5.—(1) Section 133H (meaning of “investment bank” for purposes of section 133E) is amended as follows.
(2) After subsection (1) insert—
“(1A) At any time on or after 1 January 2022, the relevant entity is an investment bank if—
(a)it is an FCA investment firm that meets the conditions in subsection (1B), or
(b)it is designated by the Prudential Regulation Authority under Article 3 of the Financial Services and Markets Act 2000 (PRA-regulated Activities) Order 2013 (S.I. 2013/556) (dealing in investments as principal: designation by PRA).
(1B) An FCA investment firm meets the conditions in this subsection if it has a permanent minimum capital requirement of £750,000 and is not—
(a)a limited activity firm,
(b)a limited licence firm,
(c)a local firm, or
(d)a matched principal trading firm.
(1C) In subsection (1B)—
“limited activity firm” means an investment firm that—
deals on own account only for the purpose of fulfilling or executing a client order or for the purpose of gaining entrance to a clearing and settlement system or a recognised exchange when acting in an agency capacity or executing a client order; or
meets all the following conditions—
it does not hold client money or securities;
it undertakes only dealing on own account;
it has no external customers; and
its execution and settlement transactions take place under the responsibility of a clearing institution and are guaranteed by that clearing institution;
“limited licence firm” means an investment firm that is not authorised to provide the investment services and activities of—
dealing on own account; or
underwriting of financial instruments or placing of financial instruments on a firm commitment basis;
“local firm” means a firm—
dealing on own account on markets in financial futures or options or other derivatives and on cash markets for the sole purpose of hedging positions on derivatives markets, or
dealing for the accounts of other members of those markets and being guaranteed by clearing members of the same markets, where responsibility for ensuring the performance of contracts entered into by such a firm is assumed by clearing members of the same markets;
“matched principal trading firm” means an investment firm that executes investors’ orders for financial instruments and meets the following conditions—
the firm only holds financial instruments for its own account as a result of its failure to match investors’ orders precisely;
the total market value of all such positions is no more than 15% of the firm’s initial capital;
such positions are incidental and provisional in nature and strictly limited to the time required to carry out the transaction in question.
(1D) In determining, for the purposes of subsection (1B), whether an FCA investment firm has a permanent minimum capital requirement of £750,000, any transitional provision in the FCA Handbook is to be disregarded.
(1E) In subsections (1A) to (1D), the following terms have the meaning given by the FCA Handbook—
“dealing on own account”
“financial instrument”;
“initial capital”;
“investment firm”;
“market value”;
“permanent minimum capital requirement”.”.
(3) In subsection (2), in the words before paragraph (a), after “1 January 2014” insert “but before 1 January 2022”.
(4) In subsection (6), after “subsection”, insert “(1A)(a),”.
(5) In subsection (7), at the appropriate place, insert—
““FCA investment firm” has the meaning given by section 143A of FISMA 2000;”.