(a)changes in interest rates, exchange rates or commodity prices;                  

(b)changes in any index of retail prices or of residential or commercial property prices;                  

(c)changes in any index of the price of shares;                  

(d)default risk.                  

[F73(3A)A ring-fenced body may incur a financial institution exposure if the purpose of the transaction giving rise to the exposure                        is to allow the ring-fenced body to hold liquid assets in order to meet the general requirement set out in Article 412 of                        the prudential requirements regulation and further specified in delegated acts adopted by the European Commission under Article                        460 of that regulation.]                  

(4) A ring-fenced body may incur a financial institution exposure where the relevant financial institution concerned is a member                     of the same group as the ring-fenced body, provided that—                  

(a)the exposure concerned is not prohibited under rules made by the FCA or the PRA under the Act; and                  

(b)the exposure arises as a result of—                  

(i)a commercial transaction conducted on arm's length terms, F74...                  

(ii)a holding of shares or other securities issued by a subsidiary undertaking of the ring-fenced body.                  

[F75(iii)the relevant financial institution entering into any guarantee, bond, contract of indemnity or otherwise giving security or                           becoming responsible for any pension liability of the ring-fenced body, or                  

(iv)a shared liability arrangement within the meaning of regulation 1 of the Financial Services and Markets Act 2000 (Banking                           Reform) (Pensions) Regulations 2015 provided that either—                  

(aa)the shared liability arrangement is permitted by virtue of regulation 2(8) or (9) of those Regulations, or                  

(bb)the exposure ceases to be incurred on or after the specified date referred to in regulation 2(10) of those Regulations.]                  

(5) A ring-fenced body may incur a financial institution exposure in the course of buying, selling or subscribing for investments                     for the purposes of a transaction falling within paragraph (2).                  

(6) A ring-fenced body may incur a financial institution exposure where—

(a)the exposure concerned is a payment exposure, and                  

(b)the ring-fenced body has complied with any rules made or requirements imposed by the FCA or the PRA under the Act in relation                        to payment exposures.                  

### Financial institutions exposures: trade financeU.K.

15.—(1) A ring-fenced body may incur a financial institution exposure provided that both the following conditions are satisfied—                  

(a)the purpose of the transaction giving rise to the exposure is—                  

(i)to provide finance or make a payment in connection with the supply of goods or services by or to a person or an undertaking                        which is not a relevant financial institution; or                  

(ii)to guarantee or otherwise provide an indemnity or security for the obligations of a customer of the ring-fenced body or a                        third party in connection with the supply of goods or services by or to a person or an undertaking which is not a relevant                        financial institution;                  

(b)the ring-fenced body enters into an agreement to give effect to the transaction which specifies—                  

(i)the supplies of goods or services to which the transaction relates, and                  

(ii)the maximum payments which the ring-fenced body may be required to make under the agreement.                  

(2) For the purpose of paragraph (1)(b)(ii), the maximum payments payable under the agreement may be expressed—

(a)as a defined sum, or                  

(b)as a multiple of an average price of a commodity, where the average price is determined by reference to prices quoted on a                        specified index of prices for that commodity over a specified period, and for these purposes “specified” means specified in the agreement.                  

### [F76Financial institutions exposure: securitisation and covered bondsU.K.

16.A ring-fenced body may incur a financial institution exposure to—                  

(a)a sponsored structured finance vehicle of that ring-fenced body; or                  

(b)a covered bond vehicle which is a subsidiary of a ring-fenced body or a building society.]                  

### Financial institution exposures: conduit lendingU.K.

17.—(1) A ring-fenced body may incur a financial institution exposure to a relevant financial institution (“A”) where—                  

(a)the only business of A (apart from incidental activities) is to acquire, hold and manage assets from or for an undertaking                        which is not a relevant financial institution (“B”); and                  

(b)all or part of A's assets are being used to form the whole or part of the security for a loan or any other finance provided                        to A by the ring-fenced body or by a conduit vehicle of the ring-fenced body for the benefit of B.                  

(2) A ring-fenced body (“C”) may incur a financial institution exposure to a relevant financial institution (“D”) where—

(a)D was established by, or is operated for the benefit of, C; and                  

(b)the only business of D (apart from incidental activities) is—                  

(i)to acquire, hold and manage assets from or for C, or                  

(ii)to make loans or provide other finance at the direction or on the advice of C using resources provided by C or raised in the                        financial markets to entities which are not relevant financial institutions, or to relevant financial institutions which satisfy                        the conditions in paragraph (1)(a) and (b).                  

### Financial institution exposures: repo transactionsU.K.

18.  A ring-fenced body (“A”) may incur a financial institution exposure to a relevant financial institution (“B”) pursuant to                     an agreement with B—                  

(a)for the transfer of its own assets to B on terms—                  

(i)imposing an obligation on A to buy those assets, or assets of the same description, from B at one or more subsequent times;                        or                  

(ii)imposing an obligation on B to transfer those assets, or assets of the same description, to A at one or more subsequent times;                  

(b)for the transfer of liquid assets from B to A for the purpose of managing A's liquidity risk on terms—                  

(i)imposing an obligation on B to buy those assets, or assets of the same description from A at one or more subsequent times;                        or                  

(ii)imposing an obligation on A to transfer those assets, or assets of the same description, to B at one or more subsequent times.                  

### Financial institution exposures: ancillary exposuresU.K.

19.—(1) Subject to any rules made by the FCA or the PRA under the Act, a ring-fenced body may incur a financial institution exposure                     where the exposure concerned—                  

(a)arises in any of the circumstances set out in paragraphs (2) to (5), or                  

(b)is permitted under paragraph (6).                  

(2) The exposure arises in consequence of the provision—

(a)by the ring-fenced body of payment services to its customers in the United Kingdom or any other country;                  

(b)by the ring-fenced body to the relevant financial institution of—                  

(i)operational services, including in particular information technology, human resources or payment services, F77...                  

(ii)services as a trustee or agent in connection with a syndicated loan to an undertaking which is not a relevant financial institution;                        F78...                  

[F79(iii)services as a trustee or agent in connection with a syndicated invoice discounting or factoring arrangement pursuant to which                           payment is advanced to any entity which is not a relevant financial institution, or                  

(iv)consultative services, including in particular the provision of business or financial advice; or]                  

(c)to the ring-fenced body of services from a relevant financial institution which are ancillary to or facilitate—                  

(i)the divestment or acquisition by the ring-fenced body of one or more of its subsidiaries or other assets,                  

(ii)the continuing operation of a business, entity or assets which have been acquired by the ring-fenced body,                  

(iii)an issue of securities by the ring-fenced body, by a subsidiary undertaking of the ring-fenced body or by a sponsored structured                        finance vehicle,                  

(iv)the participation by the ring-fenced body in a syndicated loan to an undertaking which is not a relevant financial institution.                  

[F80(v)the participation by the ring-fenced body in any syndicated invoice discounting or factoring arrangement pursuant to which                           payment is advanced to any entity which is not a relevant financial institution.]                  

(3) The exposure arises where—

(a)the ring-fenced body is acting as distributor for a relevant financial institution in connection with the distribution of                        trade finance or other financial products or investments issued by or services provided by the relevant financial institution,                        or in respect of which that relevant financial institution is acting as distributor,                  

(b)the relevant financial institution is acting as a distributor for the ring-fenced body in connection with the provision by                        the ring-fenced body of trade finance or other financial products or investments issued by or services provided by the ring-fenced                        body to or for the benefit of an entity which is not a relevant financial institution.                  

(4) The exposure arises in consequence of guarantees, warranties, indemnities or covenants given to the ring-fenced body by a                     relevant financial institution as part of a permitted acquisition or disposal—                  

(a)by the ring-fenced body, or                  

(b)by a subsidiary undertaking of the ring-fenced body,                  

and for the purposes of this paragraph “permitted” means that the acquisition or disposal is not prohibited under the Act, this Order, or any rules made by the FCA or the                     PRA under the Act.                  

(5) The exposure arises in consequence—

(a)of a breach of a duty owed by the relevant financial institution to the ring-fenced body, or                  

(b)of the appointment of the ring-fenced body as executor of the estate of any person or of services provided by the ring-fenced                        body in that capacity.                  

(6) A ring-fenced body may incur a financial institution exposure to a global systemically important insurer where the exposure                     concerned results from the purchase of insurance by the ring-fenced body for the benefit of the business, directors, officers,                     employees or other staff of the ring-fenced body or of any subsidiary undertaking of the ring-fenced body.                  

[F81(7)A ring-fenced body may incur a financial institution exposure that arises where the ring-fenced body is acting as trustee                        for or on behalf of any individual or charity.]                  

### [F82Financial institution exposures: financing of infrastructure projectsU.K.

19A.—(1)A ring-fenced body may incur a financial institution exposure to a relevant financial institution (“A”) where—                  

(a)A is an infrastructure special purpose vehicle; and                  

(b)the exposure arises from financial assistance given by the ring-fenced body to A.                  

(2)For the purposes of this article—                  

(a)“financial assistance” means—                  

(i)loans,                  

(ii)guarantees or indemnities, or                  

(iii)the purchase of bonds or notes.                  

(b)“infrastructure special purpose vehicle” means an entity the only business of which (apart from incidental activities) is                           financing the acquisition, design, construction, conversion, improvement, operation and repair of infrastructure within the                           EEA.                  

(c)“infrastructure” means—                  

(i)housing,                  

(ii)water, electricity, gas, telecommunications, sewerage or other services,                  

(iii)railway facilities (including rolling stock), roads or other transport facilities,                  

(iv)health or educational facilities, and                  

(v)court or prison facilities.                  

F82Arts. 19A, 19B inserted (1.12.2016) by The Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment)                                 Order 2016 (S.I. 2016/1032), arts. 1(2), 3(10)

### Financial institution exposures: changes in status of counterpartiesU.K.

19B.—(1)Subject to paragraph (2), where a ring-fenced body incurs a financial institution exposure as a result of a counterparty to                        a transaction becoming a relevant financial institution at any time after the date upon which the transaction was entered                        into, that exposure is permitted for a period of twelve months commencing on the date upon which the counterparty became a                        relevant financial institution.                  

(2)A ring-fenced body is not permitted to incur the financial institution exposure by virtue of paragraph (1) where, at the time                        the transaction was entered into, the ring-fenced body knew, or could reasonably be expected to have known, that the counterparty                        would become a relevant financial institution.]                  

F82Arts. 19A, 19B inserted (1.12.2016) by The Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment)                                 Order 2016 (S.I. 2016/1032), arts. 1(2), 3(10)

### Transitional provisionU.K.

21.  A ring-fenced body does not carry on an excluded activity or contravene a prohibition imposed by this Order by holding or                     selling any investments on or after 1st January 2019 provided that—                  

(a)the investment in question was created or acquired by the ring-fenced body before 1st January 2019, and                  

(b)the period remaining until the investment matures is less than two years at 1st January 2019.                  

David Evenett

John Penrose

 Two of the Lords Commissioners of Her Majesty's Treasury

 Article 2

## SCHEDULEU.K.

1.  The European Union.U.K.

2.  The European Atomic Energy Community.U.K.

3.  The European Financial Stability Mechanism.U.K.

4.  The European Financial Stability Facility.U.K.

5.  The European Financial Stabilisation Mechanism.U.K.

6.  The International Monetary Fund.U.K.

7.  The Bank for International Settlements.U.K.

8.  The European Investment Bank.U.K.

9.  The European Investment Fund.U.K.

10.  The Council of Europe Development Bank.U.K.

11.  The International Bank for Reconstruction and Development.U.K.

12.  The International Finance Corporation.U.K.

13.  The African Development Bank.U.K.

14.  The Asian Development Bank.U.K.

15.  The Inter-American Development Bank.U.K.

16.  The European Bank for Reconstruction and Development.U.K.

17.  The Islamic Development Bank.U.K.

18.  The International Finance Facility for Immunisation.U.K.

19.  The Caribbean Development Bank.U.K.

20.  The Nordic Development Bank.U.K.

21.  The Multilateral Investment Guarantee Agency.U.K.

## Explanatory Note

(This note is not part of the Order)

This Order defines the circumstances in which ring-fenced bodies will be able to deal with investments as principal by providing                        for exceptions to the excluded activity set out in section 142D of the Financial Services and Markets Act 2000 in relation                        to the management by the ring-fenced body of its own risks or of its liquid assets or the provision of derivatives to its                        clients. The Order also imposes prohibitions on ring-fenced bodies under section 142E, which (with the exceptions provided                        for) limit the way in which a ring-fenced body may have access to clearing and settlement services provided by a recognised                        inter-bank payment system, restrict the exposures a ring-fenced body may have to relevant financial institutions, and ensure                        that a ring-fenced body may not have a subsidiary or branch in any country outside the EEA (other than operational subsidiaries                        which do not provide banking services).                     

Article 1 defines the terms used in the Order.

Article 2 defines relevant financial institution for the purposes of the Order.

Article 3 defines terms used in connection with securitisation companies and structured finance vehicles for the purposes                        of the Order.                     

Part 2 provides for an additional excluded activity (commodities trading), and sets out the circumstances in which ring-fenced                        bodies may engage in dealing in investments as principal, and commodities trading, as exceptions to the excluded activities.                     

Article 4 provides for additional circumstances in which the activity of dealing in investments as principal will be an excluded                        activity, clarifying the relationship between the excluded activity and the regulated activity of dealing in investments as                        principal. Under section 142D(2) the regulated activity of dealing in investments as principal, defined in article 14 of the                        Financial Services and Markets Act (Regulated Activities) Order 2001 (“the Regulated Activities Order”) (and subject to a number of exceptions which are set out in articles 15 to 20 of that Order) is an excluded activity. Article                        4 ensures that dealing in investments as principal which falls within the scope of articles 15, 19 or 20 of the Regulated                        Activities Order 2001, and is not therefore a regulated activity, is made an excluded activity. Dealing in investments as                        principal which falls within the exemptions from the regulated activity set out in articles 17, 18 or 18A of the Regulated                        Activities Order 2001 will remain outside the scope of the excluded activity.                     

Article 5 provides that a ring-fenced body may not engage in commodities trading except in the circumstances set out in that                        article.                     

Article 6 provides for exceptions to the excluded activity of dealing with an investment as principal where the ring-fenced                        body is managing the risks associated with its business, including for example its interest rate risk, exchange rate risk,                        or liquidity risk (paragraphs (1) and (2)). The ring-fenced body is also permitted to deal in liquid assets or to provide                        collateral required for derivative transactions entered into as part of its risk management (paragraph (3)). Article 6(4)                        further permits a ring-fenced body to acquire investments in exchange for a loan write-off (subparagraph (a)), and to acquire                        debentures issued by itself, one of its subsidiaries or its parent undertaking (subparagraph (b)) (no exception is necessary                        to permit the ring-fenced body to deal with its own shares, as, by virtue of article 18A of the Regulated Activities Order                        2001, this is not an excluded activity). It may also acquire debentures directly from an issuer where the issuer chooses to                        structure its borrowing in this way (paragraph (4)(c)), and to acquire shares in subsidiaries or companies in which it has                        a participating interest (paragraph (4)(d)). Paragraph (5) sets out the circumstances in which investments acquired under                        these provisions may be sold (debentures acquired under paragraph (4)(c) may not be sold – the ring-fenced body must hold                        them to maturity). Finally, Article 6(6) permits the ring-fenced body to use investments as security.                     

Article 7 permits a ring-fenced body to deal in investments as principal where the other party to the transaction is a structured                        finance vehicle sponsored by the ring-fenced body which satisfies the conditions set out in article 3(2). The ring-fenced                        body may also buy debentures issued by such a structured finance vehicle or by a conduit vehicle of the ring-fenced body.                     

Article 8 provides for an exception to the excluded activities of dealing in investments as principal and commodities trading                        where the ring-fenced body is entering into a transaction with a central bank or a wholly owned subsidiary of a central bank.                     

Articles 9 to 12 set out the conditions which must be satisfied by a ring-fenced body which wishes to deal in derivative instruments                        with its account holders.                     

Article 10 permits a ring-fenced body to sell currency and interest swaps, forward contracts (including futures) relating                        to currency, commodities or other property to its account holders.                     

Article 11 permits a ring-fenced body to sell certain options to its account holders, including interest rate caps and floors,                        and interest rate swaptions.                     

Article 12 sets out the conditions which must be satisfied by derivative transactions between a ring-fenced body and its account                        holders.                     

Part 3 imposes a number of prohibitions on ring-fenced bodies, and provides for exemptions to those prohibitions.

Article 13 sets out the circumstances in which a ring-fenced body may use services provided through an inter-bank payment                        system indirectly by an intermediary.                     

Articles 14 to 19 set out the circumstances in which a ring-fenced body is permitted to have an exposure to a relevant financial                        institution.                     

Article 14 permits exposures arising in relation to transactions entered into by the ring-fenced body for risk management                        purposes, intra-group transactions and payments exposures.                     

Article 15 permits exposures arising in relation to trade finance.

Article 16 permits a ring-fenced body to incur exposures to its own sponsored structured finance vehicle (which must satisfy                        the conditions set out in article 3(2)).                     

Article 17 permits a ring-fenced body to incur exposures for the purpose of conduit lending to the special purpose vehicle                        of an undertaking which is not itself a financial institution or to the ring-fenced body's own special purpose vehicle.                     

Article 18 permits a ring-fenced body incur exposures arising in the course of repo transactions.

Article 19 permits a ring-fenced body to incur exposures to relevant financial institutions which are ancillary to the provision                        of the core services by the ring-fenced body.                     

Article 20 prohibits a ring-fenced body from having a branch or a subsidiary (other than a subsidiary which does not carry                        out any activities which would be regulated under the Financial Services and Markets Act 2000 if they were carried on in the                        UK) in a country or territory outside the EEA.                     

Article 21 makes transitional provision to ensure that a ring-fenced body is not required to divest itself of investments                        which have less than two years to maturity when this order comes into force.                     

An Impact Assessment of the effect of the Financial Services (Banking Reform) Act 2013, and the secondary legislation to be                        made under it (including this Order) on the costs of business and the voluntary sector has been prepared and is available                        on HM Treasury's website (www.gov.uk/treasury) or from HM Treasury, 1 Horse Guards Road, London SW1A 2HQ and is annexed to                        the Explanatory Memorandum for this Order.