# Financial Services and Markets Act 2023, Paragraph 34: Write-down power

Extent: E+W+S+N.I.

(1) The seventh stabilisation option is for the Bank to make one or more write-down instruments.
(2) A write-down instrument is an instrument that makes any of the following provision (or any combination of the following)—
(a) provision cancelling an unsecured liability owed by the CCP;
(b) provision modifying or changing the form of an unsecured liability owed by the CCP;
(c) provision that a contract under which the CCP has an unsecured liability is to have effect as if a specified right had been exercised under it;
(d) provision under paragraph 35(1).
(3) The power under this paragraph may be exercised only for the purpose of recovering losses arising otherwise than as a result of a clearing member defaulting on the member’s obligations to the CCP.
(4) The power under sub-paragraph (2) may not be exercised so as to affect the following liabilities—
(a) liabilities to employees or workers, including liabilities owed to a pension scheme in respect of those persons;
(b) liabilities to commercial or trade creditors arising from the provision to the CCP of goods or services that are critical to the continuity of the CCP’s critical clearing services;
(c) HMRC debts which are preferential debts within the meaning of section 386 of the Insolvency Act 1986;
(d) liabilities to designated systems, operators of designated systems, or participants in such systems to the extent that the liabilities arise from their participation in the system;
(e) liabilities to interoperable CCPs;
(f) liabilities to central banks;
(g) liabilities to clearing members so far as these relate to initial margin requirements;
(h) liabilities to small enterprises.
(5) The reference to modifying a liability owed by the CCP includes a reference to modifying the terms (or the effect of the terms) of a contract under which the CCP has a liability.
(6) The reference to changing the form of a liability owed by the CCP includes, for example—
(a) converting an instrument under which a CCP owes a liability from one form or class to another,
(b) replacing such an instrument with another instrument of a different form or class,
(c) creating a new security (of any form or class) in connection with the modification of such an instrument, or
(d) converting those liabilities into securities issued by the CCP or a bridge central counterparty or UK parent of the CCP.
(7) The Treasury may by regulations amend sub-paragraph (4) by—
(a) adding to the list of liabilities;
(b) amending or omitting any liability listed.
(8) Regulations under this paragraph are subject to the affirmative procedure.
(9) In this paragraph—
“designated system” has the meaning given by regulation 2 of the Financial Markets and Insolvency (Settlement Finality) Regulations 1999 (S.I. 1999/2979) as amended from time to time;
“initial margin requirements” means margins provided by clearing members to a CCP to cover the CCP’s potential future exposure in the event of default by those members;
“small enterprise” means an enterprise which employs fewer than 50 people and whose annual turnover or annual balance sheet total does not exceed £10 million.

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Source: https://www.legislation.gov.uk/ukpga/2023/29/schedule/11/paragraph/34 (the official version)
Page: https://openlegislation.uk/financial-services-and-markets-act-2023/schedule-11/paragraph-34
Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.