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571.Subsection (3) establishes that the meanings of terms used in this section are as defined in the Acts of Exchange Act 1882. Specifically:

• “Act of exchange” has the meaning given in section 3 of the Act, namely “an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to or to the order of a specified person, or to bearer”; and

• “cheque” means “a Act of exchange drawn on a banker payable on demand” as defined in section 73 of the Act.

572.Subsection (4)(a) amends section 53(2) of the Acts of Exchange Act 1882, in which the “funds attached” principle is set out. The amendment provides that section 53(2) no longer applies in relation to cheques.

573.Subsection (4)(b) repeals section 75A of the Acts of Exchange Act 1882, which was inserted by section 11 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 to deal with a problem that arose in relation to stopped cheques in the context of the operation of the “funds attached” rule. With the abolition of the rule in relation to cheques, the problem which section 75A addressed ceases to arise.

574.Subsection (5) repeals section 11 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985. See also paragraph 520 above.

575.In accordance with section 263 in Part 8, this section will come into force automatically two months after the Banking Act receives Royal Assent.

Financial collateral arrangements

Section 255: Regulations

576.This section concerns a power to make regulations concerning financial collateral arrangements. Financial collateral arrangements are arrangements between specified types of persons, often involved in the financial markets, where the obligations under an agreement are secured by the provision of collateral (under the Directive, cash and financial instruments, such as shares) either by way of creating security over collateral or by title transfer of the collateral.

577.The background to the power is the EU Financial Collateral Arrangements Directive (2002/47/EC). The Directive covers the ground of removing formalities in relation to financial collateral arrangements, making provisions in relation to how such arrangements may be enforced, how they must be capable of taking effect, in particular in relation to the effect of insolvency proceedings and of choice of law in relation to particular forms of financial collateral arrangements.

578.This Directive is implemented in UK law by the Financial Collateral Arrangements (No.2) Regulations 2003, S.I. 2003/3226 (the 2003 Regulations). The power exercised to make the regulations was section 2(2) of the European Communities Act 1972 (ECA). The power under the ECA relates to the scope of the Directive and the new power, as noted in subsection (3), extends beyond provision in connection with the Directive.

579.Subsection (2) sets out the scope of what are financial collateral arrangements, that collateral may be cash, securities or in any other form and that an arrangement can be by way of security or title transfer.

580.Subsection (3) sets out that the power enables the Treasury to cover the ground relating to the Directive, but also to go beyond that field to include provisions that the Treasury thinks are necessary or desirable for the purpose of enabling financial collateral arrangements to be commercially useful and effective.

581.Subsection (4) sets out examples of the provision that may be made under the power to disapply or modify legislation, the scope relates to the scope of the Directive and the 2003 Regulations.

582.The section also includes power to make provision on a retrospective basis.

Section 256: Supplemental

583.This section provides the Parliamentary procedure applicable to the regulations made under the previous section concerning financial collateral arrangements together with incidental, consequential and transitional provision that may be made.

Part 8: General

Section 257: “Financial assistance”

584.This section provides a partial definition of financial assistance and allows the Treasury further to define financial assistance for the purposes of the Act by statutory instrument.

Section 258: “Enactment”

585.This section defines “enactment” as including Acts of the Scottish Parliament, Scottish subordinate legislation and Northern Ireland legislation.

Section 259: Statutory instruments

586.Subsection (1) provides that the statutory instruments made under this Act can apply generally or to specific cases and can be of any type or form.

587.Subsection (2) provides that no statutory instrument under the Act is to be treated as a hybrid instrument under the Standing Orders of either House of Parliament.

588.Subsection (3) contains a table of powers conferred by the Act and the arrangements for Parliamentary scrutiny in each case.

589.Subsection (4) provides that certain powers (listed in subsection (5) may be exercised by the 28 day affirmative procedure. This will be possible only the first time that the power is exercised and only where the person exercising the power is satisfied that it is necessary to do so.

Sections 260-265: General

590.This part gives an index of which sections contain important definitions.

591.The short title of the legislation is the Banking Act 2008.

Commencement

592.The Act will be commenced by way of order (apart from section 254, provisions relating to the abolition of the “funds attached” rule, relating to Scottish cheques, which comes into force two months after the date of Royal Assent in Scotland only and sections 263 to 265, which commence on Royal Assent).

Hansard References

The following table sets out the dates and Hansard references for each stage of the Act's passage through Parliament.