Barclays Bank Plc & Ors, Re

A banking business transfer scheme under Part VII of the Financial Services and Markets Act 2000 may transfer only part of a deposit-taking business, provided the statutory conditions are met and the scheme is fair overall. The court may use its ancillary powers to duplicate contracts and transfer connected business, including business of another group company, where that is genuinely necessary to carry out the sanctioned scheme effectively. The power does not extend to transferring unrelated business or enhancing business deliberately excluded from the transfer. Recognition in every overseas jurisdiction is unnecessary if the scheme serves a substantial purpose. The court must scrutinise complex schemes carefully and must be given adequate time to determine whether they should be sanctioned.

Barclays Bank PLC and Barclays Capital Securities Limited sought approval for a scheme transferring substantial parts of their corporate banking, investment banking and private banking businesses to Barclays Bank Ireland Public Limited Company. The scheme was designed to address the loss of passporting rights following a possible no-deal Brexit. Barclays Bank PLC was authorised to accept deposits and could therefore propose a banking business transfer scheme. Barclays Capital Securities Limited was not authorised to accept deposits and relied on the court’s ancillary powers under section 112(1)(d) of the Financial Services and Markets Act 2000.

The central issues were whether the statutory requirements were satisfied, whether the scheme should be sanctioned in relation to Barclays Bank PLC, and how far the ancillary powers could extend to the business of Barclays Capital Securities Limited.

The court sanctioned the scheme in relation to Barclays Bank PLC and ordered the transfer of some, but not all, of the business of Barclays Capital Securities Limited.

1. Statutory jurisdiction and discretion. Barclays Bank PLC was a UK authorised person with permission to accept deposits, and part of its business was being transferred. The scheme therefore qualified as a banking business transfer scheme under section 106 of the Financial Services and Markets Act 2000. The statutory notices, certificates and authorisations were satisfactory. The court’s discretion under section 111(3) was absolute, but had to recognise the commercial judgment of the directors. The fundamental question was whether the scheme as a whole was fair between the affected classes. Individual adverse effects did not necessarily require rejection.
2. Effectiveness and overseas recognition. The court would not sanction a scheme likely to be ineffective, but it was unnecessary to establish recognition in every relevant jurisdiction. The scheme served a substantial purpose because a sufficiently large proportion of the relevant contracts were governed by English law or otherwise likely to be recognised.
3. Ancillary powers. Section 112(1)(d) permitted contractual duplication and related modifications where necessary to secure the full and commercially effective implementation of the scheme. That could include the transfer of Barclays Capital Securities Limited trades where a client had transferred business with Barclays Bank PLC and the trades formed part of a composite transaction or course of dealing involving both companies. It could also include a directly connected back-to-back hedge necessary to give full commercial effect to a transferred Barclays Bank PLC trade.
4. The power did not permit the transfer of business involving clients who had dealt only with Barclays Capital Securities Limited, absent a sufficiently demonstrated connection with the business transferred by Barclays Bank PLC. Nor could it be used to provide a commercial enhancement to business which the parties had decided not to transfer.
5. The “Wrong Pockets” provision required amendment so that the affected client received written notice and an opportunity to object. The amended scheme adequately protected clients.

First-instance decision. The judgment records an earlier decision concerning the proposed use of section 112(1)(d) in Re Barclays Bank plc [2018] EWHC 2868 (Ch), but that decision formed part of the same litigation and is not an appellate stage of this judgment.