Re Barclays Bank plc and others

The Chancellor considered whether to sanction a ring-fencing transfer scheme under Part VII of the Financial Services and Markets Act 2000 (FSMA), having regard to the statutory pre-conditions in sections 106B, 107, 109A and 111 and the Skilled Person’s report required by section 109A(1) and (4). The court confirmed that its discretion under section 111(3) is genuine, not a rubber stamp, but that it must be exercised in the context of (i) the statutory twofold question in section 109A(4) about likely adverse effects and whether any such effects are greater than reasonably necessary to achieve the ring-fencing purposes in section 106B(3), (ii) the views of the Skilled Person and regulators, and (iii) the commercial judgment of the directors (including duties under section 172 of the Companies Act 2006).

Applying the materiality and likelihood thresholds described in the Scheme Report, the Skilled Person identified only one material adverse effect (loss of certain counter services for customers transferring to the ring-fenced bank when visiting Jersey, Guernsey and the Isle of Man) and concluded it was unavoidable and no greater than reasonably necessary. The court accepted the Skilled Person’s independence, methodology and conclusions, and the supporting views of the Prudential Regulation Authority and the Financial Conduct Authority. The court also considered and rejected numerous pension-related objections, accepting the Trustee’s negotiated mitigation package (including collateral, altered recovery contributions and continued participation by the ring-fenced bank until late 2025) as reasonable mitigation of any adverse effect on the Barclays Bank UK Retirement Fund. Accordingly the court sanctioned the Scheme under section 111 and granted the ancillary orders sought under section 112.

Background and parties. The applicants, Barclays Bank plc and Woolwich Plan Managers Limited, sought the court’s sanction of a ring-fencing transfer scheme under Part VII of FSMA to transfer UK retail and certain wealth businesses into a new ring‑fenced bank (Barclays Bank UK plc) and related group restructuring. The Prudential Regulation Authority and the Financial Conduct Authority were parties entitled to be heard and provided regulatory certificates and authorisations required by section 111(2). A Skilled Person (Mr Byers) was appointed under section 109A to prepare a Scheme Report answering the statutory question in section 109A(4). There were some 100 written representations, predominantly from members of the Barclays Bank UK Retirement Fund (UKRF), and several individual objectors who made specific complaints.

Nature of the application. The applicants applied for an order sanctioning the ring‑fencing transfer scheme under section 111(3) FSMA and for ancillary orders under section 112 to give effect to consequential transfers (including transfer of the new bank’s shares and residual assets to a service company).

Issues framed by the court. The court focussed on (i) the statutory twofold question in section 109A(4): whether persons other than the transferor are likely to be adversely affected by the Scheme and, if so, whether any such adverse effect is likely to be greater than reasonably necessary to achieve the purposes in section 106B(3); (ii) whether the statutory pre-conditions and certificates required by section 111(2) had been obtained; (iii) the exercise of the court’s discretion under section 111(3) in all the circumstances; and (iv) whether ancillary orders under section 112 were necessary to secure effective implementation.

Reasoning and factual findings. The court reviewed the legislative frame for ring‑fencing (including Part 9B of FSMA and associated orders), the communications plan and procedural history, and the Skilled Person’s methodology, materiality and likelihood thresholds. The Skilled Person adopted a hypothesis‑led approach, assessed stakeholder groups, and concluded that the only material adverse effect likely to arise from the Scheme was the loss of certain counter services for customers transferring to the ring‑fenced bank when visiting certain Crown Dependencies. He concluded that this effect was an inevitable consequence of ring‑fencing law and was no greater than reasonably necessary; communications and mitigation steps were adequate. The court examined the large number of pensions representations and accepted the Trustee’s evidence that the negotiated Pensions Agreement (adjusted contribution timetable, collateral up to a capped amount, last‑man‑standing participation by the ring‑fenced bank until late 2025 and a dividend mechanism) provided reasonable mitigation; the Skilled Person and the court considered BBPLC to remain a substantial and diversified covenant and the mitigation package, coupled with other regulatory protections, meant the UKRF members were not likely to be adversely affected. The court gave weight to the Skilled Person and regulators, acknowledged the board’s commercial judgment under section 172 duties, and held that the statutory pre‑conditions were satisfied.

Relief granted. The court sanctioned the Scheme under section 111 and approved the ancillary orders sought under section 112 as necessary, concluding that the Scheme should proceed and that detailed ancillary orders could be finalised at a subsequent hearing to settle form of order.

This first-instance application for sanction of a ring-fencing transfer scheme is granted. The court concluded that the statutory pre-conditions under Part VII and the ring-fencing provisions (including the Skilled Person’s Scheme Report under section 109A and the regulatory certificates) have been or will be met, that only one narrow material adverse effect existed (loss of certain counter services in Crown Dependencies) and that it was no greater than reasonably necessary to achieve the ring-fencing purposes. The court therefore exercised its discretion under section 111(3) FSMA to sanction the Scheme and approved ancillary orders under section 112 as necessary to give effect to the transfers.