Regulatory Filings • Aug 29, 2018
Regulatory Filings
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(INCORPORATED IN ENGLAND WITH LIMITED LIABILITY, REGISTERED NUMBER 2294747)
(AS ISSUER OF SENIOR NOTES)
and
(INCORPORATED IN ENGLAND WITH LIMITED LIABILITY, REGISTERED NUMBER 08700698) (AS ISSUER OF SENIOR NOTES AND DATED SUBORDINATED NOTES)
€30,000,000,000
Santander UK plc ("Santander UK") and Santander UK Group Holdings plc ("Santander UK Group Holdings", together with Santander UK, the "Issuers" and each an "Issuer") may from time to time issue notes (the "Notes") denominated in any currency as agreed between the relevant Issuer and the relevant Dealer (as defined below) under this €30,000,000,000 Euro Medium Term Note Programme (the "Programme"). The Notes issued under the Programme may comprise (i) unsubordinated Notes of either Issuer which rank as senior obligations of the relevant Issuer ("Senior Notes") and (ii) Notes of Santander UK Group Holdings which are subordinated as described herein and have terms capable of qualifying as Tier 2 capital ("Dated Subordinated Notes"). This Prospectus is valid for a period of 12 months from the date hereof. Any Notes issued under the Programme by the completion of the Final Terms or, in the case of Exempt Notes (as defined below), the Pricing Supplement on or after the date of this Prospectus are issued subject to the provisions hereof. "Final Terms" means the terms set out in a Final Terms document substantially in the form set out in this Prospectus and "Pricing Supplement" means the terms set out in a Pricing Supplement document substantially in the form set out in this Prospectus. Accordingly, in the case of Exempt Notes, each reference in this Prospectus to information being specified or identified in the applicable Final Terms shall be read and construed as a reference to such information being specified or identified in the applicable Pricing Supplement unless the context requires otherwise.
This Prospectus has (other than in respect of Exempt Notes) been approved by the United Kingdom Financial Conduct Authority (the "FCA"), which is the United Kingdom competent authority for the purposes of Directive 2003/71/EC as amended (the "Prospectus Directive") and relevant implementing measures in the United Kingdom, as a base prospectus (the "Base Prospectus") issued in compliance with the Prospectus Directive and relevant implementing measures in the United Kingdom for the purpose of giving information with regard to the issue of the Notes (other than Exempt Notes) under the Programme during the period of 12 months after the date hereof.
Application has been made to the FCA in its capacity as competent authority (the "UK Listing Authority") for Notes (other than Exempt Notes) issued under the Programme to be admitted to the official list of the UK Listing Authority (the "Official List"). In respect of Notes to be admitted to the Official List, application has also been made to the London Stock Exchange plc (the "London Stock Exchange") for such Notes to be admitted to trading on the London Stock Exchange's Regulated Market. The London Stock Exchange's Regulated Market is a regulated market (a "Regulated Market") for the purposes of Directive 2014/65/EU (as amended, the "MiFID II").
The requirement to publish a prospectus under the Prospectus Directive only applies to Notes which are to be admitted to trading on a regulated market in the European Economic Area and/or offered to the public in the European Economic Area other than in circumstances where an exemption is available under Article 3.2 of the Prospectus Directive (as implemented in the relevant Member State(s)). References in this Prospectus to "Exempt Notes" are to Notes for which no prospectus is required to be published under the Prospectus Directive. The UK Listing Authority has neither approved nor reviewed information contained in this Prospectus in connection with Exempt Notes and such information shall not form part of the Base Prospectus approved by the UK Listing Authority.
Notes may be issued in bearer or registered form (respectively "Bearer Notes" and "Registered Notes"). The maximum aggregate nominal amount of all Notes from time to time outstanding under the Programme will not exceed €30,000,000,000 (or its equivalent in other currencies calculated as described in the Programme Agreement described herein), subject to increase as described herein.
The Notes may be issued on a continuing basis to one or more of the Dealers specified under "Overview of the Programme" and any additional Dealer appointed under the Programme from time to time (each a "Dealer" and together the "Dealers"), which appointment may be for a specific issue or on an ongoing basis. References in this Prospectus to the "relevant Dealer" shall, in the case of an issue of Notes being (or intended to be) subscribed by more than one Dealer, be to all Dealers agreeing to subscribe for such Notes.
Notice of the aggregate nominal amount of Notes, interest (if any) payable in respect of Notes, the issue price of Notes, and certain other information not contained herein which are applicable to each Tranche of Notes will (other than in the case of Exempt Notes) be set out in the applicable Final Terms which, with respect to Notes to be admitted to the Official List and to be admitted to trading on the London Stock Exchange's Regulated Market, will be delivered to the UK Listing Authority and the London Stock Exchange on or before the date of issue of the Notes of such Tranche and will also be published on the website of the London Stock Exchange through a regulatory information service (the "RNS website"). In the case of Exempt Notes, notice of the aggregate nominal amount of Notes, interest (if any) payable in respect of Notes, the issue price of Notes, and certain other information not contained herein which are applicable to each Tranche of Exempt Notes will be set out in the applicable Pricing Supplement.
The Programme provides that Notes may be listed on such other Regulated Market(s) as may be agreed between the relevant Issuer and the relevant Dealer and specified in the Final Terms.
See "Risk Factors" (pages 17 to 78) for a discussion of factors which may affect the relevant Issuer's ability to fulfil its obligations under Notes issued under the Programme and factors which are material for the purpose of assessing the market risks associated with Notes issued under the Programme.
The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended, (the "Securities Act") and may not be offered or sold in the United States or to, or for the benefit of, U.S. persons (as defined in Regulation S under the Securities Act ("Regulation S")) unless the Notes are registered under the Securities Act or an exemption from the registration requirements of the Securities Act is available. See "Form of the Notes" for a description of the manner in which Notes will be issued. Notes are subject to certain restrictions on transfer, see "Subscription and Sale and Transfer and Selling Restrictions".
The rating of certain Series of Notes to be issued under the Programme may be specified in the applicable Final Terms.
Arranger
Dealers
BARCLAYS BOFA MERILL LYNCH BNP PARIBAS CITIGROUP CREDIT SUISSE DEUTSCHE BANK GOLDMAN SACHS INTERNATIONAL HSBC J.P. MORGAN MIZUHO SECURITIES MORGAN STANLEY NATWEST MARKETS NOMURA SANTANDER CORPORATE & INVESTMENT BANKING
UBS INVESTMENT BANK The date of this Prospectus is 29 August 2018. In this document references to "Santander UK" are references to Santander UK plc, references to "Santander UK Group Holdings" are to Santander UK Group Holdings plc and references to "Santander UK Group" and the "Group" are references to Santander UK Group Holdings and its subsidiaries. References to "Banco Santander" are references to Banco Santander, S.A. and references to the "Banco Santander Group" are references to Banco Santander and its subsidiaries.
In this document references to "Moody's" are to Moody's Investors Service Limited; references to "S&P" are to Standard & Poor's Credit Market Services Europe Limited; and references to "Fitch" are to Fitch Ratings Ltd. Each of Moody's, S&P and Fitch is established in the European Union and registered under Regulation 1060/2009/EC of the European Parliament and of the Council of 16 September 2009 on credit rating agencies (as amended) (the "CRA Regulation"). In general, European regulated investors are restricted from using a rating for regulatory purposes if such rating is not issued by a credit rating agency established in the European Union and registered under the CRA Regulation unless the rating is provided by a credit rating agency operating in the European Union before 7 June 2010 which has submitted an application for registration in accordance with the CRA Regulation and such registration is not refused. Credit ratings are not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency.
In this document references to the "Prospectus Directive" are references to Directive 2003/71/EC (as amended, including by Directive 2010/73/EU), and includes any relevant implementing measure in a relevant Member State of the European Economic Area.
Each Issuer accepts responsibility for the information contained in this Prospectus and the Final Terms for each Tranche of Notes issued by it under the Programme. To the best of the knowledge of each Issuer (having taken all reasonable care to ensure that such is the case) the information contained in this Prospectus is in accordance with the facts and does not omit anything likely to affect the import of such information.
Save for the Issuers, no other party has separately verified the information contained herein. Accordingly, no representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by the Dealers or the Trustee as to the accuracy or completeness of the information contained or incorporated in this Prospectus or any other information provided by the Issuers in connection with the Programme. No Dealer or the Trustee accepts any liability in relation to the information contained or incorporated by reference in this Prospectus or any other information provided by the Issuers in connection with the Programme.
No person is or has been authorised by either Issuer to give any information or to make any representation not contained in or not consistent with this Prospectus or any other information supplied in connection with the Programme or the Notes and, if given or made, such information or representation must not be relied upon as having been authorised by either Issuer, any of the Dealers or the Trustee.
Neither this Prospectus nor any other information supplied in connection with the Programme or any Notes (i) is intended to provide the basis of any credit or other evaluation or (ii) should be considered as a recommendation by either Issuer, any of the Dealers or the Trustee that any recipient of this Prospectus or any other information supplied in connection with the Programme or any Notes should purchase any Notes. Each investor contemplating purchasing any Notes should make its own independent investigation of the financial condition and affairs, and its own appraisal of the creditworthiness, of the relevant Issuer. Neither this Prospectus nor any other information supplied in connection with the Programme or the issue of any Notes constitutes an offer or invitation by or on behalf of either Issuer, any of the Dealers or the Trustee to any person to subscribe for or to purchase any Notes.
Neither the delivery of this Prospectus nor the offering, sale or delivery of any Notes shall in any circumstances imply that the information contained herein concerning the Issuers is correct at any time subsequent to the date hereof or that any other information supplied in connection with the Programme is correct as of any time subsequent to the date indicated in the document containing the same. The Dealers and the Trustee expressly do not undertake to review the financial condition or affairs of the Issuers during the life of the Programme or to advise any investor in the Notes of any information coming to their attention. Investors should review, inter alia, the most recently published documents incorporated by reference in this Prospectus when deciding whether or not to purchase any Notes.
The Notes, not in registered form, are subject to U.S. tax law requirements and may not be offered, sold or delivered within the United States or its possessions or to or for the account or benefit of U.S. persons, except in certain transactions permitted by U.S. tax regulations. Terms used in this paragraph have the meanings given to them by the U.S. Internal Revenue Code of 1986 and the U.S. Treasury regulations promulgated thereunder.
Notwithstanding anything in this Prospectus to the contrary, each prospective investor (and each employee, representative or other agent of the prospective investor) may disclose to any and all persons, without limitation of any kind, the U.S. tax treatment and U.S. tax structure of any offering and all materials of any kind (including opinions or other tax analyses) that are provided to the prospective investor relating to such U.S. tax treatment and U.S. tax structure, other than any information for which nondisclosure is reasonably necessary in order to comply with applicable securities laws.
Persons into whose possession offering material comes must inform themselves about and observe any such restrictions. This Prospectus does not constitute, and may not be used for or in connection with, an offer to any person to whom it is unlawful to make such an offer or a solicitation by anyone not authorised so to act.
This Prospectus does not constitute an offer to sell or the solicitation of an offer to buy any Notes in any jurisdiction to any person to whom it is unlawful to make the offer or solicitation in such jurisdiction. The distribution of this Prospectus and the offer or sale of Notes may be restricted by law in certain jurisdictions. The Issuers, the Dealers and the Trustee do not represent that this Prospectus may be lawfully distributed, or that any Notes may be lawfully offered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an exemption available thereunder, or assume any responsibility for facilitating any such distribution or offering, or that all actions have been taken by the Issuers, the Dealers or the Trustee which would permit a public offering of any Notes or distribution of this Prospectus in any jurisdiction where action for that purpose is required. In particular, no action has been taken by the Issuers, the Dealers or the Trustee which would permit a public offering of any Notes or distribution of this Prospectus in any jurisdiction where action for that purpose is required. Accordingly, no Notes may be offered or sold, directly or indirectly, and neither this Prospectus nor any advertisement or other offering material may be distributed or published in any jurisdiction, except under circumstances that will result in compliance with any applicable laws and regulations. Persons into whose possession this Prospectus or any Notes may come must inform themselves about, and observe, any such restrictions on the distribution of this Prospectus and the offering and sale of Notes. In particular, there are restrictions on the distribution of this Prospectus and the offer or sale of Notes in the United States, the European Economic Area, Belgium, the United Kingdom, Australia, Canada, Japan, Hong Kong, Ireland, Singapore, Poland, the United Arab Emirates, the Dubai International Financial Centre, Indonesia and Malaysia, see "Subscription and Sale and Transfer and Selling Restrictions".
In making an investment decision, investors must rely on their own examination of the relevant Issuer and the terms of the Notes being offered, including the merits and risks involved.
Certain of the Dealers and their affiliates have engaged and may in the future engage in investment banking and/or commercial banking transactions with, and may perform services for the Issuers and their respective affiliates. In addition, in the ordinary course of their business activities, the Dealers and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of the Issuers or any of their affiliates.
None of the Dealers, the Issuers and the Trustee makes any representation to any investor in the Notes regarding the legality of its investment under any applicable laws. Any investor in the Notes should satisfy itself that it is able to bear the economic risk of an investment in the Notes for an indefinite period of time.
The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area ("EEA"). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, "MiFID II"); or (ii) a customer within the meaning of Directive 2002/92/EC (as amended, the "Insurance Mediation Directive"), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in the Prospectus Directive. Consequently no key information document required by Regulation (EU) No 1286/2014 (as amended, the "PRIIPs Regulation") for offering or selling the Notes or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the Notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.
The Final Terms in respect of any Notes (or Pricing Supplement, in the case of Exempt Notes) may include a legend entitled "MiFID II product governance" which will outline the target market assessment in respect of the Notes and which channels for distribution of the Notes are appropriate. Any person subsequently offering, selling or recommending the Notes (a "distributor") should take into consideration the target market assessment; however, a distributor subject to MiFID II is responsible for undertaking its own target market assessment in respect of the Notes (by either adopting or refining the target market assessment) and determining appropriate distribution channels.
A determination will be made in relation to each issue about whether, for the purpose of the Product Governance rules under EU Delegated Directive 2017/593 (the "MiFID Product Governance Rules"), any Dealer subscribing for any Notes is a manufacturer in respect of such Notes, but otherwise neither the Arranger nor the Dealers nor any of their respective affiliates will be a manufacturer for the purpose of the MiFID Product Governance Rules.
The Final Terms in respect of any Notes (or Pricing Supplement, in the case of Exempt Notes) may include a legend entitled "Notification under Section 309B(1)(c) of the Securities and Futures Act (Chapter 289) of Singapore (the "SFA"). The relevant Issuer will make a determination in relation to each issue about the classification of the Notes being offered for purposes of section 309B(1)(a). Any such legend included on the relevant Final Terms (or Pricing Supplement, in the case of Exempt Notes) will constitute notice to "relevant persons" for the purposes of section 309B(1)(c) of the SFA.
Unless otherwise stated in the applicable Final Terms (or Pricing Supplement, in the case of Exempt Notes), all Notes shall be prescribed capital markets products (as defined in the Securities and Futures (Capital Markets Products) Regulations 2018 of Singapore) and Excluded Investment Products (as defined in the Monetary Authority of Singapore (the MAS) Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).
The Notes have not been approved or disapproved by the United States Securities and Exchange Commission or any other securities commission or other regulatory authority in the United States, nor have the foregoing authorities approved this Prospectus or confirmed the accuracy or determined the adequacy of the information contained in this Prospectus. Any representation to the contrary is unlawful.
This Prospectus may be distributed on a confidential basis in the United States to a limited number of Qualified Institutional Buyers ("QIBs") as defined in Rule 144A under the Securities Act ("Rule 144A") for informational use solely in connection with the consideration of the purchase of the Notes being offered hereby. Its use for any other purpose in the United States is not authorised. It may not be copied or reproduced in whole or in part nor may it be distributed or any of its contents disclosed to anyone other than the prospective investors to whom it is originally submitted.
Registered Notes may be offered or sold within the United States only to QIBs in transactions exempt from the registration requirements under the Securities Act. Each U.S. purchaser of Registered Notes is hereby notified that the offer and sale of any Registered Notes to it may be made in reliance upon the exemption from the registration requirements of the Securities Act provided by Rule 144A.
Each purchaser or holder of Notes represented by a Rule 144A Global Note or any Notes issued in registered form in exchange or substitution therefor (together "Rule 144A Notes") will be deemed, by its acceptance or purchase of any such Rule 144A Notes, to have made certain representations and agreements intended to restrict the resale or other transfer of such Notes as set out in "Subscription and Sale and Transfer and Selling Restrictions". Unless otherwise stated, terms used in this paragraph have the meanings given to them in "Form of the Notes".
To permit compliance with Rule 144A in connection with any resales or other transfers of Notes that are "restricted securities" within the meaning of the Securities Act, the Issuers have undertaken in the Trust Deed to furnish, upon the request of a holder of such Notes or any beneficial interest therein, to such holder or to a prospective purchaser designated by him, the information required to be delivered under Rule 144A(d)(4) under the Securities Act if, at the time of the request, the relevant Issuer is neither a reporting company under Section 13 or 15(d) of the U.S. Securities Exchange Act of 1934, as amended, (the "Exchange Act") nor exempt from reporting pursuant to Rule 12g3-2(b) thereunder. Each Issuer is currently a reporting company under the Exchange Act.
Each Issuer is a company incorporated in England. All of the directors of each Issuer reside outside the United States and all or a substantial portion of the assets of each Issuer are located outside the United States. As a result, it may not be possible for investors to effect service of process outside England upon either Issuer, or to enforce judgments against it obtained in the United States predicated upon civil liabilities of either Issuer or such directors under laws other than English, including any judgment predicated upon United States federal securities laws. The Issuers have been advised by Slaughter and May, their English solicitors, that there is doubt as to the enforceability in England in original actions or in actions for enforcement of judgments of United States courts of civil liabilities predicated solely upon the federal securities laws of the United States.
All references in this document to "U.S. dollars", "U.S. \$" and "\$" are to the currency of the United States of America, to "Sterling" and "£" are to the currency of the United Kingdom and to "euro" and "€" are to the currency introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty on the Functioning of the European Union, as amended.
Each Issuer maintains its financial books and records and prepares its financial statements in Sterling in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"), including interpretations issued by the IFRS Interpretations Committee ("IFRIC") of the IASB that, under European Regulations, are effective and available for early adoption at the relevant Issuer's reporting date. Each Issuer has complied with IFRS as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006.
ALTERNATIVE PERFORMANCE MEASURES - Certain alternative performance measures ("APMs") are included or referred to in this Prospectus (including in the documents incorporated by reference). APMs are non-IFRS measures used to supplement disclosures prepared in accordance with other applicable regulations such as IFRS. Santander UK Group Holdings considers that these APMs provide useful information to enhance the understanding of financial performance. The APMs should be viewed as complementary to, rather than a substitute for, the figures determined according to other regulatory measures. An explanation of each such APM's components and calculation method can be found at pages 254 and 255 of the Annual Report of Santander UK Group Holdings for the year ended 31 December 2017 and pages 72 to 74 (inclusive) of Santander UK Group Holdings' Half Yearly Financial Report as at and for the six months ended 30 June 2018 (both incorporated by reference).
In connection with the issue of any Tranche of Notes, one or more relevant Dealers (the "Stabilisation Manager(s)") (or persons acting on behalf of any Stabilisation Manager(s)) may overallot Notes or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail. However stabilisation may not necessarily occur. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the offer of the relevant Tranche of Notes is made and, if begun, may cease at any time, but it must end no later than the earlier of 30 days after the issue date of the relevant Tranche of Notes and 60 days after the date of the allotment of the relevant Tranche of Notes. Any stabilisation action or over- allotment must be conducted by the relevant Stabilisation Manager(s) (or person(s) acting on behalf of any Stabilisation Manager(s)) in accordance with all applicable laws and rules.
Amounts payable under certain Notes issued under the Programme may be calculated by reference to one or more "benchmarks" for the purposes of Regulation (EU) No. 2016/1011 of the European Parliament and of the Council of 8 June 2016 (the "Benchmarks Regulation"). In this case, a statement will be included in the applicable Final Terms, as to whether or not the relevant administrator of the "benchmark" is included in ESMA's register of administrators under Article 36 of the Benchmarks Regulation. Transitional provisions in the Benchmarks Regulation may have the result that the administrator of a particular benchmark is not required to appear in the register of administrators at the date of the applicable Final Terms. The registration status of any administrator under the Benchmarks Regulation is a matter of public record and, save where required by applicable law, the relevant Issuer does not intend to update the applicable Final Terms to reflect any change in the registration status of the administrator.
| Page | |
|---|---|
| DOCUMENTS INCORPORATED BY REFERENCE | 9 |
| OVERVIEW OF THE PROGRAMME | 11 |
| RISK FACTORS | 17 |
| FORM OF THE NOTES | 79 |
| FORM OF FINAL TERMS | 86 |
| FORM OF PRICING SUPPLEMENT | 106 |
| TERMS AND CONDITIONS OF THE NOTES | 126 |
| USE OF PROCEEDS | 204 |
| DESCRIPTION OF THE ISSUERS AND THE GROUP | 205 |
| BOOK-ENTRY CLEARANCE SYSTEMS | 210 |
| TAXATION | 215 |
| SUBSCRIPTION AND SALE AND TRANSFER AND SELLING RESTRICTIONS | 229 |
| GENERAL INFORMATION | 242 |
The following documents which have previously been published or are published simultaneously with this Prospectus and have been approved by the FCA or filed with it shall be incorporated in, and form part of, this Prospectus and the Base Prospectus set out in this Prospectus and approved by the FCA for the purpose of the Prospectus Directive:
Any statement contained herein or in a document which is incorporated by reference herein shall be modified or superseded for the purpose of this Prospectus to the extent that a subsequent statement which is deemed to be incorporated by reference herein or contained herein modifies or supersedes such earlier statement (whether expressly, by implication or otherwise), (provided, however, that such statement shall only form part of the Base Prospectus to the extent that it is contained in a document all of the relevant portion of which is incorporated by reference by way of a supplement proposed in accordance with Article 16 of the Prospectus Directive). Any statement so modified or superseded shall not, except as so modified or superseded, constitute part of this Prospectus.
Copies of the documents incorporated by reference in this Prospectus, listed in (1) to (5) above, are available for viewing at: http://www.santander.co.uk/uk/about-santander-uk/investor-relations.
Any documents themselves incorporated by reference in the documents incorporated by reference in this Prospectus shall not form part of this Prospectus.
The Issuers will, in the event of any significant new factor, material mistake or inaccuracy relating to information included in this Prospectus which is capable of affecting the assessment of any Notes, prepare a supplement to this Prospectus or publish a new Prospectus for use in connection with any subsequent issue of Notes. The Issuers have undertaken to the Dealers in the Programme Agreement (as defined in "Subscription and Sale and Transfer and Selling Restrictions" herein) that they will comply with section 87G of the UK Financial Services and Markets Act 2000 ("FSMA").
Certain information contained in the documents listed above has not been incorporated by reference in this Prospectus. Such information is either (i) not considered by the Issuers to be relevant for prospective investors in the Notes to be issued under the Programme or (ii) is covered elsewhere in this Prospectus.
The following overview does not purport to be complete and is taken from, and is qualified in its entirety by, the remainder of this Prospectus and, in relation to the terms and conditions of any particular Tranche of Notes, the applicable Final Terms.
This Overview constitutes a general description of the Programme for the purposes of Article 22.5(3) of Commission Regulation (EC) No 809/2004, as amended, implementing the Prospectus Directive.
Words and expressions defined in "Form of the Notes" and "Terms and Conditions of the Notes" shall have the same meanings in this overview.
| Issuers: | Santander UK plc and Santander UK Group Holdings plc |
|---|---|
| Issuers' Legal Entity Identifiers (LEI): |
Santander UK plc: PTCQB104N23FMNK2RZ28 |
| Santander UK Group Holdings plc: 549300F5XIFGNNW4CF72 | |
| Description of Issuers: | Santander UK provides financial services in the UK. Santander UK was incorporated in England and Wales in 1988. |
| Santander UK Group Holdings is the immediate parent company of the Santander UK Group which provides financial services in the UK. Santander UK Group Holdings was incorporated in England and Wales in 2013. |
|
| Each Issuer forms part of the Banco Santander Group. | |
| Risk Factors: | There are certain factors that may affect the relevant Issuer's ability to fulfil its obligations under Notes issued under the Programme. These are set out under "Risk Factors - Business Risk Factors" below and include, among others, risks concerning (i) the creditworthiness of the relevant Issuer, (ii) general economic conditions, (iii) competition in the financial services industry, (iv) regulatory and legislative change, (v) operational risks and (vi) the future unavailability or discontinuance of certain benchmark rates. In addition, there are certain factors set out under "Risk Factors - Risks relating to the Notes" below which are material for the purpose of assessing the market risks associated with Notes issued under the Programme, including (i) there being no assurance that a trading market for the Notes will develop or be maintained, (ii) that the Notes may be redeemed prior to their maturity, (iii) the fact that the Notes are subject to certain transfer restrictions, (iv) that the relevant Issuer might rely on paying agents and clearing systems, (v) the loss of all or part of a Noteholder's anticipated return due, inter alia, to Notes bearing a fixed-to-floating (or floating-to-fixed) rate of interest, an inverse floating rate of interest, a capped or variable rate of interest or to payments of interest on Notes being determined by reference to a formula or other reference factor, as specified in the applicable Final Terms, (vi) the fact that Santander UK Group Holdings' obligations under the Dated Subordinated Notes are subordinated, (vii) the fact that |
Noteholders may be required to absorb losses in the event Santander UK Group Holdings or the Group become non-viable, (viii) the fact that, upon the occurrence and continuation of a Loss Absorption Disqualification Event, and if specified as being applicable in the applicable Final Terms, Santander UK Group Holdings may, without the need for any consent of the Noteholders or the Trustee, redeem all (but not some only) of its Senior Notes, (ix) the fact that Senior Notes of Santander UK Group Holdings may be subject to limited events of default and so the Trustee and Noteholders may have more limited remedies available thereunder, (x) the fact that, upon the occurrence and continuation of a Regulatory Capital Event, Santander UK Group Holdings may, without the need for any consent of the Noteholders or the Trustee, redeem all (but not some only) of the Dated Subordinated Notes and (xi) the fact that, upon the discontinuation or unavailability of LIBOR or any other benchmark, the rate of interest on Floating Rate Notes or Fixed Rate Reset Notes which are linked to or which reference such benchmark will be determined for the relevant period by the applicable fallback provisions without the consent of Noteholders and without the assurance that any subsequent adjustment of the rate of interest will be favourable to Noteholders.
Dealers: Banco Santander, S.A. Barclays Bank PLC BNP Paribas Citigroup Global Markets Limited Credit Suisse Securities (Europe) Limited Deutsche Bank AG, London Branch Goldman Sachs International HSBC Bank plc J.P. Morgan Securities plc Merrill Lynch International Mizuho International plc Morgan Stanley & Co. International plc NatWest Markets Plc Nomura International plc UBS Limited
and any other Dealers appointed in accordance with the Programme Agreement.
Certain Restrictions: Each issue of Notes denominated in a currency in respect of which particular laws, guidelines, regulations, restrictions or reporting requirements apply will only be issued in circumstances which comply with such laws, guidelines, regulations, restrictions or reporting requirements from time to time (see "Subscription and Sale and Transfer and Selling Restrictions").
| Trustee: | Citicorp Trustee Company Limited |
|---|---|
| Issuing and Principal Paying Agent: |
Citibank, N.A., London Branch |
| Registrar: | Citigroup Global Markets Europe AG |
| Programme Size: | Up to €30,000,000,000 (or its equivalent) outstanding at any time. The Issuers may increase the amount of the Programme in accordance with the terms of the Programme Agreement. |
| Distribution: | The Notes may be distributed by way of private or public placement and in each case on a syndicated or non-syndicated basis. |
| Currencies: | Any currency indicated in the applicable Final Terms. |
| Maturities: | Subject to any applicable legal or regulatory restrictions and the rules from time to time of any relevant central bank (or equivalent body), such maturity as indicated in the applicable Final Terms. Unless otherwise permitted by the prevailing Capital Rules, Dated Subordinated Notes will have a minimum maturity of five years. |
| Issue Price: | Notes may be issued at an issue price which is at par or at a discount to, or premium over, par. |
| Form of Notes: | The Notes will be issued in bearer or registered (or inscribed) form as described in "Form of the Notes". Notes issued in bearer form may also be issued in new global note ("NGN") form. Registered Notes will not be exchangeable for Bearer Notes or vice versa. |
| Fixed Rate Notes: | Interest on Fixed Rate Notes will be payable on such date or dates as indicated in the applicable Final Terms and on redemption and will be calculated on the basis of such Day Count Fraction as may be agreed between the relevant Issuer and the relevant Dealer. |
| Fixed Rate Reset Notes: | Fixed Rate Reset Notes will, in respect of an initial period, bear interest at the initial fixed rate of interest specified in the applicable Final Terms. Thereafter, the fixed rate of interest will be reset on one or more date(s) specified in the applicable Final Terms by reference to a Mid-Swap Rate, a Benchmark Gilt Rate or a Reference Bond Rate and for a period equal to the reset period, as adjusted for any applicable margin, in each case as may be specified in the applicable Final Terms. Interest will be payable in arrear on the date or dates in each year specified in the relevant Final Terms. |
| Floating Rate Notes: | Floating Rate Notes will bear interest at a rate: |
(1) determined on the same basis as the floating rate under a notional interest rate swap transaction in the relevant Specified Currency governed by an agreement incorporating the 2006 ISDA Definitions (as published by
| the International Swaps and Derivatives Association, Inc., and as amended and updated as at the Issue Date of the first Tranche of the Notes of the relevant Series); or |
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| (2) | determined on the basis of a reference rate appearing on the agreed screen page of a commercial quotation service; or |
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| (3) | equal to a fixed rate minus a rate based upon a reference rate such as the London interbank offered rate. |
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| The Margin (if any) relating to such floating rate will be indicated in the applicable Final Terms. |
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| Convertible Interest Basis Notes: |
Convertible Interest Basis Notes may be converted from one interest and/or payment basis to another if so provided in the applicable Final Terms. |
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| Other provisions in relation to Floating Rate Notes, Variable Interest Notes and Convertible |
Floating Rate Notes, Variable Interest Notes and Convertible Interest Basis Notes may also have a maximum interest rate, a minimum interest rate or both. |
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| Interest Basis Notes: | Interest on Floating Rate Notes, Variable Interest Notes and Convertible Interest Basis Notes in respect of each Interest Period, as agreed prior to issue by the relevant Issuer and the relevant Dealer, will be payable on such Interest Payment Dates, and may be calculated on the basis of such Day Count Fraction, as indicated in the applicable Final Terms. |
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| Zero Coupon/Discount Notes: |
Zero Coupon Notes and Discount Notes will be offered and sold at a discount to their nominal amount and, in the case of Zero Coupon Notes, will not bear interest. |
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| Benchmark discontinuation: |
In certain situations, including if the relevant benchmark ceases to be administered, an Independent Adviser may determine, or (if such Independent Adviser fails to make any such determination or the Issuer is unable to appoint an Independent Adviser) the Issuer may determine, (a) an Alternative Reference Rate in respect of the relevant Floating Rate Notes pursuant to Condition 4(c)(ii)(B)(II) or (b) an Alternative Relevant Rate in respect of the relevant Fixed Rate Reset Notes pursuant to Condition 4(b)(iii), as applicable. |
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| Exempt Notes: | Each Issuer may issue Exempt Notes. The relevant Issuer may agree with any Dealer that Exempt Notes may be issued in a form not contemplated by the "Terms and Conditions of the Notes", in which event the relevant provisions will be included in the applicable Pricing Supplement. |
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| Redemption: | The applicable Final Terms will indicate either that the relevant Notes cannot be redeemed prior to their stated maturity (other than for taxation reasons or following an Event of Default or, in the case of Dated Subordinated Notes, upon the occurrence of a Regulatory |
Capital Event) or that such Notes will be redeemable at the option of the relevant Issuer (including, in the case of Senior Notes issued by Santander UK Group Holdings, due to a Loss Absorption Disqualification Event and upon satisfaction of any applicable conditions to redemption, as described below) and/or the Noteholders (other than the case of Dated Subordinated Notes) upon giving notice to the Noteholders or the relevant Issuer, as the case may be, on a date or dates specified prior to such stated maturity or automatically upon the occurrence of certain specified events and at a price or prices and on such other terms as may be agreed between the relevant Issuer and the relevant Dealer and indicated in the applicable Final Terms.
No sales of Rule 144A Notes in the United States to any one purchaser will be for less than U.S.\$200,000.
claim or plead any right of set-off, compensation or retention in respect of any amount owed to it by Santander UK Group Holdings arising under or in connection with the Dated Subordinated Notes or the Senior Notes issued by Santander UK Group Holdings or, in each case, the relative Coupons (if any), and each holder of any Dated Subordinated Notes or Senior Notes issued by Santander UK Group Holdings and, in each case, the relative Coupons (if any) shall, by virtue of being the holder of any Dated Subordinated Note or Senior Note issued by Santander UK Group Holdings or, in each case, the holder of the relative Coupon (if any), be deemed to have waived all such rights of set-off, compensation or retention.
Neither the Trust Deed constituting the Notes nor the Terms and Conditions of the Notes will contain any negative pledge covenant by the relevant Issuer or any events of default other than those set out in Condition 9 (which do not include, inter alia, a cross default provision).
In purchasing Notes, investors assume the risk that the relevant Issuer might become insolvent or otherwise be unable to make all payments due in respect of the Notes. There is a wide range of factors which individually or together could result in the relevant Issuer becoming unable to make all payments due in respect of the Notes. It is not possible to identify all such factors or to determine which factors are most likely to occur, as the Issuers might not be aware of all relevant factors and certain factors which they currently deem not to be material may become material as a result of the occurrence of events outside that Issuer's control. Each Issuer believes that the factors described below represent the principal risks inherent in investing in Notes issued under the Programme.
Prospective investors should also read the detailed information set out elsewhere in this Prospectus and reach their own views prior to making any investment decision.
Words and expressions defined in the "Terms and Conditions of the Notes" below or elsewhere in this Prospectus have the same meanings in this section.
The Group relies on recruiting, retaining and developing appropriate senior management and skilled personnel
The Group's continued success depends in part on the continued service of key members of the Group's management team. The ability to continue to attract, train, motivate and retain highly qualified and talented professionals is a key element of the Group's strategy. The successful implementation of the Group's growth strategy depends on the availability of skilled management, both at the Group's head office and in each of the Group's business units. If the Group or one of the Group's business units or other functions fails to staff its operations appropriately, or loses one or more of its key senior executives and fails to replace them in a satisfactory and timely manner, the Group's business, financial condition and results of operations, including control and operational risks, may be adversely affected.
In addition, the financial services industry has and may continue to experience more stringent regulation of employee compensation, which could have an adverse effect on the Group's ability to hire or retain the most qualified employees. If the Group fails or is unable to attract and appropriately train, motivate and retain qualified professionals, the Group's business may also be adversely affected.
Over the past 10 years, financial systems worldwide have experienced difficult credit and liquidity conditions and disruptions leading to reduced liquidity, greater volatility (such as volatility in spreads) and, in some cases, a lack of price transparency on interbank lending rates. Uncertainties remain concerning the outlook and the future economic environment despite recent improvements in certain segments of the global economy, including in the United Kingdom (the "UK"). Investors remain cautious and a slowing or failing of the global economic recovery would likely aggravate the adverse effects of difficult economic and market conditions on the Group and on others in the financial services industry.
Whilst evidence of recovery has emerged in relation to the UK economy, the possibility of a renewed economic downturn remains a real risk. Uncertainty surrounding the future of the eurozone is less acute than before, but slow growth increase may pose a risk of a further slowdown in the UK's principal export markets which would have an adverse effect on the broader UK economy.
In particular, the Group may face, among others, the following risks related to any future economic downturn:
Financial markets in the past two years have been affected by a series of political events, including the UK's vote in June 2016 to leave the European Union (the "EU") and the general election in the UK in June 2017, which caused significant volatility in the global stock and foreign exchange markets (for more information, see the risk factor entitled 'Exposure to UK political developments, including the ongoing negotiations between the UK and EU, could have a material adverse effect on the Group') and there has been an increase in anti-EU sentiment in other EU member states ("EU Member States"). Further, there continues to be significant uncertainty as to the respective legal and regulatory environments in which the Group will operate going forward as a result of the UK's vote to leave the EU. Such uncertainties have had, and may continue to have, a negative impact on macroeconomic conditions and the Group's business, financial condition and results of operations, and there can be no assurance that the European and global economic environments will not continue to be affected by political developments (for more information, see the risk factor entitled 'The Group may suffer adverse effects as a result of the economic and sovereign debt tensions in the eurozone').
Continued or worsening disruption and volatility in the global financial markets could have a material adverse effect on the Group, including the Group's ability to access capital and liquidity on financial terms acceptable to the Group, if at all. If capital markets financing ceases to become available, or becomes excessively expensive, the Group may be forced to raise the rates it pays on deposits to attract more customers and become unable to maintain certain liability maturities particularly if interest rates continue to rise following the decisions of the Bank of England ("BOE") to increase the base rate from 25 basis points to 50 basis points in November 2017 and from 50 basis points to 75 basis points in August 2018. Any such increase in capital markets funding costs or deposit rates could have a material adverse effect on the Group's interest margins, liquidity and profitability, particularly given the sustained low interest rate environment expected in the medium term.
If all or some of the foregoing risks were to materialise, this could have a material adverse effect on the Group.
The Group's operating results, financial condition and prospects may be materially impacted by economic conditions in the UK
The Group's business activities are concentrated in the UK and the Group offers a range of banking and financial products and services to UK retail and corporate customers. As a consequence, the Group's operating results, financial condition and prospects are significantly affected by the general economic conditions in the UK.
The Group's financial performance is intrinsically linked to the UK economy and the economic confidence of consumers and businesses. The sustainability of the UK economic recovery, along with its concomitant impacts on the Group's profitability, remains a risk. Conversely, a strengthened UK economic performance may increase the possibility of a higher interest rate environment. In such a scenario, other market participants might offer more competitive product pricing resulting in increased customer attrition.
Adverse changes in EU and global growth may pose the risk of a further slowdown in the UK's principal export markets which would have an adverse effect on the broader UK economy.
In addition, adverse changes in the credit quality of the Group's borrowers and counterparties or a general deterioration in EU, UK or global economic conditions could reduce the recoverability and value of the Group's assets and require an increase in the level of provisions for bad and doubtful debts. Likewise, a significant reduction in the demand for the Group's products and services could negatively impact the Group's business and financial condition. UK economic conditions and uncertainties may have an adverse effect on the quality of the Group's loan portfolio and may result in a rise in delinquency and default rates. There can be no assurance that the Group will not have to increase the Group's provisions for loan losses in the future as a result of increases in non-performing loans and/or for other reasons beyond the Group's control. Material increases in the Group's provisions for loan losses and write-offs or charge-offs could have an adverse effect on the Group's operating results, financial condition and prospects.
Any related significant reduction in the demand for the Group's products and services could have a material adverse effect on the Group's operating results, financial condition and prospects.
Exposure to UK political developments, including the ongoing negotiations between the UK and EU, could have a material adverse effect on the Group
On 23 June 2016, the UK held a referendum (the "UK EU Referendum"") on its membership of the EU, in which a majority voted for the UK to leave the EU. Immediately following the result, the UK and global stock and foreign exchange markets commenced a period of significant volatility, including a steep devaluation of the pound sterling. There remains significant uncertainty relating to the process, timing and negotiation of the UK's exit from, and future relationship with, the EU and the basis of the UK's future trading relationship with the rest of the world.
On 29 March 2017, the UK Prime Minister gave notice under Article 50(2) of the Treaty on European Union of the UK's intention to withdraw from the EU. The delivery of the Article 50(2) notice triggered a two year period of negotiation which will determine the terms on which the UK will exit the EU, taking account of the framework for the UK's future relationship with the EU. On 19 March 2018, a revised draft withdrawal agreement between the UK and the EU was published to govern the transition period prior to withdrawal, which contains a significant number of outstanding issues. Unless extended, the UK's EU membership will cease after this two year period. The timing of, and process for, such negotiations and the resulting terms of the UK's future economic, trading and legal relationships are uncertain, as is the basis of the UK's future trading relationship with the rest of the world. There is a possibility that the UK's membership will end at such time without reaching any agreement on the terms of its relationship with the EU going forward, although the Group notes that movement to phase two of the negotiations - with a focus on finalising withdrawal issues, transition arrangements and a framework for the UK's future relationship with the EU - was agreed on 15 December 2017. Nevertheless, as at the date of this Prospectus, the withdrawal agreement including the proposed transition period to December 2020, has not been finalised or approved.
A general election in the UK was held on 8 June 2017 (the "General Election"). The General Election resulted in a hung parliament with no political party obtaining the majority required to form an outright government. On 26 June 2017 it was announced that the Conservative party had reached an agreement with the Democratic Unionist Party (the "DUP") in order for the Conservative party to form a minority government with legislative support ('confidence and supply') from the DUP. The Government's small majority (with the support of the DUP) has impacted its ability to pass legislation in the House of Commons, which may have implications for the process of the UK leaving the EU. There is an ongoing possibility of an early general election ahead of 2022 and of a change of government.
While the longer term effects of the UK's imminent departure from the EU are difficult to predict, the effects of the UK EU Referendum, in addition to the uncertainty created as a result of the outcome of the General Election, could include further financial instability and slower economic growth as well as higher unemployment and inflation in the UK. For instance, the UK government has stated its intention for the UK to leave both the single market and the customs union (thereby ceasing to be part of the EU's internal market and party to the global trade deals negotiated by the EU on behalf of its members) and this could affect the attractiveness of the UK as a global investment centre and increase tariff and non-tariff barriers for the UK's trading relationships and, as a result, could have a detrimental impact on UK economic growth. Potential further decreases in interest rates by the BoE or sustained low or negative interest rates would put further pressure on interest margins and adversely affect the Group's operations, financial condition and prospects. Equally, further rises in interest rates (in addition to the rate rise in November 2017) could result in larger default losses which would also impact the Group's operations, financial condition and prospects.
Asset valuations, currency exchange rates and credit ratings may be particularly affected by increased market volatility as the negotiation of the UK's exit from the EU continues in the run-up to 29 March 2019. Since the UK EU Referendum the major credit rating agencies view of the UK sovereign credit rating has changed. Given the negative outlook attributed by Standard & Poor's and Fitch, there is a risk of further rating downgrades in future, particularly during the negotiation of the UK's exit from the EU as the potential terms of the exit (and any transition period) and the future UK-EU relationship become public.
The Group is subject to substantial EU-derived regulation and oversight. Although legislation has now been passed transferring the accumulated legal regime of the EU into UK law, there remains significant uncertainty as to the respective legal and regulatory environments in which the Group will operate, when the UK is no longer a member of the EU, and the basis on which cross-border financial business will take place after the UK leaves the EU. For example, the Group is finalising implementation of a number of key restructuring and strategic initiatives, such as the ring-fencing of its retail banking activities, all of which will be carried out throughout this period of significant uncertainty. This may impact the prospects for successful execution and impose additional pressure on management.
Operationally, the Group and other financial institutions may no longer be able to rely on the European passporting framework for financial services and it is unclear what alternative regime may be in place following the UK's departure from the EU. This uncertainty, and any actions taken as a result of this uncertainty, as well as new or amended rules, may have a significant impact on the Group's operations, financial condition and prospects.
Ongoing uncertainty within the UK Government and Parliament, and limited progress in the negotiations between the UK and EU, increases the possibility of the UK leaving the EU on 29 March 2019 without a withdrawal agreement (and associated transition period) in place. Such a 'cliff edge' Brexit is likely to cause significant market and economic disruption.
The UK political developments described above, along with any further changes in government structure and policies, may lead to further market volatility and changes to the fiscal, monetary and regulatory landscape in which the Group operates and could have a material adverse effect on the Group, including its ability to access capital and liquidity on financial terms acceptable to it and, more generally, on the Group's operations, financial condition and prospects.
The Group is subject to regulatory capital and leverage requirements that could limit the Group's operations, and changes to these requirements may further limit and adversely affect the Group's operating results, financial condition and prospects
The Group is subject to capital adequacy requirements applicable to banks and banking groups under directly applicable EU legislation and as adopted by the Prudential Regulation Authority (the "PRA") of the BoE. The Group is required to maintain a minimum ratio of Common Equity Tier 1 ("CET1") capital to riskweighted assets, Tier 1 capital to risk-weighted assets, total capital to risk-weighted assets and Tier 1 capital to total adjusted assets for leverage monitoring purposes. Any failure by the Group to maintain the Group's ratios above prescribed regulatory minimum levels may result in administrative actions or sanctions. These could potentially include requirements on the Group to cease all or certain lines of new business, to raise new capital resources or, in certain circumstances, a requirement for the Group's existing capital instruments (potentially including the Group's debt securities) to be subjected to bail-in or write down (for more information see the risk factor entitled "Bail-in and write down powers under the Banking Act and the BRRD may adversely affect the Group's business and the value of securities it may issue").
The Capital Requirements Directive IV (the "CRD IV Directive") and the Capital Requirements Regulation (the "CRD IV Regulation" and together with the CRD IV Directive, "CRD IV") implemented changes proposed by the Basel Committee on Banking Supervision (the "Basel Committee") to the capital adequacy framework, known as "Basel III" in the EU. The CRD IV Regulation is directly applicable in each EU Member State and does not therefore require national implementing measures, whilst the CRD IV Directive has been implemented by EU Member States through national legislative processes. CRD IV was published in the Official Journal on 27 June 2013 and came into effect on 1 January 2014, with particular requirements expected to be fully effective by 2019. CRD IV substantially reflects the Basel III capital and liquidity standards and facilitates the applicable implementation timeframes. On 19 December 2013, the PRA published the initial version of its rules and supervisory statements associated with the implementation of CRD IV, which cover prudential rules for banks, building societies and investment firms. Binding technical standards adopted by the European Commission (the "Commission") have also impacted, or may further impact, the capital requirements which apply under CRD IV. The CRD IV regime is expected to continue to evolve. On 23 November 2016, the European Commission first put forward significant draft proposals to amend, among other things, both the CRD IV Regulation and the Capital Requirements Directive (such amended Capital Requirements Regulation to be known as "CRR 2" and the Capital Requirements Directive as "CRD V"), including to propose a binding leverage ratio, a binding net stable funding ratio and more risk sensitive capital requirements. These reforms remain under discussion and are not expected to enter into force until 2019 at the earliest.
Under the "Pillar 2" framework, the PRA requires the capital resources of UK banks to be maintained at levels which exceed the base capital requirements prescribed by CRD IV and to cover relevant risks in their business (informed by the Group's Internal Capital Adequacy Assessment Process ("ICAAP") and with effect from 1 January 2018 set through the PRA's Total Capital Requirement (formerly the Individual Capital Guidance)). In addition, a series of capital buffers has been established under CRD IV and PRA rules to ensure a bank can withstand a period of stress. These buffers, which must be met by CET1 capital, include the countercyclical capital buffer, sectoral capital requirements, a PRA buffer and the capital conservation buffer. The total size of the capital buffers will be informed by the results of the annual concurrent UK stress testing exercises undertaken by the PRA. The BoE's approach to stress testing the UK banking system was outlined in October 2015. The BoE is aiming to develop an approach that is explicitly countercyclical, with the severity of the stress test and the associated regulatory capital buffers varying systematically with the state of the financial cycle. Furthermore, the framework is aiming to support a continued improvement in UK banks' risk management and capital planning capabilities, and the BoE expects participating UK banks to demonstrate sustained improvements in their capabilities over time.
The PRA can take action if a bank fails to meet the required capital ratio hurdle rates in the stress testing exercise, and the banks which fail to do so will be required to take action to strengthen their capital position over an appropriate timeframe. If a bank does not meet expectations in its risk management and capital planning capabilities in the stress testing exercise, this may inform the setting of its capital buffers. In March 2018, the BoE published its guidance on its 2018 stress tests, which will contain the same annual cyclical scenario as in 2017, but will not include the biennial exploratory scenario. However, the guidance does state that the hurdle rates for the 2018 test will evolve from previous years, namely by (i) the BoE holding banks of greater systemic importance to higher standards; (ii) hurdle rates incorporating buffers to capture domestic systemic importance as well as global systemic importance; (iii) the calculation of minimum capital requirements incorporated in the hurdle rates more accurately reflecting how they would evolve in a real stress scenario; and (iv) adjustments being made to reflect increased loss absorbency that will result from higher provisions in stress under the new international financial reporting standards accounting standard 9 (also known as "IFRS 9").
The BoE published results of the stress test in November 2017. Though the results of the PRA's 2017 stress test did not impact on the level of capital that the Group is required to hold, the PRA could, in the future, as a result of stress testing exercises (both in the UK and EU wide) and as part of the exercise of UK macro-prudential capital regulation tools, or through supervisory actions (beyond the changes described below), require UK banks, including the Group, to increase their capital resources further.
The Financial Services Act 2012 empowers the Financial Policy Committee of the BoE (the "FPC"), which is a sub-committee of the Court of Directors of the BoE, to give directions to the PRA and the FCA so as to ensure implementation of macro-prudential measures intended to manage systemic risk. For the UK, the FPC sets the countercyclical capital buffer rate on a quarterly basis.
Following its meeting in June 2017, the FPC announced that the countercyclical capital buffer rate would be increased from 0 per cent. to 0.5 per cent., with binding effect from June 2018. On 28 November 2017, it further increased the level to 1 per cent. with binding effect from November 2018. As a consequence of the Group's UK-focused business, its countercyclical capital buffer rate will reflect substantially all of this increase.
The Financial Services Act 2012 provides the FPC with certain other macro-prudential tools for the management of systemic risk. Since 6 April 2015, these tools have included powers of direction relating to leverage ratios. In July 2015, the FPC made certain directions to the PRA in relation to the leverage ratio, and since January 2016 all major UK banks (including the Group) have been required to hold enough Tier 1 capital (75 per cent. of which must be CET1 capital) to satisfy a minimum leverage requirement of 3 per cent. and enough CET1 capital to satisfy a countercyclical leverage ratio buffer of 35 per cent. of each bank's institution-specific countercyclical capital buffer rate. Following a joint consultation launched by the FPC and PRA in June 2017, and a recommendation from the FPC in September 2017, in October 2017 the PRA excluded from the calculation of the total exposure measure those assets constituting claims on central banks, and increased the minimum leverage ratio requirement to 3.25 per cent. of total exposures.
In July 2015 the FPC also directed the PRA to require UK globally systemically important banks ("G-SIBs") and domestically systemically important banks, building societies and PRA-regulated investment firms (including the Group) to hold enough CET1 capital to meet a supplementary leverage ratio buffer of 35 per cent. of the institution-specific G-SIB buffer rate or Systemic Risk Buffer ("SRB") for domestically systemically important banks. The supplementary leverage ratio buffer was implemented on 1 January 2016, in line with the G-SIB buffer rate imposed by the Financial Stability Board ("FSB"), with the SRB to be applicable from 1 January 2019. The FPC finalised and published its SRB framework on 25 May 2016. Systemic importance is measured using the total assets of ring-fenced bank sub-groups in scope of the SRB, with higher SRB rates applicable as total assets increase. In June 2018 the FPC outlined its intention to conduct a comprehensive review of the leverage ratio framework in light of revised international standards including Basel III and CRR 2. Following this announcement, in July 2018 the PRA issued a consultation which proposes to reflect the SRB framework in the UK leverage ratio framework (CP14/18). The consultation includes a proposal to apply leverage ratio requirements on a subconsolidated basis to those ring-fenced bodies whose groups are already required to meet leverage ratio requirements on a consolidated basis. Also proposed is, where applicable, a requirement on firms to hold capital on a group consolidated basis to address ring-fenced bodies group risk (the "Leverage Ratio Group Add-on") and a proposal to amend the additional leverage ratio buffer (ALRB) to reflect the SRB. The consultation closes in September 2018, and the PRA expects to implement the proposals on 1 January 2019.
The FPC can also direct the PRA to adjust capital requirements in relation to particular sectors through the imposition of sectoral capital requirements. Action taken in the future by the FPC in exercise of any of its powers could result in the regulatory capital requirements applied to the Group being further increased.
Regulators in the UK and worldwide have also proposed that additional loss absorbency requirements should be applied to systemically important institutions to ensure that there is sufficient loss absorbing and recapitalisation capacity available in resolution. The EU Bank Recovery and Resolution Directive (the "BRRD") requires that EU Member States ensure that EU banks meet a Minimum Requirement for Eligible Liabilities ("MREL"). The BRRD was transposed into UK law in January 2015, with the provisions on MREL taking effect from 1 January 2016. On 9 November 2015, the FSB also published its final Total Loss-Absorbing Capital ("TLAC") standards for G-SIBs. On 11 December 2015, the BoE published a consultation paper on its proposed statement of policy on its approach to setting MREL and the PRA published a consultation paper and a draft supervisory statement on the relationship between MREL and capital and leverage buffers. In November 2016, the BoE published its responses to the consultation (the "Policy Statement"). In the Policy Statement, the BoE has indicated that it will set MREL on a case- bycase basis, and that it intends to set MREL for G-SIBs as necessary to implement the TLAC standard. The BoE has also indicated that it intends to set consolidated MREL generally no higher than institutions' current regulatory minimum capital requirements in the period prior to the interim requirement coming into force and consequently there should be no immediate change in regulatory requirements for loss absorbency capacity. For most institutions, the BoE has imposed a requirement to meet the interim MREL standards by 1 January 2020, and has set a final MREL conformance date of 1 January 2022, although it expects UK G-SIBs to meet the interim TLAC minimum requirement by 1 January 2019. The BoE expects to conduct a review of its general approach to calibrating MREL and to set the final transition date by the end of 2020. A revised version of this Policy Statement was published in June 2018, and it now addresses the scope of application of MREL within groups (i.e. "internal" MREL), as well as the calibration of internal MREL and the criteria that instruments must meet to qualify as internal MREL resources. The BoE has made it clear that internal MREL above capital requirements is likely to be necessary only where the BoE considers that the insolvency of the institution would put the BoE's resolution objectives at risk. The transition period to meet internal MREL is the same as that set out above for "external" MREL (MREL instruments issued from a resolution entity).
In November 2016, the PRA published a supervisory statement (SS16/16) on the relationship between MREL and regulatory buffers, in which the PRA set out its policy, based on key aspects of the FSB standards, that CET1 used to meet the MREL requirement cannot also be used to meet the CRD IV combined buffer, the PRA buffer or the leverage ratio buffers. However, a firm which does not have or expects that it will not have sufficient CET1, in addition to the CET1 counted towards its MREL, to meet its CRD IV combined buffer or the PRA buffer can expect enhanced supervisory action and to be required to prepare a capital restoration plan. On 27 July 2017, the PRA published a consultation paper (CP15/17) on its proposals with regard to, amongst other things, the relationship between the MREL and CRD IV combined buffer, the PRA buffer and the leverage ratio buffers. In particular, the PRA proposes to update its previously expressed policies to clarify its expectations regarding the amount of CET1 that firms should not count simultaneously towards those buffer requirements and MREL (i.e. an amount equal to the size of the usable buffer derived from the two going-concern regimes). These proposed revisions were finalised in an updated version of the supervisory statement published in December 2017.
On 6 July 2017, the FSB published its Guiding Principles on the Internal Total Loss-Absorbing Capacity of G-SIBs, suggesting that material subsidiaries of G-SIB groups issue internal TLAC (i.e. equity and TLAC compliant debt instruments to the resolution entities in the group) so that losses and recapitalisation needs of material entities or sub-groups may be passed with legal certainty to the resolution entity of a G-SIB resolution group, without entry into resolution of the subsidiaries within the material sub-group.
As indicated above, on 23 November 2016, the European Commission published legislative proposals for amendments to CRD IV, the Single Resolution Mechanism Regulation ("SRMR") and the BRRD, including a proposal to amend the BRRD by means of an amending directive to facilitate the creation of a new asset class of "non-preferred" senior debt. The package of reforms is aimed at further strengthening the resilience of EU credit institutions and is expected to enter into force (with certain exceptions) no earlier than 2019. The proposed reforms include measures to align the MREL requirements with the FSB TLAC standards. The proposed reforms are to be considered by the European Parliament and the Council of the EU and remain subject to change, although Directive 2017/2399, amending Directive 2014/59/EU, implementing the "non-preferred" senior debt class came into force in December 2017. The final package of reforms may not include all elements of the proposals and new or amended elements may be introduced. Until the proposals are in final form, it is uncertain how they will affect the Group or the holders of the Notes.
Furthermore, the final impact of all of the above TLAC and MREL requirements is not yet known and will depend on the way in which regulators of the Group choose to implement these requirements.
In addition, since 31 December 2014, the PRA has had the power under the Financial Services and Markets Act 2000 ("FSMA") to make rules requiring a parent undertaking of a bank to make arrangements to facilitate the exercise of resolution powers, including a power to require a group to issue debt instruments. Such powers could have an impact on the liquidity of the Group's debt instruments and could materially increase the Group's cost of funding.
Since 1 January 2014, the Group has also been subject to certain recovery and resolution planning requirements (popularly known as "living wills") for banks and other financial institutions as set out in the PRA Rulebook. These requirements were updated in January 2015 to implement the recovery and resolution framework under the BRRD. The updated requirements impose more regular and detailed reporting obligations, including the requirement to submit recovery plans and resolution packs to the PRA and to keep them up to date.
In addition to the above, regulators in the UK and worldwide have produced a range of proposals for future legislative and regulatory changes which could force the Group to comply with certain operational restrictions or take steps to raise further capital, or could increase the Group's expenses, or otherwise adversely affect the Group's operating results, financial condition and prospects. These changes, which could affect the Group as a whole, include the implementation of the Basel Committee on Banking Standards' ("BCBS") new market risk framework, which includes rules made as a result of the BCBS' fundamental review of the trading book. In addition, in December 2017 the BCBS published their finalisation of the Basel III framework. This includes the following elements:
The BCBS expects these changes, with the exception of the output floor, to be implemented from January 2022, with transitional arrangements up to January 2027 (although these timelines remain unclear until such rules are translated into draft European and UK legislation).
These measures could have a material adverse effect on the Group's operating results, and consequently, on the Group's business, financial condition and prospects. There is a risk that changes to the UK's capital adequacy regime (including any increase to minimum leverage ratios) may result in increased minimum capital (including leverage) requirements, which could reduce available capital for business purposes and thereby adversely affect the Group's cost of funding, profitability and ability to pay dividends, continue organic growth (including increased lending), or pursue acquisitions or other strategic opportunities (alternatively the Group could restructure its balance sheet to reduce the capital charges incurred pursuant to the PRA's rules in relation to the assets held, or raise additional capital but at increased cost and subject to prevailing market conditions). In addition, changes to the eligibility criteria for Tier 1 and Tier 2 capital may affect the Group's ability to raise Tier 1 and Tier 2 capital and impact the recognition of existing Tier 1 and Tier 2 capital resources in the calculation of the Group's capital position. Furthermore increased capital requirements may negatively affect the Group's return on equity and other financial performance indicators.
The Group's business could be affected if its capital is not managed effectively or if these measures limit the Group's ability to manage its balance sheet and capital resources effectively or to access funding on commercially acceptable terms. Effective management of the Group's capital position is important to the Group's ability to operate its business, to continue to grow organically and to pursue its business strategy.
The Group is subject to liquidity requirements that could limit the Group's operations, and changes to these requirements may further limit and adversely affect the Group's operating results, financial condition and prospects
As from 1 April 2013, the PRA took over the responsibility for micro-prudential regulation of banks and certain other financial institutions from the Financial Services Authority (the "FSA"). In June 2015, the PRA issued its policy statement on the transfer of the liquidity regime to the CRD IV standard, confirming that the existing regime under BIPRU 12 would cease to apply with effect from 1 October 2015, although certain of the BIPRU requirements are reflected in the new regime.
Under CRD IV, banks are or will be under transitional measures required to meet two new liquidity standards, consisting of the Liquidity Coverage Ratio ("LCR") and the Net Stable Funding Ratio ("NSFR"), which are aimed to promote:
The short-term resilience of banks' liquidity risk profiles by ensuring they have sufficient highquality liquid assets to survive a significant stress scenario.
A longer-term resilience by creating incentives for banks to fund their activities with more stable sources of funding on an on-going basis.
The LCR is intended to ensure that a bank maintains an adequate level of unencumbered, high quality liquid assets which can be used to offset the net cash outflows the bank could encounter under a shortterm significant liquidity stress scenario.
The LCR was introduced in the UK on 1 October 2015. As of 1 January 2018, following a phase-in period to, the current minimum requirement for UK banks is set out at 100 per cent. The Group currently meets the minimum requirements set by the PRA, however there can be no assurance that future changes to the applicable liquidity requirements would not have an adverse effect on the financial condition of the Group, the results of its operations and its prospects.
In October 2014, the Basel Committee published its NSFR standard. The NSFR has not yet been implemented within Europe (unlike the LCR). As such there is no formal NSFR requirement applicable to UK or other EU banks until such time as the European Commission adopts appropriate regulatory / technical standards. The NSFR is defined as the amount of available stable funding relative to the amount of required stable funding. Banks are expected to hold an NSFR of at least 100 per cent. on an on-going basis and report its NSFR at least quarterly. Ahead of its planned implementation, the NSFR will remain subject to an observation period. The Group monitors its NSFR on an ongoing basis and stands ready to comply with the standards once agreed.
There is a risk that implementing and maintaining existing and new liquidity requirements, such as through enhanced liquidity risk management systems, may incur significant costs, and more stringent requirements to hold liquid assets may materially affect the Group's lending business as more funds may be required to acquire or maintain a liquidity buffer, thereby reducing future profitability. This could in turn adversely impact the Group's operating results, financial condition and prospects.
Like many other UK banks, the Group's principal banking entity Santander UK invests in debt securities of the UK Government largely for liquidity purposes. As of 31 December 2017, approximately 1 per cent. of the Group's total assets and 35 per cent. of its securities portfolio were comprised of debt securities issued by the UK Government. Any failure by the UK Government to make timely payments under the terms of these securities, or a significant decrease in their market value, will have a material adverse effect on the Group.
Conditions in the capital markets and the economy generally in the Eurozone, which, although improving recently, continue to show signs of fragility and volatility. Interest rate differentials among eurozone countries are affecting government finance and borrowing rates in those economies. This could have a material adverse effect on the Group's operating results, financial condition and prospects.
The UK EU Referendum caused significant volatility in the global stock and foreign exchange markets (for more information, see the risk factors entitled "The Group is vulnerable to disruptions and volatility in the global financial markets' and 'Exposure to UK political developments, including the ongoing negotiations between the UK and EU, could have a material adverse effect on the Group"). It may have also encouraged anti-EU and populist parties in other EU Member States, raising the potential for other countries to seek to conduct referenda with respect to their continuing membership of the EU. Following the results of the UK EU Referendum the risk of further instability in the eurozone cannot be excluded.
In the past, the ECB and European Council have taken actions with the aim of reducing the risk of contagion in the eurozone and beyond and improving economic and financial stability. Notwithstanding these measures, a significant number of financial institutions throughout Europe have substantial exposures to sovereign debt issued by the eurozone (and other) nations which may be under financial stress. Should any of those nations default on their debt, or experience a significant widening of credit spreads, major financial institutions and banking systems throughout Europe adversely affected with the wider possible adverse consequences for global financial market conditions.
The high cost of capital for some European governments impacted the wholesale markets in the UK, which resulted in an increase in the cost of retail funding and greater competition in the savings market. In the absence of a permanent resolution of the eurozone crisis, conditions could deteriorate.
Although the Group conducts the majority of its business in the UK, the Group has direct and indirect exposure to financial and economic conditions throughout the eurozone economies, including as a result of Banco Santander and other affiliates being situated in the eurozone. General financial and economic conditions in the UK, which directly affect the Group's operating results, financial condition and prospects, may deteriorate as a result of conditions in the eurozone.
The Group routinely transacts with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, mutual funds, hedge funds and other institutional clients. Defaults by, and even rumours or questions about the solvency of certain financial institutions and the financial services industry generally, have led to market- wide liquidity problems over the last 10 years and could lead to losses or defaults by other institutions. Many of the routine transactions the Group enters into expose the Group to significant credit risk in the event of default by one of the Group's significant counterparties. A default by a significant financial counterparty, or liquidity problems in the financial services industry generally, could have a material adverse effect on the Group.
Liquidity risk is the risk that the Group, although solvent, either does not have available sufficient financial resources to meet its obligations as they fall due or can secure them only at excessive cost. This risk is inherent in any retail and commercial banking business as carried out by the Group and can be heightened by a number of enterprise-specific factors, including over-reliance on a particular source of funding, changes in credit ratings or market-wide phenomena such as market dislocation. While the Group implements liquidity management processes to seek to mitigate and control these risks, unforeseen systemic market factors in particular make it difficult to eliminate completely these risks. Adverse constraints in the supply of liquidity, including inter-bank lending, which arose between 2009 and 2013, materially and adversely affected the cost of funding the Group's business. There can be no assurance that such constraints will not reoccur. Extreme liquidity constraints may affect the Group's operations and limit the Group's ability to fulfil its regulatory liquidity requirements, as well as limiting growth possibilities.
Disruption and volatility in the global financial markets could have a material adverse effect on the ability of the Group to access capital and liquidity on financial terms acceptable to the Group.
The Group's cost of obtaining funding is directly related to prevailing market interest rates and to the Group's credit spreads. Increases in interest rates and the Group's credit spreads can significantly increase the cost of the Group's funding. Changes in the Group's credit spreads are market-driven, and may be influenced by market perceptions of the Group's creditworthiness. Changes to interest rates and the Group's credit spreads occur continuously and may be unpredictable and highly volatile.
If wholesale markets financing ceases to become available, or becomes excessively expensive, the Group may be forced to raise the rates the Group pays on deposits, with a view to attracting more customers, and/or to sell assets, potentially at depressed prices. The persistence or worsening of these adverse market conditions or an increase in base interest rates could have a material adverse effect on the ability of the Group to access liquidity and on its cost of funding (whether directly or indirectly).
Central banks around the world, including the U.S. Federal Reserve Bank and the ECB, made coordinated efforts to increase liquidity in the financial markets in response to the financial crisis and put in place additional facilities, by taking measures such as increasing the amounts they lend directly to financial institutions, lowering interest rates and ensuring that currency swaps markets remain liquid. Over the course of 2017 central banks signalled the start, or in some cases (such as the U.S. Federal Reserve Bank) a continuation, of unwinding such stimulus. In addition to the BoE Base Rate rise on 2 November 2017, the BoE voted to maintain the stock of the quantitative easing programme of £445 billion of assets, comprising £10 billion of corporate bonds and £435 billion of gilts. In October 2017, the ECB announced that it would reduce its monthly volume of bond purchases from January 2018 to €30 billion (from €60 billion). If these current facilities were rapidly removed or significantly reduced, this could have an adverse effect on the Group's ability to access liquidity and on the Group's funding costs. In the U.S., the Federal Reserve increased its policy interest rate by 25 basis points in March 2017, June 2017 and December 2017, and has forecast additional interest rate increases in 2018.
In October 2013, the BoE updated its Sterling Monetary Framework to provide more transparent liquidity insurance support in exceptional circumstances. The Indexed Long-Term Repo Facility will now be available to support regular bank requirements for liquidity while the Discount Window Facility has been reinforced as support for banks experiencing idiosyncratic stress. The Collateralised Term Repo Facility will be made available to support markets in the event of market wide liquidity stress. The Collateralised Term Repo Facility will be made available to support markets in the event of market wide liquidity stress. Further, on 4 August 2016, the BoE announced its Term Funding Scheme ("TFS"), which allows participants to borrow central bank reserves in exchange for eligible collateral. As at 31 December 2017, the Group had drawn £8.5 billion under the TFS. In addition to the TFS, the Group participated in the Funding for Lending Scheme ("FLS"). As at 31 December 2017, the Group had drawn down £3.2 billion of UK treasury bills under the FLS.
The availability of BoE facilities for UK financial institutions reduces the Group's funding costs and reliance on retail and/or wholesale markets by providing the Group with access to cheaper and more attractive funding than other sources. The TFS closed for drawdowns on 28 February 2018, as scheduled. However, the Group remains a borrower under the TFS and has a four year window from the date of each drawdown in which to meet its repayment obligations.
Each of the factors described above: the persistence or worsening of adverse market conditions, and the lack of availability, or withdrawal, of such central bank schemes or an increase in base interest rates, could have a material adverse effect on the Group's liquidity and the cost of funding (whether directly or indirectly).
The Group aims for a funding structure that is consistent with the Group's assets, avoids excessive reliance on short term wholesale funding, attracts enduring commercial deposits and provides diversification in products and tenor. The Group therefore relies, and will continue to rely, on commercial deposits to fund a significant proportion of lending activities. The ongoing availability of this type of funding is sensitive to a variety of factors outside the Group's control, such as general economic conditions and the confidence of commercial depositors in the economy, in general, and in the financial services industry, and the availability and extent of deposit guarantees, as well as competition between banks for deposits or competition with other products, such as mutual funds. A change in any of these factors could significantly increase the amount of commercial deposit withdrawals in a short period of time, thereby reducing the Group's ability to access commercial deposit funding on appropriate terms, or at all, in the future.
The Group anticipates that its customers will continue to make deposits (particularly demand deposits and short-term time deposits), and the Group intends to maintain its emphasis on the use of banking deposits as a source of funds. The short-term nature of some deposits could cause liquidity problems for the Group in the future if deposits are not made in the volumes it expects or are not renewed. If a substantial number of the Group's depositors withdraw their demand deposits or do not roll over their time deposits upon maturity, the Group may be materially and adversely affected.
A sudden or unexpected shortage of funds in the banking system could lead to increased funding costs, a reduction in the term of funding instruments or require the Group to liquidate certain assets. If these circumstances were to arise, this could have a material adverse effect on the Group's operating results, financial condition and prospects.
An adverse movement in the Group's external credit rating would likely increase the Group's cost of funding, require the Group to post additional collateral or take other actions under some of the Group's derivative contracts and adversely affect the Group's interest margins and results of operations
Credit ratings can in some instances affect the cost and other terms upon which the Group is able to obtain funding. Credit rating agencies regularly evaluate the Group, and their credit ratings of the Group and the Group's debt in issue are based on a number of factors, including the Group's financial strength and that of the UK economy and conditions affecting the financial services industry generally.
Any downgrade in the external credit ratings assigned to the Group or any of the Group's debt securities could have an adverse impact on the Group. In particular, such downgrade in the Group's credit ratings could increase the Group's borrowing costs and could require the Group to post additional collateral or take other actions under some of the Group's derivative contracts, and could limit the Group's access to capital markets and adversely affect its commercial business. For example, a credit rating downgrade could adversely affect the Group's ability to sell or market certain of its products, engage in certain longerterm transactions and derivatives transactions and retain its customers, particularly customers who need a minimum rating threshold in order to invest.
In addition, under the terms of certain of the Group's derivative contracts, the Group may be required to maintain a minimum credit rating or otherwise the Group's counterparties may be able to terminate such contracts. Any of these results of a credit rating downgrade could, in turn, reduce the Group's liquidity and have an adverse effect on the Group, including the Group's operating results, financial condition and prospects. For example, the Group estimates that as at 31 December 2017, if Fitch, Moody's and S&P were concurrently to downgrade the long-term credit ratings of Santander UK Group Holdings and Santander UK by one notch, and thereby trigger a short-term credit rating downgrade, this could result in an outflow of £3.9 billion of cash and collateral. A hypothetical two notch downgrade would result in a further outflow of £0.2 billion of cash and collateral as at 31 December 2017. These outflow requirements are however captured under the LCR regime.
However, while certain potential impacts are contractual and quantifiable, the full consequences of a credit rating downgrade are inherently uncertain, as they depend upon numerous dynamic, complex and interrelated factors and assumptions, including market conditions at the time of any downgrade, whether any downgrade of a firm's long-term credit rating precipitates downgrades to its short-term credit rating, and assumptions about the potential behaviours of various customers, investors and counterparties. Actual outflows could be higher or lower than this hypothetical example, depending upon certain factors including any management or restructuring actions that could be taken to reduce cash outflows and the potential liquidity impact from a loss of unsecured funding (such as from money market funds) or loss of secured funding capacity.
Although unsecured and secured funding stresses are included in the Group's stress testing scenarios and a portion of the Group's total liquid assets is held against these risks, it is still the case that a credit rating downgrade could have a material adverse effect on the Group. In addition, if certain counterparties terminated derivative contracts with the Group, and the Group was unable to replace such contracts, the Group's market risk profile could be altered.
Following the results of the UK referendum on EU membership, S&P Global Ratings and Moody's Investors Service affirmed the long-term credit ratings and changed the ratings outlooks of most major UK banks because of the medium term impact of political and market uncertainty. Santander UK's long-term debt is currently rated investment grade by the major rating agencies: Aa3 with a stable outlook by Moody's, A with a stable outlook by S&P and A with a Rating Watch Positive outlook by Fitch. Santander UK Group Holdings' long-term debt is currently rated by the major rating agencies: Baa1 with a stable outlook by Moody's, BBB with a stable outlook by S&P and A with a stable outlook by Fitch.
If a downgrade of any Group member's long-term credit ratings were to occur, it could also impact the short-term credit ratings of other members of the Group. Should there be any removal of systemic support by the UK Government, all things being equal, the impact on the Group's long-term credit-rating could potentially increase the cost of some of its wholesale borrowing and its ability to secure both long-term and short-term funding may be reduced.
In September 2017, Moody's Investors Service downgraded the UK's sovereign credit rating due to their concerns around the UK government's fiscal consolidation plans and challenges to policy-making from the UK's exit from the EU. Changes to the UK sovereign credit rating, or the perception that further changes may occur, could have a material adverse effect on the Group's operating results, financial condition, prospects and the marketability and trading value of the Group's securities. This might also impact on the Group's own credit rating, borrowing costs and the Group's ability to secure funding. Changes to the UK sovereign credit rating, or the perception that further changes may occur, could also have a material effect in depressing consumer confidence, restricting the availability, and increasing the cost, of funding for individuals and companies, further depressing economic activity, increasing unemployment and/or reducing asset prices.
There can be no assurance that the credit rating agencies will maintain the Group's current credit ratings or outlooks. The Group's failure to maintain favourable credit ratings and outlooks could increase the Group's cost of funding and adversely affect the Group's interest margins, which could have a material adverse effect on the Group.
Market risk refers to the probability of variations in the Group's net interest income or in the market value of the Group's assets and liabilities due to volatility of interest rates, exchange rates or equity prices. Changes in interest rates would affect the following areas, among others, of the Group's business:
Interest rates are highly sensitive to many factors beyond the control of the Group, including increased regulation of the financial sector, monetary policies, domestic and international economic and political conditions and other factors. Variations in interest rates could affect the Group's net interest income, which comprises the majority of its revenue, reducing its growth rate and potentially resulting in losses. This results from the different effect that a change in interest rates may have on the interest earned on the Group's assets and the interest paid on its borrowings. In addition, the Group may incur costs (which, in turn, will impact its results) as it implements strategies to reduce future interest rate exposures.
Increases in interest rates may reduce the volume of loans the Group originates. Sustained high interest rates have historically discouraged customers from borrowing and have resulted in increased delinquencies in outstanding loans and deterioration in the quality of assets. Increases in interest rates may also reduce the propensity of the Group's customers to prepay or refinance fixed-rate loans, reduce the value of the Group's financial assets and reduce gains or require the Group to record losses on sales of the Group's loans or securities.
Due to the historically low interest rate environment in the UK in recent years, the rates of the Group's interest-bearing deposit products have been priced at or near zero, which may limit the Group's ability to further reduce customer rates in the event of further cuts to the BoE Base Rate and thus, negatively impact the Group's margins. Notwithstanding the August 2018 increase in the BoE Base Rate to 0.75 per cent., if a generally low interest rate environment in the UK persists in the long term, it may be difficult for the Group to increase net interest income, which will impact the results of the Group.
The Group is also exposed to foreign exchange rate risk as a result of mismatches between assets and liabilities denominated in different currencies. Fluctuations in the exchange rate between currencies may negatively affect the Group's earnings and value of the Group's assets and securities. The Group's capital is stated in pound sterling and the Group does not fully hedge the Group's capital position against changes in currency exchange rates. Although the Group seeks to hedge most of the Group's currency risk, through hedging and purchase of cross-currency swaps, these hedges do not eliminate currency risk and the Group can make no assurance that it will not suffer adverse financial consequences as a result of currency fluctuations. The volatility in the value of the pound sterling in the wake of the result of the UK EU Referendum may persist as negotiations for exit continue and continued significant exchange rate volatility and the depreciation of the pound sterling in particular could have an adverse impact on the Group's results of operations and its ability to meet its U.S. dollar and euro-denominated obligations, and which could have a material adverse effect on the Group's operating results, financial condition and prospects.
The Group is also exposed to equity price risk in its investments in equity securities in the banking book and in the trading portfolio. The performance of financial markets may cause changes in the value of the Group's investment and trading portfolios. The volatility of world equity markets, due to the continued economic uncertainty and sovereign debt tensions, has had a particularly strong impact on the financial sector. Continued volatility may affect the value of the Group's investments in equity securities and, depending on their fair value and future recovery expectations, could become a permanent impairment, which would be subject to write- offs against the Group's results. To the extent any of these risks materialise, the Group's net interest income or the market value of the Group's assets and liabilities could be adversely affected.
Market conditions have resulted in, and could continue to result in, material changes to the estimated fair values of the Group's financial assets. Negative fair value adjustments could have a material adverse effect on the Group's operating results, financial condition and prospects
In the past 10 years, financial markets have been subject to significant stress resulting in steep falls in perceived or actual financial asset values, particularly due to volatility in global financial markets and the resulting widening of credit spreads. The Group has material exposures to securities, loans, derivatives and other investments that are recorded at fair value and are therefore exposed to potential negative fair value adjustments. Asset valuations in future periods, reflecting then prevailing market conditions, may result in negative changes in the fair values of the Group's financial assets. In addition, the value ultimately realised by the Group on disposal may be lower than the current fair value. Any of these factors could require the Group to record negative fair value adjustments, which may have a material adverse effect on the Group's operating results, financial condition and prospects.
In addition, to the extent that fair values are determined using financial valuation models, such values may be inaccurate or subject to change, as the data used by such models may not be available or may become unavailable due to changes in market conditions, particularly for illiquid assets and in times of economic instability. In such circumstances, the Group's valuation methodologies require the Group to make assumptions, judgements and estimates in order to establish fair value.
This is a challenging task as reliable assumptions are difficult to make and are inherently uncertain. Moreover, valuation models are complex, making them inherently imperfect predictors of actual results. Any consequential impairments or write-downs could have a material adverse effect on the Group's operating results, financial condition and prospects.
Failure to successfully implement and continue to improve the Group's credit risk management systems could materially and adversely affect the Group's business
As a commercial banking group, one of the main types of risks inherent in the Group's business is credit risk. For example, an important feature of the Group's credit risk management system is to employ the Group's own credit rating system to assess the particular risk profile of a customer. This system is primarily generated internally but, in the case of counterparties with a global presence, also builds off the credit assessment assigned by other Banco Santander Group members. As this process involves detailed analyses of the customer or credit risk, taking into account both quantitative and qualitative factors, it is subject to human or IT systems errors. In exercising their judgement on current or future credit risk behaviour of the Group's customers, the Group's employees may not always be able to assign a correct credit rating, which may result in the Group being exposed to higher credit risks than indicated by the Group's risk rating system.
In addition, the Group has refined its credit policies and guidelines to address potential risks associated with particular industries or types of customers, such as affiliated entities and the Group's customers. However, the Group may not be able to detect all possible risks before they occur, or the Group's employees may not be able to effectively implement the Group's credit policies and guidelines due to limited tools available to the Group, which may increase the Group's credit risk. Failure to effectively implement, consistently monitor or refine the Group's credit risk management system may result in an increase in the level of non-performing loans and a higher risk exposure for the Group, which could have a material adverse effect on the Group.
Certain Group entities enter into derivative transactions for trading purposes as well as for hedging purposes. The Group is subject to various risks associated with these transactions, including market risk, operational risk, basis risk (the risk of loss associated with variations in the spread between the asset yield and the funding and/or hedge cost) and credit or counterparty risk (the risk of insolvency or other inability of the counterparty to a particular transaction to perform its obligations thereunder, including providing sufficient collateral).
Market practices and documentation for derivative transactions in the UK may differ from those in other countries. In addition, the execution and performance of these transactions depends on the Group's ability to develop adequate control and administration systems and to hire and retain qualified personnel. Moreover, the Group's ability to adequately monitor, analyse and report derivative transactions continues to depend, to a great extent, on the Group's information technology systems. This factor further increases the risks associated with these transactions and could have a material adverse effect on the Group.
Like other financial institutions with a large customer base, the Group manages and holds confidential personal information of customers in the conduct of its banking operations, as well as a large number of assets. Accordingly, the business of the Group depends on the ability to process a large number of transactions efficiently and accurately, and on the Group's ability to rely on the Group's people, digital technologies, computer and email services, software and networks, as well as the secure processing, storage and transmission of confidential and other information in the Group's computer systems and networks, and through the adoption of cloud computing services. The proper functioning of financial control, accounting or other data collection and processing systems is critical to the Group's business and to the Group's ability to compete effectively. Losses can result from inadequate personnel, human error, inadequate or failed internal control processes and systems or from external events that interrupt normal business operations. The Group also faces the risk that the design of the Group's controls and procedures prove to be inadequate or are circumvented. Although the Group works with its clients, vendors, service providers, counterparties and other third parties to develop secure transmission capabilities and prevent against information security risk, the Group routinely exchanges personal, confidential and proprietary information by electronic means, and the Group may be the target of attempted hacking. Adoption of cloud based computing services in order to improve technological resilience and cost-effectiveness could bring with it risks to the information the Group processes if it does not take care to implement appropriate controls such as strong authentication and encryption. If the Group cannot maintain an effective data collection, management and processing system or the Group fails to maintain complete physical and electronic records, this could result in regulatory sanctions, including under the General Data Protection Regulation, which came into force on 25 May 2018. Any such failures or sanctions could result in serious reputational or financial harm to the Group.
The Group takes protective measures and continuously monitors and develops its systems to safeguard the Group's technology infrastructure and data from misappropriation or corruption, but the Group's systems, software and networks nevertheless may be vulnerable to unauthorised access, misuse, computer viruses or other malicious code and other events that could have a security impact. An interception, misuse or mishandling of personal, confidential or proprietary information sent to or received from a client, vendor, service provider, counterparty or third party could result in legal liability, regulatory action and reputational harm. Furthermore, the Group may be required to expend significant additional resources to modify the Group's protective measures or to investigate and remediate vulnerabilities or other exposures. The Group expects its programmes of change to have an effect on its risk profile, both technological and regulatory. Whether it is the opportunities from adoption of cloud technology, systems to support important regulatory initiatives, or the desire to identify, prioritise and remove obsolete systems from operations, the operational risk associated with systems change is likely to increase and this will therefore remain an area of focus in the Group's risk management. There can be no assurance that the Group will not suffer material losses from operational risks in the future, including those relating to any security breaches.
In particular, the Group has in recent years seen computer systems of companies and organisations being targeted, not only by cyber criminals, but also by activists and rogue nation states. In common with other large UK financial institutions with a large customer base, the Group manages and holds confidential personal information of customers in the conduct of its banking operations, as well as a large number of assets. Accordingly the Group has been and continues to be subject to a range of cyber-attacks, such as denial of service, malware and phishing. Cyber-attacks could give rise to the loss of significant amounts of customer data and other sensitive information, as well as significant levels of liquid assets (including cash). In addition, cyber-attacks could give rise to the disablement of the Group's information technology systems used to service its customers. As attempted attacks continue to evolve in scope and sophistication, the Group may incur significant costs in the Group's attempt to modify or enhance its protective measures against such attacks, or to investigate or remediate any vulnerability or resulting breach, or in communicating cyber-attacks to the customers of the Group. If the Group fails to effectively manage the Group's cyber security risk, for example by failing to update the Group's systems and processes in response to new threats, this could harm the Group's reputation and adversely affect the Group's operating results, financial condition and prospects through the payment of customer compensation, regulatory penalties and fines and/or through the loss of assets. Factors such as failing to apply critical security patches from its technology providers, to manage out obsolete technology or to update its processes in response to new threats could give rise to these impacts.
In addition, the Group may also be impacted by cyber-attacks against national critical infrastructures in the UK, for example, the telecommunications network. In common with other financial institutions the Group is dependent on such networks and any cyber-attack against these networks could negatively affect its ability to service its customers. As the Group does not operate these networks, it has limited ability to protect its business from the adverse effects of cyber-attack against them.
Further, the domestic and global financial services industry, including key financial market infrastructure, may be the target of cyber disruption and attack by cyber criminals, activists and rogue states looking to cause economic instability. The Group has limited ability to protect its business from the adverse effects of cyber disruption or attack against its counterparties and key financial market infrastructure. If such a disruption or attack were to occur it could cause serious operational and financial harm to the Group.
The Group also manages and holds confidential personal information of customers in the conduct of the Group's banking operations. Although the Group has procedures and controls to safeguard personal information in the Group's possession, unauthorised disclosures could subject it to legal actions and administrative sanctions as well as damages that could materially and adversely affect its operating results, financial condition and prospects.
Further, the Group's business is exposed to risk from potential non-compliance with policies, employee misconduct or negligence and fraud, which could result in regulatory sanctions and serious reputational or financial harm. In recent years, a number of multinational financial institutions have suffered material losses due to the actions of "rogue traders" or other employees. It is not always possible to deter or prevent employee misconduct, and the precautions the Group takes to detect and prevent this activity may not always be effective.
The Group may be required to report events related to information security issues (including any cyber security issues), events where customer information may be compromised, unauthorised access and other security breaches, to the relevant regulatory authorities. Any material disruption or slowdown of the Group's systems could cause information, including data related to customer requests, to be lost or to be delivered to the Group's clients with delays or errors, which could reduce demand for the Group's services and products and could materially and adversely affect the Group.
The Group's business and its ability to remain competitive depends to a significant extent upon the functionality of the Group's information technology systems (including Partenon, the global banking information technology platform utilised by Santander UK and Banco Santander), and on the Group's ability to upgrade and expand the capacity of the Group's information technology on a timely and costeffective basis. The proper functioning of the Group's financial control, risk management, credit analysis and reporting, accounting, customer service and other information technology systems, as well as the communication networks between the Group branches and main data processing centres, are critical to the Group's business and the Group's ability to compete. The Group must continually make significant investments and improvements in the Group's information technology infrastructure in order to remain competitive. The Group cannot be certain that in the future it will be able to maintain the level of capital expenditure necessary to support the improvement, expansion or upgrading of its information technology infrastructure as effectively as the Group's competitors. This may result in a loss of the competitive advantages that the Group believes the Group's information technology systems provide. Any failure to effectively improve, expand or upgrade its information technology infrastructure and management information systems in a timely manner could have a material adverse effect on the Group.
The management of risk is an integral part of the Group's activities. The Group seeks to monitor and manage the Group's risk exposure through a variety of risk reporting systems. While the Group employs a broad and diversified set of risk monitoring and risk mitigation techniques, such techniques and strategies may not be fully effective in mitigating its risk exposure in all economic market environments or against all types of risk, including risks that the Group fails to identify or anticipate.
Some of the Group's qualitative tools and metrics for managing risk are based upon the Group's use of observed historical market behaviour. The Group applies statistical and other tools to these observations to arrive at quantifications of the Group's risk exposures. These qualitative tools and metrics may fail to predict future risk exposures. These risk exposures could, for example, arise from factors the Group does not anticipate or correctly evaluate in the Group's statistical models. This would limit the Group's ability to manage the Group's risks. The Group's losses thus could be significantly greater than the historical measures indicate. In addition, the Group's quantified modelling does not take all risks into account. The Group's more qualitative approach to managing those risks could prove insufficient, exposing the Group to material, unanticipated losses. The Group could face adverse consequences as a result of decisions, which may lead to actions by management, based on models that are poorly developed, implemented or used, or as a result of the modelled outcome being misunderstood. If existing or potential customers or counterparties believe the Group's risk management is inadequate, they could take their business elsewhere or to seek to limit their transactions with the Group. This could have a material adverse effect on the Group's reputation, operating results, financial condition and prospects.
The Group faces substantial competition in all parts of its business, including in originating loans and in attracting deposits, through its banking entities. The competition in originating loans comes principally from other domestic and foreign banks, mortgage banking companies, consumer finance companies, insurance companies and other lenders and purchasers of loans. The market for UK financial services is highly competitive and the Group faces substantial competition in all parts of its business. As such, the Group constantly monitors competition, which arises from a number of financial institutions of different sizes and with a range of business models. Moreover, the recent financial crisis continues to reshape the banking landscape in the UK, particularly the financial services and mortgage markets, reinforcing the importance of a retail deposit funding base and being well capitalised. The Group's competitors have moved increasingly towards a policy of concentrating on the highest quality customers and there is strong competition for these customers.
Additionally, a large number of new entrants are increasingly entering the UK financial services market place. Again the Group identifies and closely monitors this set of new entrants and takes account of this in its management actions. Their arrival has further intensified competition as they seek to gain market share in a number of banking sector areas, including for example payments, investments, lending, foreign exchange and data aggregation. The Group also faces competition from non-bank competitors, such as supermarkets, department stores, electronic money institutions and technology firms, and generally from other loan or credit providers. The Group also competes with the UK Government owned National Savings & Investments for deposits.
Further, the rise in customer use of internet and mobile banking platforms in recent years could negatively impact the Group's investments in bank premises, equipment and personnel for its branch network. The persistence or acceleration of this shift in demand towards internet and mobile banking may necessitate changes to the Group's retail distribution strategy, which may include closing and/or selling certain branches and restructuring remaining branches and work force. These actions could lead to losses on these assets and may lead to increased expenditures to renovate, reconfigure or close a number of remaining branches or to otherwise reform the Group's retail distribution channel. Furthermore, the Group's failure to swiftly and effectively implement such changes to its distribution strategy could have an adverse effect on the Group's competitive position.
The Group expects competition to intensify in response to consumer demand, technological changes, the potential impact of consolidation, regulatory actions and other factors. For example, the Payment Services Directive II ("PSD2"), which had to be transposed in EU Member States by 13 January 2018, has opened up access to customers' online account and payments data to third party providers. This will accelerate the digital disruption that is reshaping the financial services industry and enable the provision of entirely new types of services. There will be structural reform of the UK banking sector as banks implement the Banking Reform Act, which may lead to increased competition in UK Retail or wholesale banking activities. A strong political and regulatory will to foster consumer choice in financial services could lead to even greater competition (for more information, see the risk factor entitled "The Group is subject to substantial regulation and government oversight which could adversely affect the Group's business and operations"). There can be no assurance that this increased competition will not adversely affect the Group's growth prospects, and therefore its operations.
If financial markets remain unstable, financial institution consolidation may continue (whether as a result of the UK Government taking ownership and control over other financial institutions in the UK or otherwise). Financial institution consolidation could also result from the UK Government's recent disposals of stakes in financial institutions it previously controlled and any future disposals of retained stakes in other financial institutions. Such consolidation, by increasing the size and capabilities of the Group's competitors, could adversely affect the Group's operating results, financial condition and prospects. There can be no assurance that this will not adversely affect the Group's growth prospects, and therefore its operations.
The Group considers competition in its management actions, as appropriate, such as pricing and product decisions. Increasing competition could mean that the Group increases its rates offered on deposits or lower the rates it charges on loans, which could also have a material adverse effect on the Group, including its profitability. It may also negatively affect the Group's business results and prospects by, among other things, limiting the Group's ability to increase its customer base and expand its operations and increasing competition for investment opportunities.
The Group's ability to maintain the Group's competitive position depends, in part, on the success of new products and services the Group offers its customers and its ability to continue offering products and services from third parties, and the Group may not be able to manage various risks it faces as it expands the Group's range of products and services that could have a material adverse effect on the Group
The success of the Group's operations and the Group's profitability depends, in part, on the success of new products and services the Group offers its customers. However, the Group cannot guarantee that the Group's new products and services will be responsive to customer demands or successful once they are offered to the Group's customers, or that they will be successful in the future. In addition, the Group's customers' needs or desires may change over time, and such changes may render the Group's products and services obsolete, outdated or unattractive, and the Group may not be able to develop new products that meet its customers' changing needs. If the Group cannot respond in a timely fashion to the changing needs of its customers, it may lose customers, which could in turn materially and adversely affect the Group. Its success is also dependent on its ability to anticipate and leverage new and existing technologies that may have an impact on products and services in the banking industry. Furthermore, the widespread adoption of new technologies, including cryptocurrencies and payment systems, could require substantial expenditures to modify or adapt existing products and services as the Group continues to grow its internet and mobile banking capabilities. Technological changes may further intensify and complicate the competitive landscape and influence customer choices.
As the Group expands the range of its products and services, some of which may be at an early stage of development in the UK market, the Group will be exposed to new and potentially increasingly complex risks, including conduct risk and development expenses. The Group's employees and risk management systems, as well as its experience and that of the Group's partners, may not be sufficient or adequate to enable the Group to properly handle or manage such risks. In addition, the cost of developing products that are not launched is likely to affect the Group's operating results.
Further, the Group's customers may raise complaints and seek redress if they consider that they have suffered loss from the Group's products and services; for example, as a result of any alleged misselling or incorrect application of the terms and conditions of a particular product. This could in turn subject the Group to risks of potential legal action by the Group's customers and intervention by the Group's regulators. For further detail on the Group's legal and regulatory risk exposures, see the risk factors entitled "The Group is exposed to risk of loss from legal and regulatory proceedings" and "Potential intervention by the FCA, the PRA, the CMA or an overseas regulator may occur, particularly in response to customer complaints".
Any or all of the above factors, individually or collectively, could have a material adverse effect on the Group.
If the level of non-performing loans increases or the credit quality of the Group's loans deteriorates in the future, or if the Group's loan loss reserves are insufficient to cover loan losses, this could have a material adverse effect on the Group
Risks arising from changes in credit quality and the recoverability of loans and amounts due from counterparties are inherent in a wide range of the Group's business. Non-performing or low credit quality loans have in the past, and can continue to, negatively impact the Group's operating results, financial condition and prospects. In particular, the amount of the Group's reported non-performing loans may increase in the future as a result of growth in the Group's total loan portfolio, including as a result of loan portfolios that the Group may acquire in the future, or factors beyond the Group's control, such as adverse changes in the credit quality of the Group's borrowers and counterparties, a general deterioration in the UK or global economic conditions, the impact of political events, events affecting certain industries or events affecting financial markets and global economies. The Group cannot be sure that it will be able to effectively control the level of impaired loans in, or the credit quality of, the Group's total loan portfolio.
The Group's current loan loss reserves may not be adequate to cover an increase in the amount of nonperforming loans or any future deterioration in the overall credit quality of the Group's total loan portfolio. The Group's loan loss reserves are based on the Group's current assessment of and expectations concerning various factors affecting the quality of the Group's loan portfolio. These factors include, among other things, the Group's borrowers' financial condition, repayment abilities and repayment intentions, the realisable value of any collateral, the prospects for support from any guarantor, government macroeconomic policies, interest rates and the legal and regulatory environment. As the recent global financial crisis has demonstrated, many of these factors are beyond the Group's control. As a result, there is no precise method for predicting loan and credit losses, and the Group cannot provide any assurance that the Group's current or future loan loss reserves will be sufficient to cover actual losses.
If the Group's assessment of, and expectations concerning, the above mentioned factors differ from actual developments, if the quality of the Group's total loan portfolio deteriorates, for any reason, including the increase in lending to individuals and small and medium enterprises, the volume increase in the credit card portfolio and the introduction of new products or if the future actual losses exceed the Group's estimates of incurred losses, the Group may be required to increase the Group's loan loss reserves, which may adversely affect the Group. If the Group is unable to control or reduce the level of the Group's nonperforming or poor credit quality loans, this could have a material adverse effect on the Group.
Interest rates payable on a significant portion of the Group's outstanding mortgage loan products fluctuate over time due to, among other factors, changes in the BoE base rate. As a result borrowers with variable interest rate mortgage loans are exposed to increased monthly payments when the related mortgage interest rate adjusts upward. Similarly, borrowers of mortgage loans with fixed or introductory rates adjusting to variable rates after an initial period are exposed to the risk of increased monthly payments at the end of this period. This risk may be slightly greater following the BoE Base Rate increase to 0.75 per cent. in August 2018. Over the last few years both variable and fixed interest rates have been at historically low levels, which has benefited borrowers of new loans and those repaying existing variable rate loans regardless of special or introductory rates. Future increases in borrowers' required monthly payments may result in higher delinquency rates and losses in the future. Borrowers seeking to avoid these increased monthly payments by refinancing their mortgage loans may no longer be able to find available replacement loans at comparably low interest rates. These events, alone or in combination, may contribute to higher delinquency rates and losses for the Group.
The Group's loan portfolio is subject to prepayment risk, which results from the ability of a borrower or issuer to pay a debt obligation prior to maturity. Generally, in a low interest rate environment, prepayment activity increases, which reduces the weighted average lives of the Group's earning assets and could have a material adverse effect on the Group. The Group would also be required to amortise net premiums into income over a shorter period of time, thereby reducing the corresponding asset yield and net interest income. Prepayment risk also has a significant adverse impact on credit card and collateralised mortgage loans, since prepayments could shorten the weighted average life of these assets, which may result in a mismatch in the Group's funding obligations and reinvestment at lower yields. Prepayment risk is inherent to the Group's commercial activity and an increase in prepayments could have a material adverse effect on the Group.
The value of the collateral securing the Group's loan portfolio may significantly fluctuate or decline due to factors beyond its control, including macroeconomic factors affecting the UK's economy. The residential mortgage loan portfolio of the Group constitutes one of the Group's principal assets, comprising 77 per cent. of the Group's loan portfolio as of 31 December 2017. As a result, the Group is highly exposed to developments in the residential property market in the UK.
House price activity has slowed since the UK EU Referendum, most noticeably in central London, although house price activity generally continues to be supported by certain economic fundamentals including low mortgage rates (notwithstanding the recent BoE Base Rate increase to 0.5 per cent.), healthy consumer confidence levels, falling unemployment and positive real earnings growth. Nevertheless, any increase in house prices may be limited should real earnings growth weaken. The depth of the previous house price declines as well as the continuing uncertainty as to the extent and sustainability of the UK economic recovery will mean that losses could be incurred on loans should they go into possession.
The value of the collateral securing the Group's loan portfolio may also be adversely affected by force majeure events such as natural disasters like floods or landslides. Any force majeure event may cause widespread damage and could have an adverse impact on the economy of the affected region and may therefore impair the asset quality of the Group's loan portfolio in that area.
The Group may also not have sufficiently up-to-date information on the value of collateral, which may result in an inaccurate assessment for impairment losses of the Group's loans secured by such collateral. If any of the above were to occur, the Group may need to make additional provisions to cover actual impairment losses of the Group's loans, which may materially and adversely affect the Group's operating results, financial condition and prospects.
If the Group is unable to manage the growth of its operations, this could have an adverse impact on the Group's profitability
The Group allocates management and planning resources to develop strategic plans for organic growth, and to identify possible acquisitions and disposals and areas for restructuring its businesses when necessary.
From time to time, the Group evaluates acquisition and partnership opportunities that the Group believes could offer additional value to its shareholders and are consistent with the Group's business strategy. However, the Group may not be able to identify suitable acquisition or partnership candidates, and it may not be able to acquire promising targets or form partnerships on favourable terms or at all. Furthermore preparations for acquisitions that the Group does not complete can be disruptive. The Group bases its assessment of potential acquisitions and partnerships on limited and potentially inexact information and on assumptions with respect to value, operations, profitability and other matters that may prove to be incorrect. The Group's ability to benefit from any such acquisitions and partnerships will depend in part on the Group's successful integration of those businesses. Such integration entails significant risks such as challenges in retaining the customers and employees of the acquired businesses, unforeseen difficulties in integrating operations and systems and unexpected liabilities or contingencies relating to the acquired businesses, including legal claims. The Group can give no assurances that its expectations with regards to integration and synergies will materialise.
The Group also cannot provide assurance that it will, in all cases, be able to manage its growth effectively or deliver its strategic growth decisions, including its ability to:
Fully due diligence and assess strengths and weaknesses of investment or acquisition candidates.
Finance strategic opportunities, investments or acquisitions.
Any failure to manage the Group's growth effectively, including any or all of the above challenges associated with the Group's growth plans, could have a material adverse effect on the Group's operating results, financial condition and prospects.
In addition, any acquisition or venture could result in the loss of key employees and inconsistencies in standards, controls, procedures and policies.
Moreover, the success of the acquisition or venture will at least in part be subject to a number of political, economic and other factors that are beyond the Group's control. Any or all of these factors, individually or collectively, could have a material adverse effect on the Group.
The Group has made business acquisitions in recent years and may make further acquisitions in the future. It is possible that the goodwill which has been attributed, or may be attributed, to these businesses may have to be written-down if the Group's valuation assumptions are required to be reassessed as a result of any deterioration in their underlying profitability, asset quality and other relevant matters. Impairment testing in respect of goodwill is performed annually, and more frequently if there are impairment indicators present, and comprises a comparison of the carrying amount of the cash-generating unit with its recoverable amount. Goodwill impairment does not however affect the Group's regulatory capital. Whilst no impairment of goodwill was recognised in 2016 or 2017, there can be no assurances that the Group will not have to write down the value attributed to goodwill in the future, which would adversely affect the Group's results and net assets.
The Group is subject to substantial regulation and governmental oversight which could adversely affect the Group's business and operations
As a financial services group, the Group is subject to extensive financial services laws, regulations, administrative actions and policies in the UK, the EU and each other location in which the Group operates, including in the U.S. As well as being subject to UK regulation, as part of the Banco Santander group, the Group is also impacted through regulation by the Banco de España (the Bank of Spain) and, at a corporate level, by the ECB. The laws, regulations and policies to which the Group is subject may be changed at any time. In addition, the interpretation and the application of those laws, regulations and policies by regulators are also subject to change. Extensive legislation and implementing regulations affecting the financial services industry have recently been adopted in regions that directly or indirectly affect the Group's business, including Spain, the U.S., the EU, Latin America and other jurisdictions.
The manner in which financial services laws, regulations and policies are applied to the operations of financial institutions is still evolving. Moreover, to the extent these laws, regulations and policies apply to the Group, the Group may face higher compliance costs. Any legislative or regulatory actions and any required changes to the Group's business operations resulting from such laws, regulations and policies as well as any deficiencies in the Group's compliance with such laws, regulations and policies, could result in significant loss of revenue, limit the Group's ability to pursue business opportunities in which the Group might otherwise consider engaging and limit the Group's ability to provide certain products and services. They may also affect the value of assets that the Group holds, requiring the Group to increase its prices and therefore reduce demand for its products, impose additional compliance and other costs on the Group or otherwise adversely affect the Group's operations, financial condition and prospects. Accordingly, there can be no assurance that future changes in laws, regulations and policies or in their interpretation or application will not adversely affect the Group.
During recent periods of market turmoil, there have been unprecedented levels of government and regulatory intervention and scrutiny, and changes to the regulations governing financial institutions and the conduct of business. In addition, in light of the financial crisis, regulatory and governmental authorities are considering, or may consider, further enhanced or new legal or regulatory requirements intended to reduce the probability and impact of future crises or otherwise assure the stability of institutions under their supervision. This intensive approach to supervision is maintained by the PRA and the FCA.
Proposals and measures taken by governmental, tax and regulatory authorities and further future changes in supervision and regulation (in particular in the UK), which are beyond the Group's control, could materially affect the Group's business, the value of assets and operations and result in significant increases in operational and compliance costs. Products and services offered by the Group could also be affected. Changes in UK legislation and regulation to address the stability of the financial sector may also affect the Group's competitive position, particularly if such changes are implemented before international consensus is reached on key issues affecting the industry. Although the Group works closely with the Group's regulators and continually monitors the situation, future changes in law, regulation, fiscal or other policies can be unpredictable and are beyond the Group's control. No assurance can be given generally that laws or regulations will be adopted, enforced or interpreted in a manner that will not have a material adverse effect on the Group's operations, financial condition and prospects.
The London Interbank Offered Rate ("LIBOR"), the Euro Interbank Offered Rate ("EURIBOR") and other interest rates and indices which are deemed to be "benchmarks" are the subject of recent national, international and other regulatory guidance and proposals for reform. Some of these reforms are already effective while others are still to be implemented. These reforms may cause such benchmarks to perform differently than in the past, to disappear entirely, or have other consequences which cannot be predicted. Any such consequence could have a material adverse effect on any Notes linked to or referencing such a "benchmark".
Key international regulatory initiatives relating to the reform of benchmarks include IOSCO's Principles for Financial Benchmarks (the "IOSCO Principles") and the Benchmarks Regulation. The IOSCO Principles aim to create an overarching framework of principles for benchmarks to be used in financial markets, specifically covering (among other things) governance and accountability as well as the quality, integrity and transparency of benchmark design, determination and methodologies. A review published by IOSCO in February 2015 of the status of the voluntary market adoption of the IOSCO Principles noted that there has been significant but mixed progress on implementation of IOSCO Principles but that as the benchmarks industry is in a state of change, further steps may need to be taken by IOSCO in the future. In February 2016, IOSCO published a second review of the implementation of the IOSCO Principles by administrators of EURIBOR, LIBOR and the Tokyo Inter-Bank Offer Rate, which noted that the relevant administrators had been proactively engaged in addressing the issues raised by the first review and which sets out further recommendations for each administrator to strengthen the implementation of the IOSCO Principles.
The Benchmarks Regulation was published in the Official Journal of the EU on 29 June 2016 and the majority of its provisions have applied since 1 January 2018. The Benchmarks Regulation applies to the provision of benchmarks, the contribution of input data to a benchmark and the use of a benchmark, within the EU. Among other things, it: (i) requires benchmark administrators to be authorised or registered (or, if non-EU-based, to be subject to an equivalent regime or otherwise recognised or endorsed); and (ii) prevents certain uses by EU supervised entities of benchmarks of administrators that are not authorised or registered (or, if non-EU based, not deemed equivalent or recognised or endorsed).
The Benchmarks Regulation could have a material impact on any Notes linked to a rate or index deemed to be a "benchmark", in particular, if the methodology or other terms of the "benchmark" are changed in order to comply with the requirements of the Benchmarks Regulation. Such changes could, among other things, have the effect of reducing, increasing or otherwise affecting the volatility of the published rate or level of the "benchmark".
More broadly, any of the international, national or other proposals for reform, such as the European Money Markets Institute ("EMMI")'s current intention to develop a hybrid methodology for EURIBOR, or those to LIBOR (see "Future unavailability or discontinuance of certain benchmark rates (for example LIBOR or EURIBOR) may adversely affect the value of and return on the Notes which are linked to or which reference any such benchmark rate") or the general increased regulatory scrutiny of "benchmarks", could increase the costs and risks of administering or otherwise participating in the setting of a "benchmark" and complying with any such regulations or requirements.
Such factors may have the following effects on certain "benchmarks": (i) discourage market participants from continuing to administer or contribute to such "benchmark"; (ii) trigger changes in the rules or methodologies used in the "benchmarks" or (iii) lead to the disappearance of the "benchmark". Any of the above changes or any other consequential changes as a result of international, national or other proposals for reform or other initiatives or investigations, could have a material adverse effect on the value of and return on any Notes linked to a "benchmark".
Investors should consult their own independent advisers and make their own assessment about the potential risks imposed by the Benchmarks Regulation reforms, investigations and licensing issues in making any investment decision with respect to the Notes linked to a "benchmark".
Any such consequences could have a material adverse effect on the value of and return on any such Notes.
Future unavailability or discontinuance of certain benchmark rates (for example LIBOR or EURIBOR) may adversely affect the value of and return on the Notes which are linked to or which reference any such benchmark rate
On 27 July 2017, the Chief Executive of the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced that it intends to stop persuading or compelling banks to submit rates for the calculation of LIBOR to the administrator of LIBOR after 2021 (the "FCA Announcement"). The FCA Announcement indicates that the continuation of LIBOR on the current basis cannot and will not be guaranteed after 2021. At this time, no consensus exists as to what rate or rates may become accepted alternatives to LIBOR and it is impossible to predict the effect of any such alternatives on the value of Notes that are linked to existing benchmarks.
Investors should be aware that if LIBOR, or any other benchmark, were discontinued or otherwise unavailable, the rate of interest on Floating Rate Notes and Fixed Rate Reset Notes which are linked to or which reference such benchmark will be determined for the relevant period by the fallback provisions applicable to such Notes. The Terms and Conditions of the Notes provide for certain fallback arrangements in the event that a published benchmark, such as LIBOR, (including any page on which such benchmark may be published (or any successor service)) becomes unavailable. These fallback arrangements may require or result in adjustments to the interest calculation provisions of the Terms and Conditions of the Notes. Even prior to the implementation of any changes to any benchmark, or to the interest calculation provisions based on such benchmark, uncertainty as to the nature of alternative reference rates and as to potential changes to such benchmark may adversely affect the operation of such benchmark during the term of the relevant Notes, as well as potentially adversely affecting both the return on any Notes which are linked to or which reference such benchmark and the trading market for such Notes.
In certain situations, including the relevant benchmark ceasing to be administered, where (i) in the case of relevant Floating Rate Notes, Screen Rate Determination is specified in the applicable Final Terms as the manner in which the rate of interest is to be determined or (ii) in the case of Fixed Rate Reset Notes, a Mid-Swap Rate is specified as the relevant Reset Rate in the applicable Final Terms , the fallback arrangements referenced in the preceding paragraph will include the possibility that:
in each such case, with the Independent Adviser or Issuer (as applicable) acting in good faith and a commercially reasonable manner, and all as more fully described in the Terms and Conditions of the Notes.
No consent of the Noteholders shall be required in connection with effecting any alternative rate. In addition, no consent of the Noteholders shall be required in connection with any other related adjustments and/or amendments to the Terms and Conditions of the Notes (or any other document) which are made in order to effect any alternative rate.
In certain circumstances, the ultimate fallback for a particular Interest Period or Reset Period (as applicable), including where no alternative rate is determined or, in the case of Dated Subordinated Notes, where the alternative rate is reasonably expected to prejudice the qualification of such Dated Subordinated Notes as Tier 2 capital or, in the case of Senior Notes issued by Santander UK Group Holdings, where the alternative rate is reasonably expected to prejudice the eligibility of such Senior Notes to qualify in full towards its and/or the Group's minimum requirements for (A) own funds and eligible liabilities and/or (B) loss absorbing capacity instruments, may be that the rate of interest for the last preceding Interest Period or Reset Period (as applicable) is used for the following Interest Period or Reset Period (as applicable). This may result in the effective application of a fixed rate for Floating Rate Notes or Fixed Rate Reset Notes (as applicable) based on the rate of interest that was determined for the last preceding Interest Period or Reset Period (as applicable). In addition, due to the uncertainty concerning the availability of alternative rates and the involvement of an Independent Adviser, the relevant fallback provisions may not operate as intended at the relevant time.
Any such consequences could have a material adverse effect on the value of and return on any such Notes. Moreover, any of the above matters or any other significant change to the setting or existence of any relevant rate could affect the ability of the Issuer to meet its obligations under the Floating Rate Notes or Fixed Rate Reset Notes or could have a material adverse effect on the value or liquidity of, and the amount payable under, the Floating Rate Notes or Fixed Rate Reset Notes. Investors should note that the Independent Adviser or the Issuer (as applicable) will have discretion to adjust the relevant alternative rate in the circumstances described above. Any such adjustment could have unexpected commercial consequences and there can be no assurance that, due to the particular circumstances of each Noteholder, any such adjustment will be favourable to each Noteholder. In addition, if an amendment is made to the Notes to change the reference rate/benchmark from LIBOR, or any other benchmark, to an alternative base rate, such amendment could have adverse tax consequence to U.S. holders.
Investors should consider all of these matters when making their investment decision with respect to the relevant Floating Rate Notes or Fixed Rate Reset Notes.
Investors should be aware that the market continues to develop in relation to the Sterling Overnight Index Average ("SONIA") as a reference rate in the capital markets and its adoption as an alternative to Sterling LIBOR. In particular, market participants and relevant working groups are exploring alternative reference rates based on SONIA, including term SONIA reference rates (which seek to measure the market's forward expectation of an average SONIA rate over a designated term). The market or a significant part thereof may adopt an application of SONIA that differs significantly from that set out in the Terms and Conditions of the Notes and used in relation to Floating Rate Notes that reference a SONIA rate issued under this Prospectus. Interest on Notes which reference a SONIA rate is only capable of being determined at the end of the relevant Observation Period and immediately prior to the relevant Interest Payment Date. It may be difficult for investors in Notes which reference a SONIA rate to reliably estimate the amount of interest which will be payable on such Notes. Further, if the Floating Rate Notes become due and payable under Condition 9, the Rate of Interest payable shall be determined on the date the Notes became due and payable and shall not be reset thereafter. Investors should consider these matters when making their investment decision with respect to any such Floating Rate Notes.
On 18 December 2013, the Financial Services (Banking Reform) Act (the "Banking Reform Act") was enacted. The Banking Reform Act implemented the recommendations of the Independent Commission on Banking (the ICB) and of the Parliamentary Commission on Banking Standards, including:
The establishment of a ring-fencing framework under FSMA pursuant to which UK banking groups that hold significant retail deposits are required to separate their retail banking activities from their wholesale banking activities by 1 January 2019.
On 7 July 2016, the PRA published a policy statement (PS20/16) entitled 'The Implementation of ringfencing: prudential requirements, intragroup arrangements and use of financial market infrastructures' containing its final ring-fencing rules designed to make provision for the group ring-fencing purposes outlined in the Banking Reform Act ahead of the implementation date for ring-fencing on 1 January 2019. The group ring-fencing purposes are intended to insulate a ring-fenced bank from, and ensure that a ringfenced bank is able to take decisions independently of, other members of its group.
Finally, the Banking Reform Act introduced a new form of transfer scheme, the ring-fencing transfer scheme, under Part VII of FSMA to enable UK banks to implement the ring-fencing requirements. This is a court process that requires (i) the PRA to approve the scheme (in consultation with the FCA); (ii) the appropriate regulatory authority in respect of each transferee to provide a certificate of adequate financial resources in relation to that transferee; and (iii) an independent expert (approved by the PRA, after consultation with the FCA) to provide a scheme report stating whether any adverse effect on persons affected by the scheme is likely to be greater than is reasonably necessary to achieve the ring-fencing purposes of the scheme. The PRA published its final statement of policy on its approach to ring-fencing transfer schemes on 4 March 2016.
The Group is subject to the ring-fencing requirement under the Banking Reform Act and, as a consequence, the Group will need to separate its core retail and small business deposit taking activities from its prohibited activities. In light of the changeable macro-environment, the board of Santander UK Group Holdings concluded in December 2016 that it could provide greater certainty for its customers with a 'wide' ring-fence structure, rather than the 'narrow' ring-fence structure it had originally envisaged in early 2016. Under this revised model Santander UK, the main ring-fenced bank, will serve the Group's retail, commercial and corporate customers. The majority of the Group's customer loans and assets as well as customer deposits and liabilities will remain within Santander UK or Cater Allen Limited, as ringfenced banks. Prohibited activities which cannot continue to be transacted within the ring-fenced banks principally include the derivatives business with financial institutions and certain corporates, elements of the Group's short term markets business, Santander UK's its branches in Jersey and the Isle of Man, and Abbey National Treasury Services plc's branch in the U.S.
The implementation of the new ring-fencing model entails a legal and organisational restructuring of the Group's businesses and operations, including through a ring-fencing transfer scheme. Following consent from the PRA to the application to the High Court of England and Wales (the "Court") for approval of the Group's ring-fencing transfer scheme (the "Scheme"), the Scheme was approved by the Court on 12 June 2018. In accordance with the Scheme: (a) Abbey National Treasury Services plc has transferred the majority of its business, with products, transactions, arrangements and customers and other stakeholders which are permitted in the ring-fence transferred to Santander UK and products, transactions, arrangements and customers and other stakeholders which are prohibited within the ring-fence transferred to the London branch of Banco Santander and (b) Santander UK has transferred prohibited business and certain specified business that is permitted within the ring-fence to the London branch of Banco Santander. These transfers of business took place largely in July 2018. It is expected that Abbey National Treasury Services plc will cease the activities of its U.S. branch, and the Group's current intention is to transfer the business of the Jersey and Isle of Man branches of Santander UK to a member of the Group outside the ring-fence using transfer schemes under the applicable laws. Its target remains to complete the implementation of its ring-fencing plans in advance of the legislative deadline of 1 January 2019.
On 13 June 2018, the High Court of England and Wales (the "Court") approved Santander UK's ringfencing transfer scheme under Part VII of the FSMA (the "Scheme") and the PRA consented to the application to the Court for approval of the Scheme. However, implementation of the ring-fencing model continues to depend on a number of factors, including approvals from applicable regulators and court sanctions. There can be no assurance that these approvals or sanctions will be obtained in line with the Group's implementation plan and other factors such as economic conditions in the UK and globally and developments on the terms of the UK's exit from the EU may have a bearing on the implementation of the ring-fence. In light of the scale and complexity of this process, the operational and execution risks for the Group may be material. This restructuring and migration of customers and transactions could have a material impact on how the Group conducts its business. The Group is unable to predict with certainty the attitudes and reaction of its customers.
The restructuring of the Group's business pursuant to the developing ring-fencing regime will take a substantial amount of time and cost to implement. The separation process and the structural changes which may be required could have a material adverse effect on its business, operations, financial condition, profitability and prospects.
The European banking union is expected to be achieved through new harmonised banking rules (in a single rulebook) and a new institutional framework with stronger systems for both banking supervision and resolution that will be managed at a European level. Its two main pillars are the Single Supervisory Mechanism ("SSM") and the Single Resolution Mechanism ("SRM").
The SSM (comprising both the ECB and the national competent authorities) is designed to assist in making the banking sector more transparent, unified and safer. On 4 November 2014, the ECB fully assumed its new supervisory responsibilities within the SSM, in particular direct supervision of 118 significant banks (at 1 April 2018) in the eurozone, including Banco Santander.
Regulation (EU) No. 806/2014 of the European Parliament and the Council of the EU (the "SRM Regulation") applied in full from 1 January 2016 and establishes uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of the SRM and Single Resolution Fund ("SRF"). The new Single Resolution Board ("SRB"), which is the central decision-making body of the SRM fully assumed its resolution powers on 1 January 2016. The SRB is responsible for managing the SRF. In November 2016 the Commission published a legislative proposal for a regulation to amend the SRM Regulation relating to the implementation of TLAC requirements and revisions to MREL.
Further, regulations adopted towards achieving a banking and/or fiscal union in the EU and decisions adopted by the ECB in its capacity as Banco Santander's main supervisory authority may have a material impact on the Group's business, financial condition and operations and may be impacted by the terms of the UK's exit from the EU (for more information, see the risk factor entitled "Exposure to UK political developments, including the ongoing negotiations between the UK and EU, could have a material adverse effect on the Group").
On 16 August 2012, the EU regulation on over-the-counter ("OTC") derivatives, central counterparties and trade repositories, referred to as the European Market Infrastructure Regulation ("EMIR") came into force. EMIR introduced a number of requirements, including clearing obligations for certain classes of OTC derivatives, margin requirements for non-centrally cleared derivatives and various reporting and disclosure obligations. The implementation of EMIR has already led and may yet lead to changes which may negatively impact the Group's profit margins, require the Group to adjust its business practices or increase its costs (including compliance costs).
The revised and re-enacted Markets in Financial Instruments legislation ("MiFID") replaces the existing MiFID framework and comprises MiFID II and the Regulation 600/2014 of the European Parliament and of the Council of 15 May 2014 and amending Regulation (EU) No 648/2012 ("MiFIR"), the substantive provisions of which became applicable on 3 January 2018 and introduced an obligation to trade certain classes of OTC derivative contracts on trading venues. Certain details remain to be clarified in further binding technical standards to be adopted by the Commission. Although the full impact of MiFIDII and MiFIR on the Group is not yet known, MiFIDII and MiFIR may lead to changes which negatively impact the Group's profit margins, require the Group to adjust its business practices or increase its costs (including compliance costs). It is possible that the measures and procedures the Group has introduced might, in the future, be deemed to be misaligned with MiFID obligations, or that individuals within the business may not fully comply with the new procedures. If there are breaches of the Group's MiFID obligations or of other existing laws and regulations relating to financial crime, it could face significant administrative, regulatory and criminal sanctions and restrictions on the conduct of its business and operations, as well as reputational damage. Therefore, any such breaches could have a material adverse effect on its operations, financial condition and prospects.
In the U.S., the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") enacted in 2010, has been implemented in part and continues to be implemented by various U.S. federal regulatory agencies. The Dodd-Frank Act, among other things, imposes a new regulatory framework on swap transactions, including swaps of the sort that the Group enters into, requires regulators to adopt new rules governing the retention of credit risk by securitisers or originators of securitisations and significantly expands the coverage and scope of regulations that limit affiliate transactions within a banking organisation. Over 2012-2015, the U.S. Commodity Futures Trading Commission (the "CFTC") and the U.S. Prudential Regulators adopted a host of new regulations for swaps markets, including swap dealer registration, business conduct, mandatory clearing, exchange trading and margin regulations. Most of these regulations are either already effective or will come into effect in 2017. Abbey National Treasury Services plc, which became provisionally registered as a swap dealer with the CFTC on 4 November 2013, is currently subject to these regulations for its U.S. facing swaps activities. These rules have already increased and could continue to increase the costs associated with the Group's swaps business. In addition, certain cross-border regulatory conflicts could adversely affect the profitability of the Group's swaps business by reducing the range of counterparties with which the Group can trade effectively.
In October 2014, U.S. regulators adopted a joint final rule requiring sponsors of asset-backed securitisation transactions, which would include the Issuers in relation to its residential mortgage-backed securities programmes, to retain 5 per cent. of the credit risk of the assets subject to the securitisation. The rule permits sponsors to satisfy the risk retention requirement through the acquisition and retention of either 5 per cent. (measured by fair value) of the most subordinated interest in the securitisation, or 5 per cent. (measured by nominal value) of each tranche of interests issued by the securitisation, or some combination of the two. The rule also permits certain exceptions and methods of compliance in respect of specific types of asset-backed securities transactions. The final rule took effect for residential mortgagebacked securities transactions on 24 December 2015, and on 24 December 2016 for other securitisation transactions.
Within the Dodd-Frank Act, the so-called Volcker Rule prohibits 'banking entities', including the Group, from engaging in certain forms of proprietary trading or from sponsoring or investing in certain covered funds, in each case subject to certain exemptions, including exemptions permitting foreign banking entities to engage in trading and fund activities that take place solely outside of the U.S. The final rules contain exclusions and certain exemptions for market-making, hedging, underwriting, trading in U.S. government and agency obligations as well as certain foreign government obligations, trading solely outside the U.S., and also permit ownership interests in certain types of funds to be retained. The Group was generally required to come into compliance with the Volcker Rule by July 2015, although the Federal Reserve extended the conformance deadline for pre-2014 "legacy" investments in and relationships with private equity funds and hedge funds until 21 July 2017 and additional extensions for illiquid funds may be requested. On 30 May 2018, the Federal Reserve and other federal regulators requested comment on proposed modifications to the Volcker Rule, including modifications to the scope of restrictions on proprietary trading and investments in covered funds. It cannot be predicted at this time what, if any, modifications to the Volcker Rule may be adopted or what the impact of such changes would be on the Group.
Each of these aspects of the Dodd-Frank Act, as well as the changes in the U.S. banking regulations, and increased uncertainty surrounding future changes, may directly and indirectly impact various aspects of the Group's business. The full spectrum of risks that the Dodd-Frank Act (including the Volcker Rule and any modifications to it) pose to the Group is not yet known, however, such risks could be significant and the Group could be materially and adversely affected by them.
In the UK and elsewhere, there is continuing political, competitive and regulatory scrutiny of the banking industry. Political involvement in the regulatory process, in the behaviour and governance of the UK banking sector and in the major financial institutions in which the UK Government has a direct financial interest is likely to continue. The Competition and Markets Authority ("CMA") is the UK's main competition authority responsible for ensuring that competition and markets work well for consumers. In addition, under the Banking Reform Act, as of 1 April 2015, the FCA has the power to enforce against breaches of the Competition Act 1998 and to refer markets to the CMA for in-depth investigation in the areas of financial services in the UK. As of 1 April 2015, the PSR also has an objective and powers equivalent to those of the FCA to promote competition in the payments industry.
In August 2016, the CMA published the final report in its market investigation into competition in the personal current account and SME retail banking markets, which identified a number of features of the markets for the supply of personal current accounts, business current accounts and SME lending that, in combination, were having an adverse effect on competition. The CMA is currently implementing a comprehensive package of remedies including, among other things, the introduction of requirements to prompt customers to review the services that they receive from their bank at certain trigger points and to promote customer awareness of account switching.
Further work on overdraft charges – which remain under political scrutiny – is ongoing by the FCA. Most recently, in May 2018 the FCA published a consultation paper on overdrafts (C18/13) in which it observes that competition between banks for overdraft users is weaker than for non-overdraft users, and that it sees evidence of harm from both usage patterns and the level of overdraft charges. To address these issues, the FCA is consulting on measures such as improvements in the visibility and content of key information and the promotion of online tools to help consumers get an indication of their eligibility for an overdraft. In addition, and as part of a discussion rather than consultation, it is considering the case for more interventionist measures such as directly intervening in how firms structure their prices, price capping and measures to ensure that firms take active steps to address repeat overdraft use. The FCA expects to finalise its rules towards the end of 2018, or as part of the next stages of its analysis on pricing interventions and repeat overdraft use.
PSD2 is a fundamental piece of payments-related legislation in Europe that has applied since 13 January 2018, and creates a legal framework for requiring payment service providers ("PSPs") such as Santander UK to give certain third party providers ("TPP") authorised by the FCA access to certain customer account and payments data. The PSD2 customer data access requirements are not expected to apply until 18 months after the publication of relevant Regulatory Technical Standards, and are therefore not expected to become binding until at least the third quarter of 2019. Separately, in 2016 the CMA launched the UK Open Banking initiative, which initially came into force on 13 January 2018 but has since been subject to some implementation date extensions (including in relation to Santander UK). Open Banking mandates certain retail banking providers in the UK, including Santander UK, to grant access to customer and transaction data through standardised API technology developed by the UK Open Banking Implementation Entity.
Open Banking and PSD2 have the potential to exacerbate a number of existing risks including data loss/data protection, cyber security, fraud and wider financial crime risk, which in turn could give rise to increased costs, litigation risk and risk of regulatory investigation and enforcement activity. Examples of the heightened risk include the risk of fraud relating to activities of a TPP pursuant to which funds are redirected to a third party not chosen by the customer; and the risk of data misuse by a TPP/other third party where the TPP has requested the data from the Group and this is provided to the TPP.
The FCA is conducting a Strategic Review of Retail Banking Business Models, looking at the potential effect of technological change, increased digitalisation and free-if-in-credit banking on firms' business models. It is also looking to secure an appropriate degree of consumer protection for consumers in vulnerable circumstances. This review will inform the FCA's ongoing policy work in retail banking and related areas. The Group may be required to make changes to its business model or business practices as a result of this review (or related work), and such changes could materially and adversely affect the Group's operations, financial condition and prospects.
In addition, the FCA and PSR continue to undertake a number of competition related studies and reviews across a number of the Group's businesses. Intervention as a result of these studies and reviews, in addition to regulatory reforms, investigations and court cases affecting the UK financial services industry, could have an material adverse effect on the Group's operations, financial condition and prospects, or on the Group's relations with its customers and potential customers.
A number of EU and UK measures targeted at preventing financial crime (including anti-money laundering ("AML")) and countering the financing of terrorism ("CTF") provisions have come into effect in 2017 and 2018.
As part of the EU's revision of its AML / CTF rules, Directive (EU) No 2015 / 849 (the "Fourth EU Anti-Money Laundering Directive") and Regulation (EU) No 847 / 2015 (the "EU Wire Transfer Regulation") came into effect on 26 June 2017. The Fourth EU Anti-Money Laundering Directive replaces existing Directive (EC) No 60 / 2005 and significantly expands the existing AML / CTF regime applicable to financial institutions by, among other things:
On 22 June 2017, the final text of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 was published, which came into force on 26 June 2017 and implements the requirements of the Fourth EU Anti-Money Laundering Directive into national law. Regulations amending the national People with Significant Control Regime also came into force on 26 June 2017.
On 15 December 2017, the Council of EU and the European Parliament reached a political agreement on the EU Commission's proposal to amend the Fourth EU Anti-Money Laundering Directive, and the Council adopted it on 14 May 2018. The amended directive ("5th AMLD") seeks to prevent large scale concealment of funds and to introduce increased corporate transparency rules, whereby corporate and other legal entities will be required by law to publicly disclose information on beneficial ownership. The amended directive also introduces the application of AML rules to firms providing services associated with virtual currencies and further extends enhanced due diligence requirements to all transactions with natural persons or legal entities established in third countries identified as high risk countries pursuant to Article 9 (2) of the Directive. Following the political agreement between the co-legislators, EU Member States will have until mid-2019 to implement the 5th AMLD into national legislation. Although it is not yet certain that the UK government will implement the Directive into UK law, UK regulations and/or guidance are expected later in 2018. Furthermore, the UK Sanctions and AML Act received Royal Assent in 2018, providing the legal basis for sanctions post-Brexit and also certain new AML measures.
The EU Wire Transfer Regulation replaces the existing Regulation (EC) No 1781 / 2006 and has applied since 26 June 2017. This regulation applies to all transfers of funds in any currency which are sent or received by a payment service provider ("PSP") or an intermediary PSP established in the EU, subject to certain exceptions for low-risk and low-value payments. The payer's PSP is required to ensure that any transfer of funds is accompanied by the identification information prescribed in the regulation and must verify the accuracy of this information from a reliable and independent source. Obligations are also imposed on the payee's PSP to implement effective procedures to detect whether the information about the payer or payee in the messaging or payment and settlement system is incomplete and to take a riskbased approach to determining whether to execute, reject or suspend a transfer of funds with missing information.
The UK Policing and Crime Act 2017 contains several measures to strengthen the enforcement of financial sanctions including enhanced criminal penalties and the power to impose monetary penalties for breaches of financial sanctions, deferred prosecution agreements and serious crime prevention orders for such breaches and the power to temporarily implement UN financial sanctions in the absence of EU implementing measures. The UK Policing and Crime Act 2017 received royal assent on 31 January 2017. Banks are expected to take a proactive approach to reporting any potential sanctions breaches to the new Office of Financial Sanctions Implementation ("OFSI"), as set out in recent OFSI Guidance. Under the Policing and Crime Act, OFSI has powers to fine banks a maximum of £1 million or 50 per cent. of the estimated value of the funds or resources, whichever is greater, as well as criminal enforcement powers. The penalty powers apply to offences committed after 1 April 2017. In 2016, just over 100 suspected breaches were reported by firms to OFSI, of which 95 were deemed actual breaches, totalling £75 million.
The UK Immigration Act 2016 requires banks to conduct immigration checks on their current account holders and report any persons unlawfully present in the UK to the Home Office. Banks are required to perform quarterly checks to determine whether they are operating a current account for a person known by the Home Office to be in the UK illegally. If a bank establishes that a customer is an illegal migrant, they will have a duty to report the match and details of any other accounts they provide to the Home Office. The FCA has responsibility for supervising banks' adherence to the requirements of the UK Immigration Act 2016. The Home Office may require the bank to close the accounts of such individuals as soon as reasonably practicable.
The Criminal Finances Act 2017 (the "CF Act"), which came into force on 30 September 2017, introduces a new offence (modelled on the corporate offence under section 7 of the Bribery Act 2010), which will be committed by a corporation which fails to prevent the criminal facilitation of tax evasion by its associated persons (which includes its employees, agents and other persons who perform services for or on behalf of it) regardless of whether the tax is owed in the UK or another country. There is a defence where the corporation has put in place reasonable prevention procedures. If an offence is committed, unlimited financial penalties or ancillary orders could be imposed. The CF Act includes a range of further provisions targeted at improving the UK government's ability to tackle money laundering and corruption, recover the proceeds of crime and counter terrorist financing and enables greater sharing of information between entities within the regulated sector and enforcement agencies. Failure to comply with the requirements of the CF Act could expose the Group to significant criminal or civil sanctions.
In May 2018, the Trump administration announced that the United States will cease its participation in the Joint Comprehensive Plan of Action ("JCPOA") and re-impose sanctions relating to Iran following winddown periods ending 6 August 2018 and 4 November 2018. It is expected that U.S. sanctions will revert to provisions substantially similar to those in force in 2013, prior to the initial Iran nuclear agreement, and that U.S. secondary sanctions will target a wide range of Iran-related activities.
The lack of certainty on possible requirements arising from new AML and Sanctions laws could pose risks given the penalties for financial crime compliance failings. If such penalties are incurred then they could have a material adverse effect on the Group's operations, financial condition and prospects.
The implementation of the foregoing measures (whether in their current form or as amended) has already increased the Group's regulatory and compliance burden, and there can be no assurances that this burden will not increase further, particularly if the time frame for implementation is short. The regulatory changes required substantial amendments to the Group's AML / CTF procedures and policies and may yet require further such amendments. The changes could adversely impact the Group's business by increasing its operational and compliance costs and reducing the value of its assets and operations. These challenges are exacerbated by the complexity arising from overlapping requirements between different legislation, and, in some instances, conflicts of laws. There are also some requirements which have extraterritorial effect, for example, the UK Bribery Act. There are challenges in ensuring the compliance of entities over which the Group does not have full control or where the UK rules do not align easily with the local requirements. There is a risk that the measures will not be implemented correctly or on time or that individuals within the business will not be fully compliant with the new procedures. If there are breaches of these measures, the Group could face significant administrative, regulatory and criminal sanctions and restrictions on the conduct of its business operations, as well as reputational damage. Any such breaches could have a material adverse effect on its operations, financial condition and prospects.
The EU General Data Protection Regulation (the "GDPR") came into direct effect in all EU Member States on 25 May 2018, replacing previous EU data privacy laws. Although a number of basic existing principles have remained the same, the GDPR has introduced new obligations on data controllers and rights for data subjects, including, among others:
The GDPR has also introduced new fines and penalties for a breach of requirements, including fines for systematic breaches of up to the higher of 4 per cent. of annual worldwide turnover or €20m and fines of up to the higher of 2 per cent. of annual worldwide turnover or €10m (whichever is highest) for other specified infringements. The GDPR identifies a list of points to consider when imposing fines (including the nature, gravity and duration of the infringement).
The implementation of the GDPR has required substantial amendments to the Group's procedures and policies. The changes have impacted, and could further adversely impact, the Group's business by increasing its operational and compliance costs. Further, there is a risk that the measures may not be implemented correctly or that there may be partial non-compliance with the new procedures. If there are breaches of the GDPR obligations, the Group could face significant administrative and monetary sanctions as well as reputational damage, which could have a material adverse effect on its operations, financial condition and prospects.
In December 2011, the FSA published a consultation paper that consolidated proposals arising out of its wide-ranging mortgage market review. In October 2012, the FSA published a feedback statement and the final rules in relation to the FCA Mortgage Market Review ("MMR") generally came into force on 26 April 2014. These rules required a number of material changes to the mortgages sales process both in terms of advice provision in nearly all scenarios and significantly enhanced affordability assessment and evidencing. The new rules permit interest-only loans. However, there is a clear requirement for a clearly understood and credible strategy for repaying the capital (evidence of which the lender must obtain before making the loan).
The Group has implemented certain changes to implement the MMR requirements. The FCA continues to assess firms' implementation of the rules introduced as a result of the MMR and commenced a review of responsible lending practices in April 2015, publishing its report in May 2016. This is in addition to regulatory reforms being made as a result of the implementation of the Mortgage Credit Directive from 21 March 2016. In December 2016, the FCA published terms of reference for a market study into competition in the mortgages sector, which will focus on consumers' ability to make effective decisions and whether commercial arrangements between lenders, brokers and other players leads to conflicts of interest or misaligned incentives to the detriment of consumers. Following a deferral, the FCA published its interim report setting out its preliminary conclusions in May 2018. In its report, the FCA highlights a number of positive features displayed in the mortgage market, including high levels of consumer choice and engagement and little evidence that current commercial arrangements between firms are leading to poor consumer outcomes. Equally, the FCA notes its concerns around the difficulty for some customers to find the cheapest mortgage and barriers to switching. The FCA's proposed remedies include aiding consumers in identifying, comparing and obtaining suitable mortgage products, removing barriers to innovation in the sale of mortgages, and making it easier for consumers to switch mortgages in certain specified situations. The FCA is consulting on the remedies until 31 July 2018, and plans to publish its final report later in 2018. There can be no assurance that the Group will not make any future changes to its mortgage lending business, whether as a result of the MMR or other mortgage lending reforms, and that such changes would not adversely affect the Group.
It is possible that further changes may be made to the FCA's Mortgage Conduct of Business ("MCOB") rules as a result of these reviews and other related future regulatory reforms. To the extent that any new rules do apply to any of the loans, failure to comply with these rules may entitle a borrower to claim damages for loss suffered or set-off the amount of the claim against the amount owing under the loan. Any further changes to the FCA's MCOB rules or to MCOB or the FSMA or changes in the regulatory structure or the Financial Services Act 2012, may adversely affect the Group's operating results, financial condition and prospects.
On 1 April 2014, consumer credit regulation was transferred from the OFT to the FCA in accordance with the Financial Services Act 2012. Firms that held an OFT licence and had registered with the FCA by 31 March 2014, including Santander UK, were granted an interim permission under the new regime and had to apply to the FCA for full authorisation during an application period notified by the FCA. Under the new regime: (i) carrying on certain credit- related activities (including in relation to servicing credit agreements) otherwise than in accordance with permission from the FCA will render the credit agreement unenforceable without FCA approval; and (ii) the FCA has the power to make rules providing that contracts made in contravention of its rules on cost and duration of credit agreements, or in contravention of its product intervention rules, are unenforceable. Santander UK is fully authorised to carry out consumer credit-related regulated activities, however, if the FCA were to impose conditions on that authorisation and/or make changes to the FCA rules applicable to authorised firms with consumer credit permissions, this could have an adverse effect on the Group's operating results, financial condition and prospects.
The Group faces various legal and regulatory issues that may give rise to civil or criminal litigation, arbitration, or criminal, tax, administrative or regulatory investigations, inquiries or proceedings. Failure to adequately manage the risks arising in connection with legal and regulatory issues, including the Group's obligations under existing applicable law and regulation or the Group's contractual obligations including arrangements with suppliers, or failing to properly implement new applicable law and regulation could result in significant loss or damage including reputational damage, all of which could have a material adverse effect on the Group's operations, financial condition and prospects. Additionally, the current regulatory environment, with its increased supervisory focus and associated enforcement activity, combined with uncertainty about the evolution of the regulatory regime, may lead to material operational and compliance costs. Relevant risks include:
The Group is from time to time subject to certain legal or regulatory investigations, inquiries or proceedings in the normal course of the Group's business, including in connection with the Group's lending activities, relationships with the Group's employees and other commercial or tax matters. These may be brought against the Group under UK legal or regulatory processes, or under legal or regulatory processes in other jurisdictions, such as the EU and the U.S., where overseas regulators and authorities may have jurisdiction by virtue of the Group's activities or operations. In view of the inherent difficulty of predicting the outcome of legal or regulatory proceedings, particularly where opportunistic claimants seek very large or indeterminate damages, cases present novel legal theories, involve a large number of parties or are in the early stages of discovery, or where the approaches of regulators or authorities to legal or regulatory issues and sanctions applied are subject to change, the Group cannot state with confidence what the eventual outcome of any pending matters will be and any such pending matters are not disclosed by name because they are under assessment. The Group's provisions in respect of any pending legal or regulatory proceedings are made in accordance with relevant accounting requirements and are reviewed periodically.
In light of the uncertainties involved in such legal or regulatory proceedings, there can be no assurance that the ultimate resolution of these matters will not exceed the provisions currently accrued by the Group. As a result, the outcome of a particular matter (whether currently provided or otherwise) may be material to the Group's operations, financial condition and prospects for a particular period, depending upon, among other factors, the size of the loss or liability imposed and the Group's level of income for that period.
The PRA and the FCA continue to have a more outcome-focused regulatory approach. This involves proactive intervention, investigation and enforcement, and punitive penalties for infringement. As a result, the Group and other PRA and/or FCA authorised firms continue to face increased supervisory intrusion and scrutiny (resulting in increasing costs including supervision fees), and in the event of a breach of relevant law or regulation, the Group is likely to face more stringent penalties and regulatory actions.
The developing legal and regulatory regime in which the Group operates requires the Group to be compliant across all aspects of the Group's business, including the training, authorisation and supervision of personnel, systems, processes and documentation. If the Group fails to be compliant with relevant law or regulation, there is a risk of an adverse impact on the Group's business from more proactive regulatory intervention (including by any overseas regulator which establishes jurisdiction), investigation and enforcement activity leading to sanctions, fines or other action imposed by or agreed with the regulatory authorities, as well as increased costs associated with responding to regulatory inquiries and defending regulatory actions. Customers of financial services institutions, including the Group's customers, may seek redress if they consider that they have suffered loss for example as a result of the misselling of a particular product, or through incorrect application of the terms and conditions of a particular product or in connection with a competition law infringement.
In particular, the FCA has operational objectives to protect consumers and to promote competition, and it is taking a more interventionist approach in its increasing scrutiny of product terms and conditions and monitoring compliance with competition law. FSMA (as amended by the Financial Services Act 2012) gives the FCA the power to make temporary product intervention rules either to improve a firm's systems and controls in relation to product design, product management and implementation, or to address problems identified with products which may potentially cause significant detriment to consumers because of certain product features or firms' flawed governance and distribution strategies. Such rules may prevent firms from entering into product agreements with consumers until such problems have been rectified. These powers are echoed by those granted under MiFID II, which applied as of 3 January 2018, and as a result of which the FCA has set out its policy on the making of temporary product intervention rules in Chapter 2 of its new Product Intervention and Product Governance Sourcebook.
Since April 2015 the FCA (and the PSR) also has concurrent competition law enforcement powers. This is in addition to the CMA, the UK's main competition authority, and the Commission which continue to have jurisdiction, respectively, to enforce competition law infringements in the UK or which have an effect on trade between EU Member States. Following a report by the National Audit Office, the CMA has stated it will seek to shift its focus toward enforcement of competition law breaches. As a result, the UK financial services sector now operates in an environment of heightened competition law scrutiny. Under the Financial Services Act 2010, the FCA also has the power to impose its own customer redress scheme on authorised firms, including the Group, if it considers that consumers have suffered loss or damage as a consequence of a regulatory failing, including misselling.
In recent years there have been several industry-wide issues in which the FCA has intervened directly. One such issue is the mis-selling of PPI where, following an unsuccessful legal challenge by the British Bankers' Association in 2011 of new FSA rules which altered the basis on which regulated firms must consider and deal with complaints in relation to the sale of PPI, the Group, along with other institutions, revised its provision for PPI complaint liabilities in 2011 to reflect the change in rules and the consequential increase in claims levels. No additional provisions were made for PPI in 2012 or 2013. In 2014, a total charge of £140m, including related costs, was made for conduct remediation. Of this, £95m related to PPI. In November 2015, the FCA issued a consultation paper (the "Consultation Paper") outlining its proposed approach to PPI in light of the 2014 decision of the Supreme Court in Plevin v Paragon Personal Finance Ltd ("Plevin") and its proposal to set a two year deadline for PPI claims. In March 2017, the FCA published final rules and guidance with respect to payment protection insurance complaints in light of Plevin (which came into force on 29 August 2017). The FCA confirmed that, save in exceptional circumstances, the FOS cannot consider complaints in respect of PPI contracts sold prior to 29 August 2017 unless such complaints are referred to the relevant firm or the FOS on or prior to 29 August 2019. However this FCA deadline does not affect the ability of a borrower to pursue their complaint through the courts and the 29 August 2019 deadline will not apply to such claims.
In Plevin, the Supreme Court ruled that a failure to disclose a large commission payment on a single premium PPI policy sold in connection with a secured personal loan made the relationship between the lender and the borrower unfair under section 140A of the Consumer Credit Act 1974.
Regarding the two year deadline for PPI claims, the FCA outlined details of a £42.2 million media campaign, funded by the 18 firms (including firms in the Group) that have reported the most PPI complaints. When assessing the adequacy of the Group's provision, the Group has applied its interpretation of the proposed rules and guidance in the Consultation Paper to its current assumptions. This application resulted in an additional £450 million provision charge in December 2015, which represented the Group's best estimate of the remaining redress and costs at that time, notwithstanding the ongoing nature of the consultation. New legislation was introduced in 2015 which has the effect of restricting the corporation tax deductibility for a large proportion of this cost. This new legislation is further detailed in the risk factor entitled "Changes in taxes and other assessments may adversely affect the Group". The Group's PPI provision amounted to £457 million at 31 December 2016. The Group made an additional £114 million provision charge in December 2016, which included its best estimate of Plevinrelated claim costs and a £30 million charge for a specific portfolio under a past business review. The Group made an additional provision of £32 million in March 2017 in response to the final rules and guidance published by the FCA, which represents the Group's best estimate of additional future costs. In June 2017, the Group made a further net charge of £37 million, following a review of claims handling procedures in relation to a specific PPI portfolio including the impact of a past business review. In the fourth quarter of 2017, the Group made a further PPI provision of £40 million, relating to an increase in estimated future claims activity following the commencement of the FCA advertising campaign for PPI.
Given the above, the ultimate financial impact on the Group of the claims arising from PPI complaints is still uncertain and will depend on a number of factors, including changes to the FOS' approach to handling customer complaints (if any), the rate at which new complaints arise, the length of any complaints, the content and quality of the complaints (including the availability of supporting evidence) and the average uphold rates and redress costs. The Group can make no assurance that expenses associated with PPI complaints will not exceed the provision made relating to these claims. More generally, the Group can make no assurance that estimates for potential liabilities, based on the key assumptions used, are correct. The reserves taken as a result may prove inadequate. If the Group were to incur additional expenses that exceed provisions for PPI liabilities or other provisions were to be incurred, these expenses could have a material adverse effect on the Group's operating results, financial condition and prospects.
All the above is similarly relevant to any future industry-wide mis-selling or other issues that could affect the Group, such as the sale of other retail financial products and interest-rate derivative products sold to SMEs. This may lead from time to time to: (i) significant direct costs or liabilities (including in relation to mis-selling); and (ii) changes in the practices of such businesses which benefit customers at a cost to shareholders.
Decisions taken by the FOS (or any overseas equivalent that has jurisdiction) could, if applied to a wider class or grouping of customers, have a material adverse effect on the Group's operating results, financial condition and prospects.
The Financial Services and Markets Act 2000 (Designated Consumer Bodies) Order 2013 (the "Order") was made on 16 December 2013 and came into force on 1 January 2014. The Order designates the National Association of Citizens Advice Bureaux, the Consumers' Association, the General Consumer Council for Northern Ireland and the National Federation of Self Employed and Small Businesses as consumer bodies that may submit a "super-complaint" to the FCA. A "super-complaint" is a complaint made by any of these designated consumer bodies to the FCA on behalf of consumers of financial services where it considers that a feature, or a combination of features, of the market for financial services in the UK is seriously damaging the interests of these customers. Complaints about damage to the interests of individual consumers will continue to be dealt with by the FOS. If a "super-complaint" were made against a Group entity by a designated consumer body under the Order, any response published or action taken by the FCA could have a material adverse effect on the Group's operating results, financial condition and prospects.
Given the requirement for compliance with an increasing volume of relevant laws and regulation, more proactive regulatory intervention and enforcement and more punitive sanctions and penalties for infringement, inherent unpredictability of litigation, and evolution of jurisdiction for FOS and related impacts (including the changes proposed by the FCA in the consultation paper (CP18/3) on 22 January 2018, proposing changes to the eligibility criteria to access the FOS), it is possible that related costs or liabilities could have a material adverse effect on the Group's operating results, financial condition and prospects.
The Banking Act came into force on 21 February 2009. The special resolution regime set out in the Banking Act provides HM Treasury, the BoE, the PRA and the FCA (and their successor bodies) with a variety of powers for dealing with UK deposit taking institutions (and, in certain circumstances, their holding companies) that are failing or likely to fail, including: (i) to take a bank or bank holding company into temporary public ownership; (ii) to transfer all or part of the business of a bank to a private sector purchaser; or (iii) to transfer all or part of the business of a bank to a "bridge bank". The special resolution regime also comprises a separate insolvency procedure and administration procedure each of which is of specific application to banks. These insolvency and administration measures may be invoked prior to the point at which an application for insolvency proceedings with respect to a relevant institution could be made.
In addition, pursuant to amendments made to the Banking Act, which came into force on 1 August 2014, provision has been made for various tools to be used in respect of a wider range of UK entities, including investment firms and certain banking group companies, provided that certain conditions are met. Secondary legislation specifies that the Banking Act powers can be applied to investment firms that are required to hold initial capital of €730,000 or more and to certain UK incorporated non-bank companies in the Group.
If an instrument or order were made under the Banking Act in respect of Santander UK, Santander UK Group Holdings or another Group entity, such instrument or order (as the case may be) may, among other things: (i) result in a compulsory transfer of shares or other securities or property of Santander UK, Santander UK Group Holdings or such other entity; (ii) impact on the rights of the holders of shares or other securities in Santander UK, Santander UK Group Holdings or such other entity or result in the nullification or modification of the terms and conditions of such shares or securities; or (iii) result in the delisting of the shares and/or other securities of Santander UK, Santander UK Group Holdings or such other entity in the Group. In addition, such an order may affect matters in respect of the relevant Issuer or such other entity and/or other aspects of the shares or other securities of Santander UK, Santander UK Group Holdings or such other entity in the Group, which may negatively affect the ability of Santander UK, Santander UK Group Holdings or such other entity to meet its obligations in respect of such shares or securities.
Further, amendments to the Insolvency Act 1986 and secondary legislation have introduced changes to the treatment and ranking of certain debts with the result that certain eligible deposits will rank in priority to the claims of ordinary (i.e. non-preferred) unsecured creditors in the event of an insolvency. This may negatively affect the ability of Santander UK, Santander UK Group Holdings or such other entity to meet its obligations in respect of its unsecured creditors in an insolvency scenario.
The Banking Reform Act as of 31 December 2014 amended the Banking Act to introduce a UK "bail-in power". On 6 May 2014, the Council adopted the BRRD, which contains a similar bail-in power and requires EU Member States to provide resolution authorities with the power to write down the claims of unsecured creditors of a failing institution and to convert unsecured claims to equity (subject to certain parameters). The UK Government decided to implement the BRRD bail-in power from 1 January 2015. The new PRA and FCA rules and supervisory statements took effect from 19 January 2015, with the exception of the rules that require a contractual clause recognising bail-in powers in foreign law liabilities. These rules were phased in, with the first phase, which applies to debt instruments, having commenced on 19 February 2015. The second phase, which applies to all other relevant liabilities commenced on 1 January 2016.
The UK bail-in power is an additional power available to the UK resolution authorities under the special resolution regime provided for in the Banking Act to enable them to recapitalise a failed institution by allocating losses to such institution's shareholders and unsecured creditors subject to the rights of such shareholders and unsecured creditors to be compensated under a bail-in compensation order, which is based on the principle that such creditors should receive no less favourable treatment than they would have received had the bank entered into insolvency immediately before the coming into effect of the bailin power. The bail-in power includes the power to cancel or write down (in whole or in part) certain liabilities or to modify the terms of certain contracts for the purposes of reducing or deferring the liabilities of a relevant institution under resolution and the power to convert certain liabilities into shares (or other instruments of ownership) of the relevant institution. The conditions for use of the UK bail-in power are generally that (i) the regulator determines the relevant institution is failing or likely to fail; (ii) it is not reasonably likely that any other action can be taken to avoid such a relevant institution's failure; and (iii) the relevant UK resolution authority determines that it is in the public interest to exercise the bail-in power. Certain liabilities are excluded from the scope of the bail-in powers, including liabilities to the extent that they are secured. The Notes would be subject to such powers.
According to the Banking Act, as well as similar principles in the BRRD, the relevant UK resolution authority should have regard to the insolvency treatment principles when exercising the UK bail-in power. The insolvency treatment principles are that (i) the exercise of the UK bail-in power should be consistent with treating all liabilities of the relevant bank in accordance with the priority that they would enjoy on a liquidation and (ii) any creditors who would have equal priority on a liquidation should bear losses on an equal footing with each other. HM Treasury may, by order, specify further matters or principles to which the relevant UK resolution authority must have regard when exercising the UK bail-in power. These principles may be specified in addition to, or instead of, the insolvency treatment principles. If the relevant UK resolution authority departs from the insolvency treatment principles when exercising the UK bail-in power, it must report to the Chancellor of the Exchequer stating the reasons for its departure.
The bail-in power under the Banking Act and the BRRD may potentially be exercised in respect of any unsecured debt securities issued by a financial institution under resolution or by a relevant member of the Group, regardless of when they were issued. Accordingly, the bail-in power under the Banking Act and the BRRD could be exercised in respect of the Group's debt securities. The Group expects that public financial support would only be used as a last resort after having assessed and exploited, to the maximum extent practicable, the resolution tools including the bail-in tool, and the occurrence of circumstances in which bail-in powers would need to be exercised in respect of the Group would likely have a negative impact on the Group's business.
The BRRD also contains a mandatory write down power which requires EU Member States to grant powers to resolution authorities to recapitalise institutions and/or their EEA parent holding companies that are at the point of non-viability by permanently writing down Tier 1 and Tier 2 capital instruments issued by such institutions and/or their EEA parent holding companies, or converting those capital instruments into shares. The mandatory write down provision has been implemented in the UK through the Banking Act (or other instruments of ownership). Before taking any form of resolution action or applying any resolution power set out in the BRRD, the UK resolution authorities have the power (and are obliged when specified conditions are determined to have been met) to write down, or convert Tier 1 and Tier 2 capital instruments issued by the relevant institution into CET1 capital instruments before, or simultaneously with, the entry into resolution of the relevant entity. These measures could be applied to certain of the Group's debt securities. The occurrence of circumstances in which write-down powers would need to be exercised in respect of Santander UK or Santander UK Group Holdings would be likely to have a negative impact on the Group's business.
In contrast to the creditor protections afforded in the event of the bail-in powers being exercised, holders of capital instruments will not be entitled to the "no creditor worse off" protections under the Banking Act in the event that their capital instruments are written down or converted to equity under the mandatory writedown tool (unless the mandatory write-down tool were to be used alongside a bail-in).
Furthermore, in circumstances where capital instruments are converted into equity securities by application of the mandatory write-down tool, those equity securities may be subjected to the bail-in powers in resolution, resulting in their cancellation, significant dilution or transfer away from the investors therein.
In addition, the BRRD provides for resolution authorities to have the power to require institutions and groups to make structural changes to ensure legal and operational separation of "critical functions" from other functions where necessary, or to require institutions to limit or cease existing or proposed activities in certain circumstances. As a result of changes to the PRA Rulebook made to implement the BRRD, each Issuer is now required to identify such "critical functions" as part of its resolution and recovery planning. If used in respect of the Group, these ex ante powers could have a negative impact on the Group's business.
The Group is responsible for contributing to compensation schemes in the UK in respect of banks and other authorised financial services firms that are unable to meet their obligations to customers
In the UK, the Financial Services Compensation Scheme ("FSCS") was established under FSMA and is the UK's statutory fund of last resort for customers of authorised financial services firms. The FSCS can pay compensation to customers if a PRA-authorised or FCA-authorised firm is unable, or likely to be unable, to pay claims against it (for instance, an authorised bank is unable to pay claims by depositors). The FSCS is funded by levies on firms authorised by the PRA or the FCA (i.e. participant firms), including Santander UK and other members of the Group.
Following the default of a number of authorised financial services firms since 2008, the FSCS borrowed funds totalling approximately £18 billion from HM Treasury to meet the compensation costs for customers of those firms. It is expected that the substantial majority of the principal should be repaid from funds the FSCS levies from asset sales, surplus cash flow or other recoveries in relation to assets of the firms that defaulted. However, the FSCS estimates that the assets of these failed institutions are insufficient, and, to the extent that there remains a shortfall, the FSCS is recovering this shortfall by levying firms authorised by the PRA or the FCA in instalments. The first instalment was in scheme year 2013/14, and the Group made a first capital contribution in August 2013. The second instalment was in scheme year 2014/15, and the Group made a second capital contribution in August 2014. For the year ended 31 December 2016, the Group charged £34 million to the income statement in respect of the costs of the FSCS. For the year ended 31 December 2017, its contribution decreased and it charged £1 million to the income statement in respect of the costs of the FSCS.
The FSCS also has the power to impose "management expenses in respect of relevant schemes levy" ("MERS Levy") in relation to its potential role as agent of other compensation schemes. The FSCS may impose a MERS Levy on participant firms to meet expenses it incurs in its role as agent.
In the event that the FSCS raises further funds from participant firms or increases the levies to be paid by such firms or the frequency at which the levies are to be paid, the associated cost to the Group may have a material adverse effect on the Group's operating results, financial condition and prospects. Since 2008, measures taken to protect the depositors of deposit-taking institutions involving the FSCS, such as the borrowing from HM Treasury mentioned above, have resulted in a significant increase in the levies made by the FSCS on the industry and such levies may continue to go up if similar measures are required to protect depositors of other institutions. In addition, following amendments to the preferred credit status of depositors that came into force on 31 December 2014, the FSCS stands in the place of depositors of a failing institution and has preferred status over an institution's other creditors.
Regulatory reform initiatives in the UK and internationally may result in further changes to the FSCS, which could result in additional costs and risks for the Group. For instance, in July 2013, the Council announced its intention that revisions to the EU Deposit Guarantee Scheme Directive should be adopted by the end of 2013. The recast EU Deposit Guarantee Scheme Directive (the "DGSD"), which was published in the Official Journal on 12 June 2014 and entered into force on 2 July 2014, introduced a tighter definition of deposits and includes a requirement that the Deposit Guarantee Scheme pay customers within a week and a requirement that banks must be able to provide information on the aggregated deposits of a depositor. These revisions are likely to affect the methodology employed by the FSCS for determining levies on institutions. In addition, the DGSD also required EU Member States to ensure that by 3 July 2014 the available financial means of deposit guarantee schemes reach a minimum target level of 0.8 per cent. of the covered deposits of their members and requires deposit guarantee schemes to be ex-ante funded. Between April and July 2015, the PRA published its final rules implementing the DGSD, most of which took effect on 3 July 2015. The final rules enable the FSCS to use the existing bank levy to meet the ex-ante funding requirements in the DGSD. Changes as a result of this may affect the profitability of members of the Group required to contribute to the FSCS.
FSCS levies are collected by the FCA as part of a single payment by firms covering the FCA, the PRA, the FOS and the FSCS fees. It is possible that future policy of the FSCS and future levies on the firms authorised by the FCA or PRA may differ from those at present and that this could lead to a period of some uncertainty for Group entities. In addition, it is possible that other jurisdictions where the Group operates could introduce or amend their similar compensation, contributory or reimbursement schemes. As a result of any such developments, the Group may incur additional costs and liabilities which may adversely affect the Group's operating results, financial condition and prospects. Recent amendments to the FSCS rules, the majority of which came into effect on 1 April 2018, do not affect the FSCS funding arrangements in a material way.
The Group may fail to detect or prevent money laundering and other financial crime activities due to not correctly identifying the Group's financial crime risks and failing to implement effective controls to mitigate those risks. This could expose the Group to heavy fines, additional regulatory scrutiny, increased liability and reputational risk
The Group may fail to detect or prevent money laundering and other financial crime activities due to not correctly identifying the Group's financial crime risks and failing to implement effective controls to mitigate those risks. This could expose the Group to heavy fines, additional regulatory scrutiny, increased liability and reputational risk. The Group is obligated to comply with applicable AML, anti-bribery and corruption, anti-terrorism, sanctions and other laws and regulations in the jurisdictions in which the Group operates. These laws and regulations require the Group, among other things, to conduct full customer due diligence in respect of sanctions and politically-exposed person screening, keep the Group's customer, account and transaction information up to date and implement effective financial crime policies and procedures detailing what is required from those responsible. The Group's requirements also include financial crime training for the Group's staff, reporting suspicious transactions and activity to appropriate law enforcement following full investigation by the Suspicious Activity Reporting Unit.
Financial crime has become the subject of enhanced regulatory scrutiny and supervision by regulators globally. AML, anti-bribery and corruption and sanctions, laws and regulations are increasingly complex and detailed and have become the subject of enhanced regulatory supervision, requiring improved systems, sophisticated monitoring and skilled compliance personnel.
The Group has developed policies and procedures aimed at detecting and preventing the use of the Group's banking network for money laundering and financial crime related activities. These require the implementation and embedding within the business of effective controls and monitoring which requires ongoing changes to systems and operational activities. Financial crime is continually evolving, and the expectation of regulators is increasing. This requires similarly proactive and adaptable responses from the Group so that the Group is able to deter threats and criminality effectively. Even known threats can never be fully eliminated, and there will be instances where the Group may be used by other parties to engage in money laundering and other illegal or improper activities. In addition, the Group relies heavily on the Group's staff to assist it by spotting such activities and reporting them, and the Group's staff have varying degrees of experience in recognising criminal tactics and understanding the level of sophistication of criminal organisations. Where the Group outsources any of its customer due diligence, customer screening or anti financial crime operations, the Group remains responsible and accountable for full compliance and any breaches. If the Group is unable to apply the necessary scrutiny and oversight there remains a risk of regulatory breach.
If the Group is unable to fully comply with applicable laws, regulations and expectations, the Group's regulators and relevant law enforcement agencies have the ability and authority to impose significant fines and other penalties on the Group, including requiring a complete review of the Group's business systems, day to day supervision by external consultants and ultimately the revocation of the Group's banking licence.
The reputational damage to the Group's business and global brand would be severe if the Group was found to have breached AML, anti-bribery and corruption or sanctions requirements. The Group's reputation could also suffer if the Group is unable to protect its customers or its business from being used by criminals for illegal or improper purposes.
In addition, while the Group reviews its relevant counterparties' internal policies and procedures with respect to such matters, the Group, to a large degree, relies upon its relevant counterparties to maintain and properly apply their own appropriate AML procedures. Such measures, procedures and compliance may not be completely effective in preventing third parties from using the Group's (and its relevant counterparties') services as a conduit for money laundering (including illegal cash operations) without the Group's (or its relevant counterparties') knowledge. If the Group is associated with, or even accused of being associated with, or become a party to, money laundering, then its reputation could suffer and/or the Group could become subject to fines, sanctions and/or legal enforcement (including being added to "black lists" that would prohibit certain parties from engaging in transactions with the Group), any one of which could have a material adverse effect on its operating results, financial condition and prospects. Any such risks could have a material adverse effect on the Group's operating results, financial condition and prospects.
The tax and other assessment regimes to which the Group's customers and the Group is subject are regularly reformed, or subject to proposed reforms. Such reforms include changes in the rate of assessments and, occasionally, enactment of temporary taxes, the proceeds of which may be earmarked for designated governmental purposes. The effects of these changes and any other changes that result from enactment of additional tax reforms have not been, and cannot be, quantified and there can be no assurance that these reforms will not, once implemented, have an adverse effect upon the Group's business. Furthermore, such changes may produce uncertainty in the financial system, increasing the cost of borrowing and contributing to the increase in the Group's non-performing credit portfolio.
On 14 February 2013, the European Commission published a proposal (the "Commission Proposal") for a Directive for a common system of financial transactions tax ("FTT") in Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia (the "Participating Member States"). However, Estonia has since stated that it will not participate. If the Commission's Proposal was adopted, the FTT would be a tax primarily on "financial institutions" (which would include each Issuer) in relation to "financial transactions" (which would include the conclusion or modification of derivative contracts and the purchase and sale of financial instruments).
Under the Commission's proposal, the FTT could apply in certain circumstances to persons both within and outside of the Participating Member States. Generally it would apply to certain dealings in securities where at least one party to the transaction is a financial institution and at least one party is established in a Participating Member State. A financial institution may be, or may be deemed to be, "established" in a Participating Member State in a broad range of circumstances, including (i) by transacting with a person established in a Participating Member State or (ii) where the financial instrument which is subject to the dealings is issued in a Participating Member State. Whilst the UK is not a Participating Member State, the Commission's Proposal is broad and as such may impact transactions completed by financial institutions operating in non-Participating Member States.
The FTT may give rise to tax liabilities for Santander UK or Santander UK Group Holdings with respect to certain transactions (including concluding swap transactions and/or purchases or sales of securities (such as authorised investments)) if it is adopted based on the Commission's Proposal. Any such tax liabilities may reduce amounts available to Santander UK or Santander UK Group Holdings to meet their obligations under the Notes and may result in investors receiving less interest or principal than expected. To the extent that such liabilities may arise at a time when winding-up proceedings have been commenced in respect of Santander UK or Santander UK Group Holdings, such liabilities may be regarded as an expense of the liquidation and, as such, be payable out of the floating charge assets of the relevant Issuer (and its general estate) in priority to the claims of Noteholders and other secured creditors. It should also be noted that the FTT could be payable in relation to relevant transactions by investors in respect of the Notes (including secondary market transactions) if the conditions for a charge to arise are satisfied and the FTT is adopted based on the Commission's Proposal. Primary market transactions referred to in Article 5(c) of Regulation (EC) No 1287/2006 are expected to be exempt.
However, the Commission's Proposal remains subject to negotiation between Participating Member States. The Commission's Proposal may therefore be altered prior to any implementation, the timing of which remains unclear. Additional EU Member States may decide to participate. The Group is monitoring developments and any likely impact on the Group. Prospective holders of the notes are advised to seek their own professional advice in relation to the FTT.
Santander UK provides retirement benefits for many of the Group's former and current employees in the UK through a number of defined benefit pension schemes established under trust. Santander UK is the principal employer under these schemes, but it has only limited control over the rate at which it pays into such schemes. Under the UK statutory funding requirements employers are usually required to contribute to the schemes at the rate they agree with the scheme trustees, although if they cannot agree, the rate can be set by the Pensions Regulator. The scheme trustees may, in the course of discussions about future valuations, seek higher employer contributions. The scheme trustees' power in relation to the payment of pension contributions depends on the terms of the trust deed and rules governing the pension schemes.
The Pensions Regulator has the power to issue a financial support direction to companies within a group in respect of the liability of employers participating in the UK defined benefit pension schemes where that employer is a service company, or is otherwise "insufficiently resourced" (as defined for the purposes of the relevant legislation). As some of the employers within the Group are service companies, if they become insufficiently resourced and no suitable mitigating action is undertaken, other companies within the Group which are connected with or an associate of those employers are at risk of a financial support direction in respect of those employers' liabilities to the defined benefit pension schemes in circumstances where the Pensions Regulator properly considers it reasonable to issue one. Such a financial support direction could require the companies to guarantee or provide security for the pension liabilities of those employers, or could require additional amounts to be paid into the relevant pension schemes in respect of them.
The Pensions Regulator can also issue contribution notices if it is of the opinion that an employer has taken actions, or failed to take actions, deliberately designed to avoid meeting its pension promises or which are materially detrimental to the scheme's ability to meet its pension promises. A contribution notice can be moved to any company that is connected with or an associate of such employer in circumstances where the Regulator considers it reasonable to issue. The risk of a contribution notice being imposed may inhibit the Group's freedom to restructure or to undertake certain corporate activities.
Should the value of assets to liabilities in respect of the defined benefit schemes operated by Santander UK record a deficit, due to a reduction in the value of the pension fund assets (depending on the performance of financial markets) and/or an increase in the pension fund liabilities due to changes in legislation mortality assumptions, discount rate assumptions, inflation, the expected rate of return on scheme assets, or other factors, or there is a change in the actual or perceived strength of the employer's covenant, this could result in Santander UK having to make increased contributions to reduce or satisfy the deficits which would divert resources from use in other areas of its business and reduce its capital resources. While the Group can control a number of the above factors, there are some over which it has no or limited control. Although the trustees of the defined benefit pension schemes are obliged to consult with Santander UK before changing the pension schemes' investment strategy, the trustees have the final say and ultimate responsibility for investment strategy rests with them. The Group's principal defined pension scheme is the Santander (UK) Group Pension Scheme and its corporate trustee is Santander (UK) Group Pension Scheme Trustee Limited (the "Pension Scheme Trustee"), a wholly-owned subsidiary of Santander UK. As at 31 December 2017, the Pension Scheme Trustee had 13 directors, comprising six directors appointed by Santander UK and seven member-elected directors. Investment decisions are delegated by the Pension Scheme Trustee to a common investment fund, managed by Santander (CF) Trustee Limited, a private limited company owned by the Santander (CF) Trustee directors, with up to four appointed by Santander UK and up to three by the Pension Scheme Trustee. The Pension Scheme Trustee directors' principal duty, within the investment powers delegated to them, is to act in the best interest of the members of the Group Pension Scheme and not that of Santander UK. Any increase in the Group's pension liabilities and obligations could have a material adverse effect on the Group's operating results, financial condition and prospects.
The ongoing changes in the UK supervision and regulatory regime and particularly the implementation of the ICB's recommendations may require Santander UK to make changes to its structure and business which could have an impact on its pension schemes or liabilities. For a discussion of the ICB's recommendations, see the risk factor entitled "The Group is subject to substantial regulation and governmental oversight which could adversely affect the Group's business and operations".
Maintaining a positive reputation is critical to the Group attracting and maintaining customers, investors and employees and conducting business transactions with counterparties. Damage to the reputation of the Group or Banco Santander (as the majority shareholder in the Group), the reputation of affiliates operating under the "Santander" brand or any of the Group's other brands could therefore cause significant harm to the Group's business and prospects. Harm to the Group's reputation can arise directly or indirectly from numerous sources, including, among others, employee misconduct, litigation, failure to deliver minimum standards of service and quality, compliance failures, breach of legal or regulatory requirements, unethical behaviour (including adopting inappropriate sales and trading practices), and the activities of customers and counterparties. Further, negative publicity regarding the Group, whether or not true, may result in harm to the Group's operating results, financial condition and prospects.
Actions by the financial services industry generally or by certain members of, or individuals in, the industry can also affect the Group's reputation. For example, the role played by financial services firms in the financial crisis has caused public perception of the Group and others in the financial services industry to decline.
The Group could suffer significant reputational harm if the Group fails to identify and manage potential conflicts of interest properly. The failure to adequately address, or the perceived failure to adequately address, conflicts of interest could affect the willingness of customers to deal with the Group, or give rise to litigation or enforcement actions against the Group. Therefore, there can be no assurance that conflicts of interest will not arise in the future that could cause material harm to the Group.
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses. Due to the inherent uncertainty in making estimates, actual results reported in future periods may be based upon amounts which differ from those estimates. Estimates, judgements and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. The accounting policies deemed critical to the Group's results and financial condition, based upon materiality and significant judgements and estimates, include impairment of loans and advances, valuation of financial instruments, provision for conduct remediation and pensions.
The valuation of financial instruments measured at fair value can be subjective, in particular where models are used which include unobservable inputs. Given the uncertainty and subjectivity associated with valuing such instruments it is possible that the results of the Group's operations and financial condition could be materially misstated if the estimates and assumptions used prove to be inaccurate.
If the judgement, estimates and assumptions the Group uses in preparing the Group's consolidated financial statements are subsequently found to be incorrect, there could be a material effect on the Group's results of operations and a corresponding effect on the Group's funding requirements and capital ratios.
Disclosure controls and procedures over financial reporting are designed to provide reasonable assurance that information required to be disclosed by the Group entities, such as Santander UK and Abbey National Treasury Services plc, in reports filed or submitted under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarised and reported within the time periods specified in the U.S. Securities and Exchange Commission's rules and forms. The Group adopted the Committee of Sponsoring Organisations of the Treadway Commission internal control – integrated framework with effect from 15 December 2014, replacing the previous framework. The revised framework is designed to recognise the many changes in business and operating environments since the issuance of the original framework and is intended to broaden and enhance the application of controls over financial reporting.
There are however inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
Consequently, the Group's business is exposed to risk from potential non-compliance with policies, employee misconduct or negligence and fraud, which could result in regulatory sanctions and serious reputational or financial harm. In recent years, a number of multinational financial institutions have suffered material losses due to the actions of "rogue traders" or other employees. It is not always possible to deter employee misconduct and the precautions the Group takes to prevent and detect this activity may not always be effective. As a result of the inherent limitations in the control system, misstatements due to error or fraud may occur and not be detected.
The accounting standard setters and other regulatory bodies periodically change the financial accounting and reporting standards that govern the preparation of the Group's consolidated financial statements. These changes can materially impact how the Group records and reports the Group's financial condition and results of operations. In some cases, the Group could be required to apply a new or revised standard retroactively, resulting in the restatement of prior period financial statements.
Third party providers and certain affiliates provide key components of the Group's business infrastructure such as loan and deposit servicing systems, back office and business process support, information technology production and support, internet connections and network access. Relying on these third party providers and affiliates is a source of operational and regulatory risk to the Group, including with respect to security breaches affecting such parties. The Group is also subject to risk with respect to security breaches affecting its third party providers and affiliates, and other parties that interact with these parties. As the Group's interconnectivity with these third parties and affiliates increases, it increasingly faces the risk of operational failure with respect to the Group's systems. The Group may be required to take steps to protect the integrity of its operational systems, thereby increasing its operational costs and potentially decreasing customer satisfaction. In addition, any problems caused by these third parties or affiliates, including as a result of them not providing their services for any reason, or performing their services poorly, could adversely affect the Group's ability to deliver products and services to customers and otherwise conduct its business, which could lead to reputational damage and regulatory investigations and intervention. Replacing these third party vendors or affiliates could also entail significant delays and expense. Further, the operational and regulatory risk that the Group face as a result of these arrangements may be increased to the extent that it restructures such arrangements. Any restructuring could involve significant expense to the Group and entail significant delivery and execution risk which could have a material adverse effect on the Group's business, operations and financial condition.
The Group and the Group's subsidiaries and affiliates have entered into a number of services agreements pursuant to which the Group renders services, such as administrative, accounting, finance, treasury, legal services and others. The Group relies upon certain outsourced services (including information technology support, maintenance and consultancy services) provided by certain other members of the Banco Santander Group.
English law applicable to public companies and financial groups and institutions, as well as the articles of association of entities in the Group, provide for several procedures designed to ensure that the transactions entered into, with or among the Group's financial subsidiaries, do not deviate from prevailing market conditions for those types of transactions, including the requirement that the Group's board of directors approve such transactions. The Group is likely to continue to engage in transactions with the Group's subsidiaries or affiliates (including the Group's controlling shareholder). Future conflicts of interest between the Group and any of the Group's subsidiaries or affiliates, or among the Group's subsidiaries and affiliates, may arise, which conflicts are not required to be and may not be resolved in the Group's favour.
There may be less publicly available information about Santander UK and Santander UK Group Holdings than is regularly published about companies in the U.S. Issuers of securities in the UK are required to make public disclosures that are different from, and that may be reported under presentations that are not consistent with, disclosures required in countries with a relatively more developed capital market, including the U.S. While Santander UK's subsidiary, Abbey National Treasury Services plc, and Santander UK Group Holdings' subsidiary, Santander UK, are subject to the periodic reporting requirements of the Exchange Act, the Group is not subject to the same disclosure requirements in the U.S. as a domestic U.S. registrant under the Exchange Act, including the requirements to prepare and issue quarterly reports, or the proxy rules applicable to domestic U.S. registrants under Section 14 of the Exchange Act or the insider reporting and short-swing profit rules under Section 16 of the Exchange Act. Accordingly, the information about Santander UK and Santander UK Group Holdings available will not be the same as the information available to holders of securities of a U.S. company and may be reported in a manner that is not familiar.
Each Issuer is a public limited company registered in England and Wales. All of the Issuers' directors live outside the U.S. As a result, it may not be possible to serve process on such persons in the U.S. or to enforce judgments obtained in U.S. courts against them or an Issuer based on the civil liability provisions of the U.S. federal securities laws or other laws of the U.S. or any state thereof.
In this context the following specific risks have been identified as areas for focus:
The relevant Issuer may issue Notes in different series with different terms in amounts that are to be determined. Such Notes may be unlisted or listed on a recognised stock exchange and there can be no assurance that an active trading market will develop for any series of Notes. There can also be no assurance regarding the ability of Noteholders to sell their Notes or the price at which such holders may be able to sell their Notes. If a trading market were to develop, the Notes could trade at prices that may be higher or lower than the initial offering price and this may result in a return that is greater or less than the interest rate on the Notes, depending on many factors, including:
the time remaining to the majority of the Notes;
the outstanding amount of the Notes;
In addition, certain Notes have a more limited trading market and experience more price volatility because they were designed for specific investment objectives or strategies. There may be a limited number of buyers when an investor decides to sell such Notes. This may affect the price an investor receives for such Notes or the ability of an investor to sell such Notes at all.
If the Notes are redeemable at the option of the relevant Issuer (including, if applicable, following a Loss Absorption Disqualification Event or Regulatory Capital Event (if specified in the applicable Final Terms) or a Tax Event), or are otherwise subject to mandatory redemption, the relevant Issuer may (in the case of optional redemption) or must (in the case of mandatory redemption) choose to redeem such Notes at times when prevailing interest rates may be relatively low. Accordingly, an investor generally will not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as that of the Notes. Furthermore, during any period when the relevant Issuer may elect to redeem Notes, or during which there is an actual or perceived increased likelihood that the relevant Issuer may elect to redeem the Notes, the market value of those Notes generally will not rise substantially above the price at which they can be redeemed. This also may be true prior to any redemption period.
The yield to maturity of each class of Notes will depend mostly on: (i) the amount and timing of the repayment of principal on the Notes; and (ii) the price paid by the Noteholders of each class. The yield to maturity of the Notes may be adversely affected by a higher or lower than anticipated rate of redemptions on the Notes (including, if applicable, in the case of redemption following a Loss Absorption Disqualification Event, Regulatory Capital Event or Tax Event).
The Notes have not been, and will not be, registered under the Securities Act or any other securities laws. Accordingly, the Notes are subject to certain restrictions on the resale and other transfer thereof as set forth under "Subscription and Sale and Transfer and Selling Restrictions". As a result of such restrictions, the relevant Issuer cannot be certain of the existence of a secondary market for the Notes or the liquidity of such market if one develops. Consequently, a Noteholder must be able to bear the economic risk of an investment in such Notes for an indefinite period of time.
The relevant Issuer may be a party to contracts with a number of other third parties that have agreed to perform services in relation to the Notes. For example, a paying agent and the agent bank have agreed to provide payment and calculation services in connection with the Notes; and Euroclear and Clearstream, Luxembourg have in respect of Bearer Global Notes in NGN form, agreed, inter alia, to accept such Bearer Global Notes as eligible for settlement and to properly service the same, and to maintain up to date records in respect of the total amount outstanding of such Bearer Global Notes in NGN form. In the event that any relevant third party was to fail to perform its obligations under the respective agreements to which it is a party, the Noteholders may be adversely affected.
Santander UK Group Holdings is a holding company and the Notes issued by it will be structurally subordinated to the claims of the creditors of its subsidiaries.
Santander UK Group Holdings is a holding company that currently has no significant assets other than its investment in Santander UK and its other subsidiaries within the Group. As a holder of ordinary shares in such subsidiaries, Santander UK Group Holdings' right to participate in the assets of its subsidiaries in the event of a liquidation of a subsidiary will be subject to the prior claims of such subsidiary's creditors and preference shareholders. Accordingly, if any of Santander UK Group Holdings' subsidiaries were to be wound up, liquidated or dissolved, (i) the holders of the Notes would have no right to proceed against the assets of such a subsidiary, and (ii) the liquidator of the subsidiary would first apply the assets of the subsidiary to settle the claims of the creditors of such subsidiary before Santander UK Group Holdings would be entitled to receive any distributions.
Santander UK Group Holdings' obligation to make payments on the Notes issued by it is solely an obligation of Santander UK Group Holdings and will not be guaranteed by any of its subsidiaries.
In addition, as a holding company, Santander UK Group Holdings' ability to make payments depends entirely upon the receipt of dividends, distributions or advances from or repayment of any amounts lent to its subsidiaries. The ability of each subsidiary to pay dividends or such other amounts will be subject to their profitability, their financial condition, to applicable laws and regulations and to the evolution of their capital adequacy position.
In relation to any issue of Notes which have denominations consisting of a minimum Specified Denomination plus one or more higher integral multiples of another smaller amount, it is possible that such Notes may be traded in amounts in excess of the minimum Specified Denomination that are not integral multiples of such minimum Specified Denomination. In such a case a holder who, as a result of trading such amounts, holds an amount which is less than the minimum Specified Denomination in his account with the relevant clearing system would not be able to sell the remainder of such holding without first purchasing a principal amount of Notes at or in excess of the minimum Specified Denomination such that its holding amounts to a Specified Denomination. Further, a holder who, as a result of trading such amounts, holds an amount which is less than the minimum Specified Denomination in his account with the relevant clearing system at the relevant time may not receive a definitive Note in respect of such holding (should definitive Notes be printed) and would need to purchase a principal amount of Notes such that its holding amounts to a Specified Denomination.
If definitive Notes are issued, holders should be aware that definitive Notes which have a denomination that is not an integral multiple of the minimum Specified Denomination may be illiquid and difficult to trade.
The "Terms and Conditions of the Notes" are based on English law in effect as at the date of issue of the Notes. No assurance can be given as to the impact of any possible judicial decision or change to English law or administrative practice after the date of issue of the Notes.
The Terms and Conditions of the Notes may be modified and certain decisions regarding the Notes may be made without the knowledge and consent of individual Noteholders.
The Trust Deed constituting the Notes contains provisions for calling meetings of Noteholders to consider matters affecting their interests generally. These provisions permit defined majorities to bind all Noteholders including Noteholders who did not attend and vote at the relevant meeting and Noteholders who voted in a manner contrary to the majority. The Trust Deed constituting the Notes also provides that, subject to the prior consent of the Regulator being obtained (to the extent that such consent is required), the Trustee may (except as set out in the Trust Deed), without the consent of Noteholders, agree to certain modifications of, or to the waiver or authorisation of any breach or proposed breach of, any of the provisions of the Notes or to the substitution of another company as principal debtor under the Notes in place of the relevant Issuer in the circumstances described in Condition 14.
The holders of the Dated Subordinated Notes and the Senior Notes of Santander UK Group Holdings waive any rights of set-off, compensation and retention in relation to such Notes insofar as permitted by applicable law.
Investors should be aware that if LIBOR, or any other benchmark, were discontinued or otherwise unavailable, the rate of interest on Floating Rate Notes or Fixed Rate Reset Notes (as applicable) which are linked to or which reference such benchmark will be determined for the relevant period by the fallback provisions applicable to such Notes. The Terms and Conditions of the Notes provide for certain fallback arrangements in the event that a published benchmark, such as LIBOR, (including any page on which such benchmark may be published (or any successor service)) becomes unavailable. These fallback arrangements may require or result in adjustments to the interest calculation provisions of the Terms and Conditions of the Notes by an Independent Adviser or the Issuer (as applicable). No consent of the Noteholders shall be required in connection with effecting any adjustments to the interest calculation provisions of the Terms and Conditions of the Notes. Any such adjustment could have unexpected commercial consequences and there can be no assurance that, due to the particular circumstances of each Noteholder, any such adjustment will be favourable to each Noteholder. In addition, if an amendment is made to the Notes to change the reference rate/benchmark from LIBOR, or any other benchmark, to an alternative base rate, such amendment could have adverse tax consequence to U.S. holders. In certain circumstances, the ultimate fallback for a particular Interest Period or Reset Period (as applicable) may result in the effective application of a fixed rate for Floating Rate Notes or Fixed Rate Reset Notes (as applicable) based on the rate of interest that was determined for the last preceding Interest Period or Reset Period (as applicable).
See also "Future unavailability or discontinuance of certain benchmark rates (for example LIBOR or EURIBOR) may adversely affect the value of and return on the Notes which are linked to or which reference any such benchmark rate" above and Condition 4(b)(iii) in relation to Fixed Rate Reset Notes and Conditions 4(c)(ii)(B)(I) and (II) in relation to Floating Rate Notes.
As described in the risk factor entitled "Bail-in and write down powers under the Banking Act and the BRRD may adversely affect the Group's business and the value of securities it may issue" above, the BRRD bail-in power has been implemented in the UK. The UK bail-in power is an additional power available to the UK resolution authorities under the special resolution regime provided for in the Banking Act to enable them to recapitalise a failed institution by allocating losses to such institution's shareholders and unsecured creditors subject to the rights of such shareholders and unsecured creditors to be compensated under a bail-in compensation order, which is based on the principle that such creditors should receive no less favourable treatment than they would have received had the bank entered into insolvency immediately before the coming into effect of the bail-in power. The bail-in power includes the power to cancel or write down (in whole or in part) certain liabilities or to modify the terms of certain contracts for the purposes of reducing or deferring the liabilities of a relevant institution under resolution and the power to convert certain liabilities into shares (or other instruments of ownership) of the relevant institution.
The Senior Notes are a liability which could be cancelled, written down (in whole or in part) or converted pursuant to the exercise of the bail-in power. The exercise of the bail-in power, or any suggestion of such exercise could, therefore, materially adversely affect the rights of Noteholders, the price or value of their investment in the Senior Notes and/or the ability of the relevant Issuer to satisfy its obligations under the Senior Notes.
(ii) Early redemption of the Senior Notes is at all times at the discretion of the relevant Issuer, and an investor may not be able to reinvest the redemption proceeds at as effective a rate of return as that in respect of the Senior Notes
The Senior Notes may, subject as provided in Condition 6, be redeemed before the Maturity Date at the sole discretion of the relevant Issuer if an optional redemption right is specified in the applicable Final Terms, following a Tax Event or, if so specified in the applicable Final Terms in respect of Senior Notes issued by Santander UK Group Holdings, following a Loss Absorption Disqualification Event.
During any period when the relevant Issuer may elect to redeem the Senior Notes, or during which there is an actual or perceived increased likelihood that the relevant Issuer may elect to redeem the Senior Notes, the market value of the Senior Notes generally will not rise substantially above the price at which they can be redeemed. This also may be true prior to any redemption period.
An investor may not be able to reinvest the redemption proceeds at an effective interest rate as high as the interest rate on the Senior Notes being redeemed and may only be able to do so at a significantly lower rate. Potential investors should consider reinvestment risk in light of other investments available at that time.
With respect to a Loss Absorption Disqualification Event, as the Loss Absorption Regulations continue to be implemented in the United Kingdom and may be subject to potential future amendments, the Issuers are currently unable to predict whether the Senior Notes issued by Santander UK Group Holdings are likely to be, fully or partially, excluded from Santander UK Group Holdings' or the Group's minimum requirements for (A) own funds and eligible liabilities and/or (B) loss absorbing capacity instruments, in each case as such minimum requirements are applicable to Santander UK Group Holdings or to the Group. If such Senior Notes issued by Santander UK Group Holdings are to be so redeemed or there is a perception that the Senior Notes issued by Santander UK Group Holdings may be so redeemed, this may impact the market price of the Senior Notes issued by Santander UK Group Holdings. Such legislative and regulatory uncertainty could also affect the value the Senior Notes and therefore affect the trading price of the Senior Notes given the extent and impact on the Senior Notes that one or more regulatory or legislative changes could have on the Senior Notes.
(iii) Where Restrictive Events of Default are specified in the Final Terms or apply pursuant to Condition 9(c) then the Senior Notes issued by Santander UK Group Holdings will be subject to limited events of default and the remedies available thereunder are limited
In accordance with the Regulator's requirements for MREL and/or TLAC capital, the only events of default under the Terms and Conditions of the Senior Notes issued by Santander UK Group Holdings where Restrictive Events of Default apply are (i) where there is a failure to pay principal or interest for a period of 14 days or more when it otherwise becomes due and payable, or (ii) an order is made or a resolution is passed for the winding-up of Santander UK Group Holdings (other than an Approved Winding-up).
The sole remedy against Santander UK Group Holdings available to the Trustee or (where the Trustee has failed to proceed against Santander UK Group Holdings as provided in the "Terms and Conditions of the Notes") any Noteholder for recovery of amounts which have become due in respect of the Senior Notes issued by Santander UK Group Holdings where Restrictive Events of Default apply will be the institution of proceedings for the winding-up of Santander UK Group Holdings and/or proving in such winding-up and/or claiming in the liquidation of Santander UK Group Holdings. Otherwise, the Trustee and the Noteholders may not take any further or other action to enforce, prove or claim any such payment (which may otherwise by available in respect of Senior Notes issued by Santander UK Group Holdings where Non-Restrictive Events of Default apply by virtue of Restrictive Events of Default not being specified in the Final Terms or pursuant to Condition 9(c)), including, in the case of a failure to pay interest, any action to accelerate a repayment of the principal amount of such Senior Notes.
If an order is made by the competent court or resolution passed for the winding-up Santander UK Group Holdings (other than an Approved Winding-up), the Trustee at its discretion may, and if so requested by Noteholders of at least one quarter in principal amount of the Senior Notes issued by Santander UK Group Holdings where Restrictive Events of Default apply then outstanding or if so directed by an Extraordinary Resolution shall (subject in each case to Condition 9(b)(iv)), give notice to Santander UK Group Holdings (or, as applicable, the liquidator) that such Senior Notes issued by Santander UK Group Holdings are, and they shall accordingly forthwith become, immediately due and repayable at the amount equal to their principal amount and any accrued and unpaid interest.
(i) The Dated Subordinated Notes are unsecured and subordinated obligations of Santander UK Group Holdings. On a winding-up of Santander UK Group Holdings, investors in the Dated Subordinated Notes may lose their entire investment in the Dated Subordinated Notes
Santander UK Group Holdings' payment obligations under the Dated Subordinated Notes will be unsecured and will be subordinated in the event of the winding-up of Santander UK Group Holdings (other than an Approved Winding-up) or the appointment of an administrator of Santander UK Group Holdings where the administrator has given notice that it intends to declare and distribute a dividend and, in each case, will rank junior to the claims of creditors of Santander UK Group Holdings (a) who are unsubordinated creditors of Santander UK Group Holdings; or (b) who are subordinated creditors of Santander UK Group Holdings (other than those whose claims constitute, or would but for any applicable limitation on the amount of any such capital constitute, Tier 1 capital or Tier 2 capital or whose claims rank, or are expressed to rank, pari passu with, or junior to, the claims of the holders of the Dated Subordinated Notes), and claims in respect of any subordinated indebtedness of Santander UK Group Holdings (other than indebtedness which ranks, or is expressed to rank, pari passu with or junior to the Dated Subordinated Notes). Accordingly, the assets of Santander UK Group Holdings would be applied first in satisfying all senior-ranking claims in full, and payments would be made to holders of the Dated Subordinated Notes, pro rata and proportionately with payments made to holders of any other pari passu instruments (if any), only if and to the extent that there are any assets remaining after satisfaction in full of all such senior-ranking claims. If Santander UK Group Holdings' assets are insufficient to meet all its obligations to senior-ranking and pari passu creditors, the holders of the Dated Subordinated Notes will lose all or some of their investment in the Dated Subordinated Notes.
There is no restriction on the amount of securities which Santander UK Group Holdings may issue and which rank senior to, or pari passu with, the Dated Subordinated Notes and accordingly, Santander UK Group Holdings may at any time incur, issue further debt or securities which rank senior to, or pari passu with, the Dated Subordinated Notes. Consequently there can be no assurance that the current level of senior or pari passu debt of Santander UK Group Holdings will not change. The issue of any such securities may reduce the amount (if any) recoverable by Noteholders on a winding-up or administration of Santander UK Group Holdings.
If Santander UK Group Holdings' financial condition deteriorates such that there is an increased risk that Santander UK Group Holdings may be wound up or enter into administration, such circumstances can be expected to have a material adverse effect on the market price of the Dated Subordinated Notes. Investors in the Dated Subordinated Notes may find it difficult to sell their Dated Subordinated Notes in such circumstances, or may only be able to sell their Dated Subordinated Notes at a price which may be significantly lower than the price at which they purchased their Dated Subordinated Notes. In such a sale, investors may lose some or substantially all of their investment in the Dated Subordinated Notes, whether or not Santander UK Group Holdings is wound up or enters into administration.
Although the Dated Subordinated Notes may pay a higher rate of interest than comparable notes which are not subordinated, there is a real risk that an investor in the Dated Subordinated Notes will lose all or some of his investment should Santander UK Group Holdings become insolvent.
(ii) Early redemption of the Dated Subordinated Notes is at all times at the discretion of Santander UK Group Holdings, and an investor may not be able to reinvest the redemption proceeds at as effective a rate of return as that in respect of the Dated Subordinated Notes
The Dated Subordinated Notes may, subject as provided in Condition 6, be redeemed before the Maturity Date at the sole discretion of Santander UK Group Holdings if an optional redemption right is specified in the applicable Final Terms, following a Tax Event or, if so specified in the applicable Final Terms, following a Regulatory Capital Event.
In response to letters from the European Commission concerning the Dutch rules allowing deductibility for interest payments on additional Tier 1 capital potentially being illegal state aid, on 29 June 2018, the Dutch government announced its intention to abolish the deductibility of interest payments on additional Tier 1 capital. While no similar announcements have been made in the United Kingdom, it is understood that the European Commission intends to send or may already have sent similar letters to all EU Member States with specific rules permitting deductions for interest payments on additional Tier 1 capital and/or Tier 2 capital. If as a consequence the interest payable on the Dated Subordinated Notes were to cease to be deductible, and the requirements for a redemption of the Dated Subordinated Notes upon the occurrence of a Tax Event were satisfied, Santander UK Group Holdings may be entitled to redeem the Dated Subordinated Notes in accordance with their terms.
During any period when Santander UK Group Holdings may elect to redeem the Dated Subordinated Notes, the market value of the Dated Subordinated Notes generally will not rise substantially above the price at which they can be redeemed. This also may be true prior to any redemption period.
An investor may not be able to reinvest the redemption proceeds at an effective interest rate as high as the interest rate on the Dated Subordinated Notes being redeemed and may only be able to do so at a significantly lower rate. Potential investors should consider reinvestment risk in light of other investments available at that time.
In accordance with the Regulator's requirements for Tier 2 capital, the only events of default under the Terms and Conditions of the Dated Subordinated Notes are (i) where there is a failure to pay principal or interest for a period of 14 days or more when it otherwise becomes due and payable or (ii) an order is made or a resolution is passed for the winding-up of Santander UK Group Holdings (other than an Approved Winding-up).
The sole remedy against Santander UK Group Holdings available to the Trustee or (where the Trustee has failed to proceed against Santander UK Group Holdings as provided in the "Terms and Conditions of the Notes") any Noteholder for recovery of amounts which have become due in respect of the Dated Subordinated Notes will be the institution of proceedings for the winding-up of Santander UK Group Holdings and/or proving in such winding-up and/or claiming in the liquidation of Santander UK Group Holdings. Otherwise, the Trustee and the Noteholders may not take any further or other action to enforce, prove or claim any such payment, including, in the case of a failure to pay interest, any action to accelerate a repayment of the principal amount of the Dated Subordinated Notes.
If an order is made by the competent court or resolution passed for the winding-up of Santander UK Group Holdings (other than an Approved Winding-up), the Trustee at its discretion may, and if so requested by Noteholders of at least one quarter in principal amount of the Dated Subordinated Notes then outstanding or if so directed by an Extraordinary Resolution shall (subject in each case to Condition 9(b)(iv)), give notice to Santander UK Group Holdings (or, as applicable, the liquidator) that the Dated Subordinated Notes are, and they shall accordingly forthwith become, immediately due and repayable at the amount equal to their principal amount and any accrued and unpaid interest, and the claim in respect thereof will be subject to the subordination provided for in Condition 3(b).
As described in the risk factor entitled "Bail-in and write down powers under the Banking Act and the BRRD may adversely affect the Group's business and the value of securities it may issue" above, the BRRD bail-in power has been implemented in the UK. The UK bail-in power is an additional power available to the UK resolution authorities under the special resolution regime provided for in the Banking Act to enable them to recapitalise a failed institution by allocating losses to such institution's shareholders and unsecured creditors subject to the rights of such shareholders and unsecured creditors to be compensated under a bail-in compensation order, which is based on the principle that such creditors should receive no less favourable treatment than they would have received had the bank entered into insolvency immediately before the coming into effect of the bail-in power. The bail-in power includes the power to cancel or write down (in whole or in part) certain liabilities or to modify the terms of certain contracts for the purposes of reducing or deferring the liabilities of a relevant institution under resolution and the power to convert certain liabilities into shares (or other instruments of ownership) of the relevant institution.
The Dated Subordinated Notes are a liability which could be cancelled, written down (in whole or in part) or converted pursuant to the exercise of the bail-in power. In accordance with the insolvency treatment principles described in the risk factor entitled "Bail-in and write down powers under the Banking Act and the BRRD may adversely affect the Group's business and the value of securities it may issue" above, the Dated Subordinated Notes would be amongst the first of Santander UK Group Holdings' obligations to bear losses through write-down or conversion to equity pursuant to the exercise of the bail-in power because in the event of the insolvency of Santander UK Group Holdings, the claims in respect of the Dated Subordinated Notes would rank behind all other claims other than claims in respect of Junior Securities.
The BRRD also contains a mandatory write down power which requires EU Member States to grant powers to resolution authorities to recapitalise institutions and/or their EEA parent holding companies that are at the point of non-viability by permanently writing down, inter alia, capital instruments such as the Dated Subordinated Notes, or converting those capital instruments into shares. The mandatory write down provision has been implemented in the UK through the Banking Act, and would apply to the Dated Subordinated Notes. Before, or simultaneously with, taking any form of resolution action or applying any resolution power set out in the BRRD, the UK resolution authorities have the power (and are obliged when specified conditions are determined to have been met) to write down, or convert capital instruments such as the Dated Subordinated Notes into CET1 capital instruments. These measures could be applied to the Dated Subordinated Notes.
In contrast to the creditor protections afforded in the event of the bail-in powers being exercised, holders of the Dated Subordinated Notes would not be entitled to the "no creditor worse off" protections under the Banking Act in the event that the Dated Subordinated Notes are written down or converted to equity under the mandatory write-down tool (unless the mandatory write-down tool were to be used alongside a bail-in).
Furthermore, if the Dated Subordinated Notes were to be converted into equity securities by application of the mandatory write-down tool, those equity securities may be subjected to the bail-in powers in resolution, resulting in their cancellation, significant dilution or transfer away from the investors therein. The exercise of such bail-in or write down powers, or any suggestion of such exercise could, therefore, materially adversely affect the rights of Noteholders, the price or value of their investment in any Dated Subordinated Notes and/or the ability of Santander UK Group Holdings to satisfy its obligations under the Dated Subordinated Notes.
(v) The gross-up obligation under the Dated Subordinated Notes is limited only to payments of interest and not to payments of principal
Santander UK Group Holdings' obligation to pay additional amounts in respect of any withholding or deduction in respect of United Kingdom taxes under the terms of the Dated Subordinated Notes applies only to payments of interest due and paid under the Dated Subordinated Notes and not to payments of principal. As such Santander UK Group Holdings would not be required to pay any additional amounts under the terms of the Dated Subordinated Notes to the extent any withholding or deduction applied to payments of principal. Accordingly, if any such withholding or deduction were to apply to any payments of principal under the Dated Subordinated Notes, holders of Dated Subordinated Notes may receive less than the full amount due under the Dated Subordinated Notes, and the market value of the Dated Subordinated Notes may be adversely affected.
Investment in Fixed Rate Notes involves the risk that subsequent changes in the market interest rates may adversely affect the value of the Fixed Rate Notes.
Fixed/Floating Rate Notes may bear interest at a rate that converts from a fixed rate to a floating rate or vice versa. If the rate converts from a fixed rate to a floating rate, the spread on the Fixed/Floating Rate Notes may be less favourable than then prevailing spreads on comparable Floating Rate Notes relating to the same reference rate. In addition, the new floating rate at any time may be lower than the interest rates payable on other Notes. If the rate converts from a floating rate to a fixed rate, the fixed rate may be lower than the then prevailing interest rates payable on the Notes.
Inverse Floating Rate Notes have an interest rate equal to a fixed rate minus a rate based upon a reference rate such as the LIBOR. The market value of Inverse Floating Rate Notes typically is more volatile than the market value of other more conventional floating rate debt securities based on the same reference rate (and with otherwise comparable terms). Inverse Floating Rate Notes are more volatile because an increase in the reference rate not only decreases the interest rate payable on the Notes, but may also reflect an increase in prevailing interest rates, which may further adversely affect the market value of these Notes.
Capped Floating Rate Notes usually have an interest rate equal to the sum of a reference rate such as LIBOR and the specified margin (if any) subject to a maximum specified rate. The maximum amount of interest payable in respect of these Notes will occur when the sum of the reference rate and the specified margin (if any) equals the maximum specified rate. Investors in Capped Floating Rate Notes will therefore not benefit from any increase in the relevant reference rate which, when the specified margin is added to such reference rate, would otherwise cause such interest rate to exceed the maximum specified rate. The market value of these Notes would therefore typically fall the closer the sum of the relevant reference rate and the margin is to the maximum specified rate.
Notes with floating interest rates can be volatile investments. If they are structured to include multipliers, or caps or floors, or any combination of those features, their market value may be more volatile than those for securities that do not include these features.
The market value of Variable Interest Notes may be more volatile than for securities that do not determine the accrual of interest on the basis of an underlying reference rate. The investor may receive substantially less interest than the rate of accrual interest specified in the applicable Final Terms or no interest at all on such Variable Interest Notes.
Fixed Rate Reset Notes will initially bear interest at the Initial Rate of Interest until (but excluding) the First Reset Date. On the First Reset Date, the Second Reset Date (if applicable) and each Subsequent Reset Date (if any) thereafter, the interest rate will be reset to the sum of (i) the applicable Mid-Swap Rate, Benchmark Gilt Rate or Reference Bond Rate and (ii) the First Margin or Subsequent Margin (as applicable) as determined by the Calculation Agent on the relevant Reset Determination Date (each such interest rate, a "Subsequent Reset Rate"). The Subsequent Reset Rate for any Reset Period could be less than the Initial Rate of Interest or the Subsequent Reset Rate for prior Reset Periods and could affect the market value of an investment in the Reset Notes.
The market value of securities issued at a substantial discount or premium from their principal amount tend to fluctuate more in relation to general changes in interest rates than do prices for conventional interest-bearing securities. Generally, the longer the remaining term of the securities, the greater the price volatility as compared to conventional interest-bearing securities with comparable maturities.
The Notes of each Series will be in either bearer form or registered (or inscribed) form. Bearer Notes will be issued outside the United States in reliance on Regulation S and Registered Notes will be issued both outside the United States in reliance on the exemption from registration provided by Regulation S and within the United States in reliance on Rule 144A.
Bearer Notes having an original maturity of more than 365 days are subject to U.S. tax law requirements, and may not be offered, sold or delivered within the United States or its possessions or to a United States person, except in certain transactions permitted by U.S. tax regulations. Terms used in this paragraph have the meanings given to them by the Internal Revenue Code of 1986 and the U.S. Treasury regulations promulgated thereunder.
Each Tranche of Bearer Notes will be in bearer form and will initially be represented by either a temporary bearer global note (a "Temporary Bearer Global Note") or a permanent bearer global note (a "Permanent Bearer Global Note" and, together with the Temporary Bearer Global Note, the "Bearer Global Notes") as indicated in the applicable Final Terms, which, in either case, will:
Where the Bearer Global Notes issued in respect of any Tranche are in NGN form, the applicable Final Terms will also indicate whether or not such Bearer Global Notes are intended to be held in a manner which would allow Eurosystem eligibility. Any indication that the Bearer Global Notes are to be so held does not necessarily mean that the Notes of the relevant Tranche will be recognised as eligible collateral for Eurosystem monetary policy and intra-day credit operations by the Eurosystem either upon issue or at any times during their life as such recognition depends upon satisfaction of the Eurosystem eligibility criteria. The Common Safekeeper for NGNs will either be Euroclear or Clearstream, Luxembourg or another entity approved by Euroclear and Clearstream, Luxembourg.
In respect of each Tranche of Notes in respect of which a Temporary Bearer Global Note is issued, on and after the date (the "Exchange Date") which is 40 days after the Temporary Bearer Global Note is issued, interests in such Temporary Bearer Global Note will be exchangeable (free of charge) upon a request as described therein for either:
In each case such exchange shall be made against certification of beneficial ownership as described below, unless such certification has already been given. Purchasers in the United States and certain U.S. persons will not be able to receive definitive Bearer Notes. The holder of a Temporary Bearer Global Note will not be entitled to collect any payment of interest, principal or other amount due on or after the Exchange Date unless, upon due presentation and certification, exchange of the Temporary Bearer Global Note for an interest in a Permanent Bearer Global Note or for definitive Bearer Notes is improperly withheld or refused.
The applicable Final Terms will specify that a Permanent Bearer Global Note will be exchangeable (free of charge), in whole but not in part, for definitive Bearer Notes with, where applicable, interest coupons and talons attached upon either:
No definitive Bearer Notes will be sent by post or otherwise delivered to any location in the United States or its possessions in connection with such exchange.
The exchange of a Permanent Bearer Global Note for definitive Bearer Notes upon notice from Euroclear and/or Clearstream, Luxembourg (acting on the instructions of any holder of an interest in such Permanent Bearer Global Note) should not be expressed to be applicable in the applicable Final Terms if the Bearer Notes are issued with a minimum Specified Denomination such as €100,000 (or its equivalent in another currency) plus one or more higher integral multiples of another smaller amount such as €1,000 (or its equivalent in another currency). Furthermore, such Specified Denomination construction is not permitted in relation to any issue of Bearer Notes which is to be represented on issue by a Temporary Bearer Global Note exchangeable for definitive Bearer Notes.
For these purposes, "Exchange Event" means that:
The relevant Issuer will promptly give notice to the Noteholders in accordance with Condition 13 if an Exchange Event occurs. In the event of the occurrence of an Exchange Event, Euroclear and/or Clearstream, Luxembourg (acting on the instructions of any holder of an interest in such Permanent Bearer Global Note) or the Trustee may give notice to the Principal Paying Agent requesting exchange and, in the event of the occurrence of an Exchange Event as described in (3) above, the relevant Issuer may also give notice to the Principal Paying Agent requesting exchange. Any such exchange shall occur not later than 45 days after the date of receipt of the first relevant notice by the Principal Paying Agent.
Whilst any Bearer Note is represented by a Temporary Bearer Global Note, payments of principal, interest (if any) and any other amount payable in respect of the Notes due prior to the Exchange Date (as defined above) will be made against presentation of the Temporary Bearer Global Note (if the Temporary Bearer Global Note is not intended to be issued in NGN form) only to the extent that certification (in a form to be provided) to the effect that the beneficial owners of interests in such Bearer Note are not U.S. persons or persons who have purchased for resale to any U.S. person, as required by U.S. Treasury regulations, has been received by Euroclear and/or Clearstream, Luxembourg and Euroclear and/or Clearstream, Luxembourg, as applicable, has given a like certification (based on the certifications it has received) to the Principal Paying Agent.
Payments of principal, interest (if any) or any other amounts on a Permanent Bearer Global Note will be made through Euroclear and/or Clearstream, Luxembourg against presentation or surrender (as the case may be) of the Permanent Bearer Global Note (if the Permanent Bearer Global Note is not intended to be issued in NGN form) without any requirement for certification.
The following legend will appear on all Bearer Notes which have an original maturity of more than 365 days and on all Talons and Coupons relating to such Notes:
"ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE."
The sections referred to provide that United States persons, with certain exceptions, will not be entitled to deduct any loss on Bearer Notes, Talons and Coupons and will not be entitled to capital gains treatment of any gain on any sale, disposition, redemption or payment of principal in respect of such Notes, Talons and Coupons.
The term "United States person", as used in this paragraph and in the preceding paragraph, has the meaning set forth in the Internal Revenue Code of 1986 and the U.S. Treasury regulations thereunder.
Notes which are represented by a Bearer Global Note will only be transferable in accordance with the rules and procedures for the time being of Euroclear or Clearstream, Luxembourg, as the case may be.
Registered Notes offered and sold in reliance on Regulation S may only be offered and sold to non-U.S. persons outside the United States and will initially be represented by a global note in registered form, without interest coupons or talons (a "Regulation S Global Note" and, together with any Notes issued in registered form in exchange or substitution therefore, the "Regulation S Notes") which will be deposited with a common depositary, common safekeeper or depositary, as the case may be, for, and registered in the name of a common nominee or nominee of, Euroclear and Clearstream, Luxembourg or such other clearing system as may be agreed between the relevant Issuer and the relevant Dealer and specified in the Final Terms, or in the name of a nominee of the common safekeeper. Prior to expiry of the Distribution Compliance Period (as defined in "Terms and Conditions of the Notes") applicable to each Tranche of Notes, beneficial interests in a Regulation S Global Note may not be offered or sold to, or for the account or benefit of, a U.S. person save as otherwise provided in Condition 2 and may not be held otherwise than through Euroclear or Clearstream, Luxembourg (or such other clearing system as may be agreed between the relevant Issuer and the relevant Dealer and specified in the Final Terms) and such Regulation S Global Note will bear a legend regarding such restrictions on transfer.
Registered Notes offered and sold in reliance on Rule 144A may only be offered and sold in the United States or to U.S. persons in private transactions to "qualified institutional buyers" within the meaning of Rule 144A under the Securities Act ("QIBs") and will be represented by a global note in registered form, without interest coupons or talons (a "Rule 144A Global Note" and, together with a Regulation S Global Note, the "Registered Global Notes") which will be deposited with a custodian for, and registered in the name of a nominee of, The Depository Trust Company ("DTC").
Where a Registered Global Note issued in respect of any Tranche is intended to be held under the new safekeeping structure ("NSS"), the applicable Final Terms will also indicate whether or not such Registered Global Note is intended to be held in a manner which would allow Eurosystem eligibility. Any indication that a Registered Global Note is to be so held under NSS does not necessarily mean that the Registered Notes of the relevant Tranche will be recognised as eligible collateral for Eurosystem monetary policy and intra-day credit operations by the Eurosystem either upon issue or at any times during their life as such recognition depends upon satisfaction of the Eurosystem eligibility criteria. The common safekeeper for a Registered Global Note held under NSS will either be Euroclear or Clearstream, Luxembourg or another entity approved by Euroclear and Clearstream, Luxembourg.
Persons holding beneficial interests in Registered Global Notes will be entitled or required, as the case may be, under the circumstances described below, to receive physical delivery of definitive Notes in registered form.
Interests in a Registered Global Note will be exchangeable (free of charge), in whole but not in part, for definitive Registered Notes without interest coupons or talons attached only upon the occurrence of an Exchange Event. For these purposes, "Exchange Event" means that:
The relevant Issuer will promptly give notice to the Noteholders in accordance with Condition 13 if an Exchange Event occurs. In the event of the occurrence of an Exchange Event, DTC, Euroclear and/or Clearstream, Luxembourg (each acting on the instructions of any holder of an interest in such Registered Global Note) or the Trustee may give notice to the Registrar requesting exchange and, in the event of the occurrence of an Exchange Event as described in (4) above, the relevant Issuer may also give notice to the Registrar requesting exchange. Any such exchange shall occur not later than 10 days after the date of receipt of the first relevant notice by the Registrar.
Payments of principal, interest and any other amount in respect of the Registered Global Notes will, in the absence of provision to the contrary, be made to the person(s) shown on the Register on the relevant Record Date (each as defined in Condition 5(d)) as the registered holder(s) of the Registered Global Notes. None of the relevant Issuer, the Trustee, any Paying Agent and the Registrar will have any responsibility or liability for any aspect of the records relating to or payments or deliveries made on account of beneficial ownership interests in the Registered Global Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.
Payments of principal, interest or any other amount in respect of the Registered Notes in definitive form will, in the absence of provision to the contrary, be made to the persons shown on the Register on the relevant Record Date (as defined in Condition 5(d)) immediately preceding the due date for payment in the manner provided in that Condition.
Interests in a Registered Global Note may, subject to compliance with all applicable restrictions, be transferred to a person who wishes to hold such interest in another Registered Global Note. The Rule 144A Notes will be subject to certain restrictions on transfer set forth therein and will bear a legend regarding such restrictions. No beneficial owner of an interest in a Registered Global Note will be able to transfer such interest, except in accordance with the applicable procedures of DTC, Euroclear and Clearstream, Luxembourg, in each case to the extent applicable. Registered Notes are also subject to the restrictions on transfer set forth therein and will bear a legend regarding such restrictions, see "Subscription and Sale and Transfer and Selling Restrictions".
All transfers of Registered Notes and entries on the Register are subject to the detailed regulations concerning the transfer of Registered Notes set out in Schedule 4 to the Agency Agreement. The regulations may be changed by the relevant Issuer with the prior written approval of the Trustee, the Registrar and the Transfer Agent. A copy of the current regulations will be made available for inspection during usual business hours and upon reasonable notice at the principal office of the Trustee and at the Specified Office of each of the Paying Agents.
Pursuant to the Agency Agreement (as defined under "Terms and Conditions of the Notes"), the Principal Paying Agent shall arrange that, where a further Tranche of Notes is issued which is intended to form a single Series with an existing Tranche of Notes at a point after the Issue Date of the further Tranche, the Notes of such further Tranche shall be assigned a common code and ISIN and, where applicable, a CUSIP and CINS number which are different from the common code, ISIN, CUSIP and CINS assigned to Notes of any other Tranche of the same Series until such time as the Tranches are consolidated and form a single Series, which shall not be prior to the expiry of the Distribution Compliance Period (as defined in "Terms and Conditions of the Notes") applicable to the Notes of such Tranche.
For so long as any of the Notes is represented by a Bearer Global Note or a Regulation S Global Note held on behalf of or, as the case may be, registered in the name of a common nominee for, Euroclear, and/or Clearstream, Luxembourg (or, as the case may be, a nominee for the common safekeeper), each person (other than Euroclear or Clearstream, Luxembourg) who is for the time being shown in the records of Euroclear or of Clearstream, Luxembourg as the holder of a particular nominal amount of such Notes (in which regard any certificate or other document issued by Euroclear or Clearstream, Luxembourg as to the nominal amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes save in the case of manifest error) shall be treated by the relevant Issuer, the Trustee, the Paying Agents, the Transfer Agents and the Registrar as the holder of such nominal amount of such Notes for all purposes other than with respect to the payment of principal or interest on such nominal amount of such Notes, for which purpose the bearer of the relevant Bearer Global Note or the registered holder of the relevant Regulation S Global Note shall be treated by the relevant Issuer, the Trustee, the Paying Agents, the Transfer Agents and the Registrar as the holder of such nominal amount of such Notes in accordance with and subject to the terms of the relevant Global Note and the expressions "Noteholder" and "holder of Notes" and related expressions shall be construed accordingly.
For so long as any of the Notes is represented by a Rule 144A Global Note registered in the name of DTC or its nominee, each person who is for the time being shown in the records of DTC or such nominee as the holder of a particular nominal amount of such Notes shall be treated by the relevant Issuer, the Trustee, the Paying Agents, the Registrar and the Transfer Agents as the holder of such nominal amount of such Notes for all purposes other than with respect to the payment of principal or interest on, or voting, giving consents or making requests in respect of, such nominal amount of such Notes, for which purpose DTC or, in the case of payments only, its nominee shall be treated by the relevant Issuer, the Trustee, the Principal Paying Agent, the Paying Agents, the Registrar and the Transfer Agents as the holder of such nominal amount of such Notes in accordance with and subject to the terms of such Rule 144A Global Note; and the expressions "Noteholder" and "holder of Notes" and related expressions shall be construed accordingly.
Any reference herein to DTC, Euroclear and/or Clearstream, Luxembourg shall, whenever the context so permits, except in relation to Notes issued in NGN form or held under the NSS for registered global securities, be deemed to include a reference to any successor operator and/or successor clearing system and/or any additional or alternative clearing system specified in the applicable Final Terms.
Any reference herein to the common depositary, depositary or, as applicable, common safekeeper shall, whenever the context so permits, be deemed to include references to any successor common depositary, depositary or, as applicable, common safekeeper or any additional or alternative common depositary, depositary or, as applicable, common safekeeper as is approved by the relevant Issuer, the Principal Paying Agent, the Registrar and the Trustee.
Any reference herein to the nominee or, as applicable, common nominee shall, whenever the context so permits, be deemed to include references to any successor nominee or, as applicable, common nominee or any additional or alternative nominee or, as applicable, common nominee as is approved by the relevant Issuer, the Principal Paying Agent, the Registrar and the Trustee.
In a press release dated 14 December 2017, "Changes to collateral eligibility criteria for unsecured bank bonds", the ECB announced that unsecured bank bonds ("UBBs") that are (i) subject to statutory, contractual or structural subordination (for example, UBBs issued by bank holding companies such as Santander UK Group Holdings) and/or (ii) issued by credit institutions or investment firms established outside the European Union would become ineligible as collateral in the first quarter of 2018.
In a subsequent press release dated 8 February 2018, "ECB amends guidelines relating to the Eurosystem's monetary policy implementation" the ECB confirmed its publication of new guidelines implementing, inter alia, its decision on the collateral eligibility criteria for UBBs. Pursuant to the new guidelines, UBBs that are (i) subject to statutory, contractual or structural subordination and/or (ii) issued by credit institutions or investment firms established outside of the European Union became ineligible from 16 April 2018.
As a result of these changes, Notes issued under the Programme that are (i) subject to statutory, contractual or structural subordination (including Dated Subordinated Notes issued by Santander UK Group Holdings) and/or (ii) issued by either Issuer after the United Kingdom has withdrawn from the European Union will be ineligible as collateral for Eurosystem monetary policy and intra-day credit operations.
Set out below is the form of Final Terms which will be completed for each Tranche of Notes which are not Exempt Notes and which are issued under the Programme with a denomination of at least €100,000 (or its equivalent in another currency) pursuant to this Prospectus.
PLEASE CAREFULLY READ THE PROSPECTUS AND THE RISK FACTORS IN THE PROSPECTUS. EACH INVESTOR SHOULD CONSULT ITS OWN FINANCIAL AND LEGAL ADVISORS ABOUT THE RISKS ASSOCIATED WITH AN INVESTMENT IN THE NOTES AND THE SUITABILITY OF AN INVESTMENT IN THE NOTES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.
[PROHIBITION OF SALES TO EEA RETAIL INVESTORS – The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area ("EEA"). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, "MiFID II"); or (ii) a customer within the meaning of Directive 2002/92/EC (as amended, the "Insurance Mediation Directive"), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in the Prospectus Directive (where "Prospectus Directive" means Directive 2003/71/EC (as amended, including by Directive 2010/73/EU), and includes any relevant implementing measure in a relevant Member State of the European Economic Area). Consequently no key information document required by Regulation (EU) No 1286/2014 (as amended, the "PRIIPs Regulation") for offering or selling the Notes or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the Notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.]
[MIFID II product governance / Professional investors and eligible counterparties only target market – Solely for the purposes of [the/each] manufacturer's product approval process, the target market assessment in respect of the Notes has led to the conclusion that: (i) the target market for the Notes is eligible counterparties and professional clients only, each as defined in [Article 4(1) of Directive 2014/65/EU (as amended, "MiFID II")]/[MiFID II]; and (ii) all channels for distribution of the Notes to eligible counterparties and professional clients are appropriate. Any person subsequently offering, selling or recommending the Notes (a "distributor") should take into consideration the manufacturer['s/s'] target market assessment; however, a distributor subject to MiFID II is responsible for undertaking its own target market assessment in respect of the Notes (by either adopting or refining the manufacturer['s/s'] target market assessment) and determining appropriate distribution channels.]
[Notification under Section 309B(1)(c) of the Securities and Futures Act (Chapter 289) of Singapore (the "SFA") – In connection with Section 309B of the SFA and the Securities and Futures (Capital Markets Products) Regulations 2018 of Singapore (the "CMP Regulations 2018"), the Issuer has determined the classification of the Notes to be capital markets products other than prescribed capital markets products (as defined in the CMP Regulations 2018) and Specified Investment Products (as defined in the Singapore Monetary Authority (the "MAS") Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).]1
[Terms used herein shall be deemed to be defined as such for the purposes of the Terms and Conditions (the "Conditions") set forth in the Prospectus dated [ ] [and the supplement[s] to it dated [ ]] which [together] constitute[s] a base prospectus for the purposes of the Prospectus Directive. This document constitutes the Final Terms of the Notes described herein for the purposes of Article 5.4 of the Prospectus Directive and must be read in conjunction with the Prospectus[, as supplemented]. Full information on the Issuer and the offer of the Notes is only available on the basis of the combination of these Final Terms and the Prospectus[, as supplemented]. The Prospectus [and the supplements] to it] [has / have] been published on the website http://www.santander.co.uk/uk/about-santander-uk/investor-relations.]
[Terms used herein shall be deemed to be defined as such for the purposes of the Terms and Conditions (the "Conditions") set forth in the Prospectus/[Information Memorandum] dated [ ] [and the supplement[s] to it dated [ ]] which are incorporated by reference in the Prospectus dated [ ]. This document constitutes the Final Terms of the Notes described herein for the purposes of Article 5.4 of the Prospectus Directive and must be read in conjunction with the Prospectus dated [ ] [and the supplement[s] to it dated [ ]] which [together] constitute[s] a base prospectus for the purposes of the Prospectus Directive. Full information on the Issuer and the offer of the Notes is only available on the basis of the combination of these Final Terms and the Prospectus dated [ ] [and the supplement[s] to it dated [ ]]. Copies of such Information Memoranda and Prospectus [and the supplements] to [it] [them] have been published on the website http://www.santander.co.uk/uk/about-santander-uk/investor-relations.]
1 Legend to be included if the Notes do not constitute prescribed capital markets products as defined under the CMP Regulations 2018.
2 If Dated Subordinated Notes, the Issuer should be Santander UK Group Holdings plc.
(ii) Series: [ ]
Maturity Date3
Applicable]
[ ]
: [[ ][not] subject to adjustment [in accordance with the Business Day Convention set out in paragraph [14(iii)/15(xvi)/16(vi)/17(iii)/18(iii)] below]/[Interest Payment Date falling in or nearest to [ ]]
3 The Maturity Date for Dated Subordinated Notes will be at least five (5) years from the specified Issue Date.
| 9. | Interest Basis: | [[ ] per cent. Fixed Rate] [Fixed Rate Reset] [[[ ] month [ ]LIBOR/EURIBOR/HIBOR/ SIBOR] +/- [ ] per cent. Floating Rate] [[ ] per cent. minus [[ ] month [ ]LIBOR/ EURIBOR/HIBOR/SIBOR] Inverse Floating Rate] [[ ] x [ ] month [[ ]LIBOR/EURIBOR/HIBOR/ |
|---|---|---|
| SIBOR] Leveraged Floating Rate] [[ ] per cent. minus ([[ ] x [ ] month [[ ] LIBOR/ EURIBOR/HIBOR/SIBOR]) Leveraged Inverse Floating Rate] |
||
| [Zero Coupon/Discount] [Floating Rate: EONIA Linked Interest] [Floating Rate: SONIA Linked Interest] [Floating Rate: CMS Linked Interest] [Variable Interest] [Convertible Interest Basis] [In respect of the period from (and including) [the Interest Commencement Date]/[ ] to (but excluding) [ ], [[ ] per cent. per annum Fixed Rate]/[[ ] month [ ] LIBOR/EURIBOR/HIBOR/SIBOR] +/- [ ] per cent. Floating Rate]/[[ ] per cent. minus [ ] month [ ]LIBOR/EURIBOR/HIBOR/SIBOR] Inverse Floating Rate]/[[ ] x [ ] month [ ]LIBOR/ EURIBOR/HIBOR/SIBOR] Leveraged Floating Rate]/[[ ] per cent. minus ([ ] x [[ ] month [ ]LIBOR/EURIBOR/HIBOR/SIBOR]) Leveraged Inverse Floating Rate]/[Floating Rate: EONIA Linked Interest]/ [Floating Rate: SONIA Linked Interest]/[Floating Rate: CMS Linked Interest]] (See paragraph[s] [11/14/15/16/17/18/19] |
||
| below) | ||
| 10. | Redemption/Payment Basis: | Subject to any purchase and cancellation or early redemption, the Notes will be redeemed on the Maturity Date at [ ] per cent. of their nominal amount |
| 11. | Change of Interest Basis: | [Applicable (See paragraphs 9 above and [14/15/16/18/19] below)/[Not Applicable]] |
| 12. | Put/Call Options: | [Investor Put] [Issuer Call] [Regulatory Capital Event Call] [Loss Absorption Disqualification Event Call] [(See paragraph[s] [20/21/22/23] below)] |
| 13. | (i) | Status of the Notes: | [Senior/Dated Subordinated4 ] |
|---|---|---|---|
| (ii) | Restrictive Events of Default: | [Applicable/Not Applicable5 ] |
|
| (iii) | Date of [Board] approval for issuance of Notes obtained: |
[[ ]]/[Not Applicable]] |
| 14. | Fixed Rate Note Provisions | [Applicable/Not Applicable] [Applicable in respect of the period from [the Interest Commencement Date]/ [ ]to[ ]] |
|||
|---|---|---|---|---|---|
| (i) Rate(s) of Interest: |
[[ ] per cent. per annum payable [annually/semi- annually/quarterly/[ ]] in arrear on each Interest Payment Date] |
||||
| [In respect of the period from (and including) [the Interest Commencement Date]/[ ] to (but excluding) [ ], [ ] per cent. per annum Fixed Rate] |
|||||
| (ii) | Interest Payment Date(s): | [ ] in each year [commencing on [ ] and ending on the Maturity Date[, subject to adjustment in accordance with the Business Day Convention specified in paragraph 14(iii) below]] |
|||
| [There will be a [short/long] first interest period from, and including, the Interest Commencement Date to, but excluding, [ ] (the "Stub Period")] |
|||||
| [There will be a [short/long] final interest period from, and including, [ ] to, but excluding, the Maturity Date (the "Stub Period").] |
|||||
| (iii) | Business Day Convention: | [Following Business Day Convention/Modified Following Business Day Convention/Preceding |
4 Dated Subordinated Notes may only be issued by Santander UK Group Holdings plc.
5 Restrictive Events of Default may only be selected as "Applicable" in the case of Senior Notes issued by Santander UK Group Holdings plc.
| (iv) | Business Day(s): Additional Business Centre(s): |
[ ] [ ] |
|
|---|---|---|---|
| (v) | Fixed Coupon Amount(s) in respect of definitive Fixed Rate Notes (and in relation to Notes in global form, see Conditions): |
[[ ] per Calculation Amount] [In respect of the period from (and including) [the Interest Commencement Date]/[ ] to (but excluding) [ ], [ ] per Calculation Amount] |
|
| (vi) | Broken Amount(s) in respect of definitive Fixed Rate Notes (and in relation to Notes in global form, see Conditions): |
[In respect of the Stub Period, [ ] per Calculation Amount, payable on the Interest Payment Date falling on [ ]]/[Not Applicable] |
|
| (vii) | Day Count Fraction: | [30/360 Actual/Actual (ICMA) RBA Bond Basis] [adjusted/unadjusted] |
|
| (viii) | Determination Date(s): | [[ ] in each year]/[Not Applicable] | |
| 15. | Fixed Rate Reset Note Provisions | [Applicable/Not Applicable] [Applicable in respect of the period from [the Interest Commencement Date]/ [ ]to[ ]] |
|
| (i) | Initial Rate of Interest: | [ ] per cent. per annum | |
| (ii) | First Margin: | [ ] per cent. per annum | |
| (iii) | Subsequent Margin: | [ ] per cent. per annum | |
| (iv) | Interest Payment Date(s): | [ ] in each year [commencing on [ ] and ending on the Maturity Date[, subject to adjustment in accordance with the Business Day Convention specified in paragraph 15(xvii) below]] |
|
| [There will be a [short/long] first interest period from, and including, the Interest Commencement Date to, but excluding, [ ] (the "Stub Period")] |
|||
| [There will be a [short/long] final interest period from, and including, [ ] to, but excluding, the Maturity Date (the "Stub Period").] |
|||
| (v) | Fixed Coupon Amount(s) in respect of definitive Fixed |
[ ] per Calculation Amount |
| Rate Reset Notes in respect of the period from (and including) [the Interest Commencement Date]/[ ] to (but excluding) the First Reset Date: |
||
|---|---|---|
| (vi) | Broken Amount(s) in respect of definitive Fixed Rate Reset Notes: |
[In respect of the Stub Period, [ ] per Calculation Amount, payable on the Interest Payment Date falling on [ ]]/[Not Applicable] |
| (vii) | First Reset Date: | [ ] |
| (viii) | Second Reset Date: | [ ]/[Not Applicable] |
| (ix) | Subsequent Reset Date[(s)]: | [ ]/[Not Applicable] |
| (x) | Reset Rate: | [Mid-Swap Rate/Benchmark Gilt Rate/Reference Bond] |
| (xi) | Reset Determination Date: | [Condition 4(b) applies]/[specify other] |
| (xii) | Relevant Screen Page: | [ ]/[Not Applicable] |
| (xiii) | Mid-Swap Rate: | [Single Mid-Swap Rate/Mean Mid-Swap Rate][Not Applicable] |
| (xiv) | Mid-Swap Maturity: | [ ] / [Not Applicable] |
| (xv) | Day Count Fraction: | [Actual/Actual (ISDA) Actual/Actual (ICMA) Actual/365 (Fixed) Actual/360 [30/360][360/360][Bond Basis] 30E/360 30E/360 (ISDA) RBA Bond Basis] [adjusted/unadjusted] |
| (xvi) | Determination Time: | [ ]/[Not Applicable] |
| (xvii) | Business Day Convention: | [Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention] |
| (xviii) | Relevant Currency: | [ ]/[Not Applicable] |
| (xix) | Business Day(s): Additional Business |
[ ] |
| Centre(s): | [ ] | ||
|---|---|---|---|
| 16. | Floating Rate Note Provisions | [Applicable/Not Applicable] [Applicable in respect of the period from [the Interest Commencement Date]/ [ ]to[ ]] |
|
| (i) | Straight Floating Rate: | [Applicable/Not Applicable] | |
| (ii) | Inverse Floating Rate: | [Applicable/Not Applicable] Set IFRN Rate: [ ] per cent. |
|
| (iii) | Leveraged Floating Rate: | [Applicable/Not Applicable] Leverage Factor: [ ] |
|
| (iv) | Leveraged Inverse Floating Rate: |
[Applicable/Not Applicable] Leverage Factor: [ ] Set IFRN Rate: [ ] per cent. |
|
| (v) | Interest Period(s)/ Interest Payment Dates: |
[ ] [There will be a [short/long] first interest period from, and including, the Interest Commencement Date to, but excluding, [ ] (the "Stub Period")] |
|
| [There will be a [short/long] last interest period from, and including, [ ] to, but excluding, the Maturity Date (the "Stub Period")] |
|||
| (vi) | Observation Look-back Period: |
[Not Applicable]/[Applicable] [[specify number] (to be not more than five (5))] [[London Banking Day[s]] (in the case of SONIA Linked Interest Notes)]/[[TARGET Business Day[s]] (in the case of EONIA Linked Interest Notes)] |
|
| (vii) | Business Day Convention: | [Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention/Floating Rate Convention] |
|
| (viii) | Business Day(s): Additional Business Centre(s): |
[ ] [ ] |
|
| (ix) | Manner in which the Rate of Interest and Interest Amount is to be determined: |
[Screen Rate Determination/ISDA Determination] |
(x) Screen Rate Determination:
93
| (A) | Reference Rate: | [[ ] month [ ]LIBOR/EURIBOR/HIBOR/SIBOR]/ [EONIA]/[SONIA]/[CMS Reference Rate] |
|
|---|---|---|---|
| (B) | Interest Determination Date(s): |
[ ] (Note that in the case of EONIA/SONIA Linked Interest Notes it is envisaged that the Interest Determination Date shall not be earlier than the completion of the Observation Period) |
|
| (C) | Relevant Screen Page: |
[ ] | |
| (D) | Interpolation for Stub Period: |
[Applicable for the Stub Period]/[Not Applicable] | |
| - Reference Rate 1: [[ ] month |
|||
| [ ]LIBOR/EURIBOR/HIBOR/SIBOR]/[Not Applicable] |
|||
| - Relevant Screen Page 1: [ ]/[Not Applicable] |
|||
| - Reference Rate 2: [[ ] month [ ]LIBOR/EURIBOR/HIBOR/SIBOR]/ [Not Applicable] |
|||
| - Relevant Screen Page 2: [ ]/[Not Applicable] |
|||
| (E) | Reference Currency: | [[ ]/Not Applicable] | |
| (F) | Relevant Centre: | [[ ]/Not Applicable] | |
| (G) | Designated Maturity: | [[ ]/Not Applicable] | |
| (H) | Determination Time: | [[ ] [a.m./p.m.] ([ ] time)]/[Not Applicable] | |
| (I) | CMS Rate Fixing Centre(s): |
[ ] | |
| (xi) | ISDA Determination: | ||
| (A) | Floating Rate Option: | [ ] | |
| (B) | Designated Maturity: | [ ] |
| (C) | Reset Date: | [ ] [, subject to adjustment in accordance with the Reset Date Business Day Convention referred to in E) below] |
|||
|---|---|---|---|---|---|
| (D) | Interpolation for Stub Period: |
Applicable for the Stub Period]/[Not Applicable] | |||
| - Floating Rate Option 1: [ ] |
|||||
| - Designated Maturity 1: [ ] |
|||||
| - Reset Date 1: [ ] [, subject to adjustment in accordance with the Reset Date Business Day Convention referred to in (E) below] |
|||||
| - Floating Rate Option 2: [ ] |
|||||
| - Designated Maturity 2: [ ] |
|||||
| - Reset Date 2: [ ] [, subject to adjustment in accordance with the Reset Date Business Day Convention referred to in (E) below] |
|||||
| (E) | Reset Date Business Day Convention: |
[Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention/Floating Rate Convention] |
|||
| (xii) | Margin(s): | [[plus/minus] [ ] per cent. per annum] [In respect of the period from (and including) [the Interest Commencement Date]/[ ] to (but excluding) [ ], [plus/minus][ ] per cent. per annum] |
|||
| (xiii) | Minimum Rate of Interest: | [ ] per cent. per annum | |||
| (xiv) | Maximum Rate of Interest: | [ ] per cent. per annum | |||
| (xv) | Day Count Fraction: | [Actual/Actual (ISDA) Actual/Actual (ICMA) Actual/365 (Fixed) Actual/360 [30/360][360/360][Bond Basis] 30E/360 30E/360 (ISDA)] [adjusted/unadjusted] |
| (xvi) | Determination Date(s): | [[ ] in each year]/[Not Applicable] | ||
|---|---|---|---|---|
| 17. | Zero Coupon/Discount Note Provisions |
[Applicable/Not Applicable] | ||
| (i) | Stated Yield: | [ ] per cent. per annum | ||
| (ii) | Issue Price: | [ ] | ||
| (iii) | Business Day Convention: | [Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention] |
||
| (iv) | Centre(s): | Business Day(s): Additional Business |
[ ] [ ] |
|
| (v) Day Count Fraction in relation to Early Redemption Amounts and late payment: |
[Actual/Actual (ICMA) 30/360 Actual/360 Actual/365 (Fixed)] [adjusted/unadjusted] |
|||
| 18. | Variable Interest Note Provisions | [Applicable/Not Applicable] | ||
| (i) | Accrual Interest Rate(s): | [[ ] per cent. Fixed Rate] [[[ ]LIBOR/EURIBOR/HIBOR/SIBOR] +/- [ ] per cent. Floating Rate] [In respect of the period from (and including) [the Interest Commencement Date]/[ ] to (but excluding) [ ],[ ]] |
||
| (A) | Screen Rate Determination: |
[Applicable/Not Applicable] | ||
| - | Reference Rate: | [[[ ] month [ ]LIBOR/EURIBOR/HIBOR/ SIBOR]/Not Applicable] |
||
| - | Interest Determination Date(s): |
[[ ]/Not Applicable] | ||
| - | Relevant Screen Page: |
[[ ]/Not Applicable] | ||
| (B) | ISDA Determination: | [Applicable/Not Applicable] | ||
| - | Floating Rate Option: | [ ] |
| - | Designated Maturity: | [ ] | |
|---|---|---|---|
| - | Reset Date: | [ ] [, subject to adjustment in accordance with the Reset Date Business Day Convention referred to below] |
|
| - | Reset Date Business Day Convention: |
[Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention/Floating Rate Convention] |
|
| (C) | Margin: | [ ]/[Not Applicable] | |
| (D) | Minimum Rate of Interest: |
[[ ] per cent. per annum/Not Applicable] | |
| (E) | Maximum Rate of Interest: |
[[ ] per cent. per annum/Not Applicable] | |
| (ii) | Interest Period(s)/Interest Payment Dates: |
[ ] | |
| (iii) | Business Day Convention: | [Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention/Floating Rate Convention] |
|
| (iv) | Centre(s): | Business Day: Additional Business |
[ ] [ ] |
| (v) | Day Count Fraction: | [Actual/Actual (ISDA) Actual/Actual (ICMA) Actual/365 (Fixed) 30/360 30E/360 30E/360 (ISDA)] [adjusted/unadjusted] |
|
| (vi) | Determination Date(s): | [[ ] in each year]/[Not Applicable] | |
| (vii) | Underlying Reference Rate: | [[ ] month [ ]LIBOR/EURIBOR/HIBOR/SIBOR]/ [EONIA]/[SONIA]/[CMS Reference Rate] |
|
| - Relevant Screen Page: [ ] |
|||
| - Reference Currency: [[ ]/Not Applicable] |
| - Relevant Centre: [[ ]/Not Applicable] |
|||
|---|---|---|---|
| - Designated Maturity: [[ ]/Not Applicable] |
|||
| - Determination Time: [[ ]/Not Applicable] |
|||
| (viii) | Lower Barrier(s): | [ ] | |
| (ix) | Upper Barrier(s): | [In respect of the period from (and including) [the Interest Commencement Date]/[ ] to (but excluding) [ ],[ ]] |
|
| (x) | Rate Cut-off Date: | [The [ ] [Fixing Business Day]/[calendar day] prior to the Interest Payment Date falling at the end of the relevant Interest Period] |
|
| (xi) | Additional Fixing Business Centre: |
[[ ]/Not Applicable] | |
| 19. | Convertible Interest Basis Provisions: | [Applicable/Not Applicable] | |
| (i) | First Interest Basis: | [[Fixed Rate/Floating Rate/Variable Interest] in accordance with paragraph [14/16/18] above and Condition 4(d)] |
|
| (ii) | Second Interest Basis: | [[Fixed Rate/Floating Rate/Variable Interest] [in accordance with paragraph [14/16/18] above and Condition 4(d)] |
|
| (iii) | Interest Basis Conversion Date: |
[ ] [subject to adjustment in accordance with the Business Day Convention][subject to no adjustment] |
|
| PROVISIONS RELATING TO REDEMPTION | |||
| 20. | Issuer Call | [Applicable/Not Applicable] | |
| (i) | Optional Redemption Date(s): | [ ] | |
| (ii) | Optional Redemption | [[[ ] per cent. of [t]/[T]he outstanding aggregate |
[[[ ] per cent. of [t]/[T]he outstanding aggregate nominal amount of Notes in [ ]] (if Notes are represented by a Global Note), [ ] per cent. of the Calculation Amount/[ ] per Calculation Amount (if Notes are in definitive form)]
(iii) If redeemable in part: [Applicable/Not Applicable]
Amount(s):
98
| (1) | Minimum Redemption Amount: |
[[ ] (if Notes are represented by a Global Note), [ ] per Calculation Amount (if Notes are in definitive form)] |
||
|---|---|---|---|---|
| (2) | Maximum Redemption Amount: |
[[ ] (if Notes are represented by a Global Note), [ ] per Calculation Amount (if Notes are in definitive form)] |
||
| (3) | Minimum period: | [ ] days | ||
| (iv) | Notice periods: | Minimum period: [ ] [calendar days]/[Business Days] Maximum period: [ ] [calendar days]/[Business Days] |
||
| 21. | Regulatory Capital Event Call | [Applicable/Not Applicable6 ] |
||
| 22. | Investor Put | [Applicable/Not Applicable] | ||
| (i) | Optional Redemption Date(s): | [ ] | ||
| (ii) | Amount(s): | Optional Redemption | [[[ ] per cent. of [t]/[T]he outstanding aggregate nominal amount of Notes in [ ]] (if Notes are represented by a Global Note), [ ] per cent. of the Calculation Amount/[ ] per Calculation Amount (if Notes are in definitive form) |
|
| (iii) | Notice periods: | Minimum period: [ ] [calendar days]/[Business Days] Maximum period: [ ] [calendar days]/[Business Days] |
||
| 23. | Call | Loss Absorption Disqualification Event | [Applicable/Not Applicable7 ] |
|
| (i) | Notice periods: | Minimum period: [ ] [calendar days]/[Business Days] Maximum period: [ ] [calendar days]/[Business Days] |
||
6 Regulatory Capital Event will be specified as "Not Applicable" in the case of Senior Notes.
7 Loss Absorption Disqualification Event Call will be specified as "Not Applicable" in the case of Senior Notes issued by Santander UK plc and Dated Subordinated Notes.
| (ii) | Loss Absorption Disqualification Redemption Amount(s): |
[[[ ] per cent. of [t]/[T]he outstanding aggregate nominal amount of Notes in [ ]] (if Notes are represented by a Global Note), [ ] per cent. of the Calculation Amount/[ ] per Calculation Amount (if Notes are in definitive form) |
|
|---|---|---|---|
| (iii) | Basis of exclusion on amendment or change in Loss Absorption Regulation: |
[Fully excluded/Fully or partially excluded] | |
| 24. | Final Redemption Amount: | [[[ ] per cent. of [t]/[T]he outstanding aggregate nominal amount of Notes in [ ]] (if Notes are represented by a Global Note), [ ] per cent. of the Calculation Amount/[ ] per Calculation Amount (if Notes are in definitive form)] |
Temporary Bearer Global Note exchangeable for a Permanent Bearer Global Note which is exchangeable for definitive Bearer Notes [on 60 days' notice given at any time/only upon an Exchange Event at the expense of the Issuer]].
[Temporary Bearer Global Note exchangeable for definitive Bearer Notes on and after the Exchange Date.]
[Permanent Bearer Global Note exchangeable for definitive Bearer Notes [on 60 days' notice given at any time/only upon an Exchange Event at the expense of the Issuer]].
[Registered Notes:
Regulation S Global Note ([ ] of the Nominal Amount registered in the name of a nominee for [a common depositary for Euroclear and Clearstream, Luxembourg/a common safekeeper for Euroclear and Clearstream, Luxembourg])/Rule 144A Global Note[s] ([ ] of the Nominal Amount) registered in the name of a nominee for DTC]
New Global Note: [Yes/No]
Calculation Agent: [ ]/[Not Applicable] 28. Determination Agent: [ ]/[Not Applicable] 29. U.S. Selling Restrictions: [Reg. S. Compliance Category 2; TEFRA D/TEFRA C/TEFRA Not Applicable; Rule 144A]
Signed on behalf of the Issuer:
By: ………………………………………………….. Duly authorised for and on behalf of the Issuer
| 1. | LISTING | ||
|---|---|---|---|
| (i) | Listing and Admission to trading: |
Application has been made by the Issuer (or on its behalf) for the Notes to be admitted to trading on [Regulated Market] and listing on [official list of competent authority of Regulated Market] with effect from [on or about [the Issue Date]]. |
|
| (ii) | Estimate of total expenses related to admission to trading: |
[ ] | |
| 2. | RATINGS | ||
| Ratings: | [The Notes [are expected to] have the following ratings: |
[Not Applicable]
[Save for any fees [of [insert relevant fee disclosure]] payable to [ ] (the ["Dealer[s]"]/["Manager[s]"]), no person involved in the issue of the Notes has an interest material to the offer. The [Manager[s]/Dealer[s]] and [its/their] affiliates have engaged, and may in the future engage, in investment banking and/or commercial banking transactions with, and may perform other services for, the Issuer and its affiliates in the ordinary course of business.]
[S & P: [ ]] [Moody's: [ ]] [[Fitch]: [ ]]]
Indication of yield: [ ]
(i) ISIN Code: [ ] (ii) Common Code: [ ] (iii) CUSIP Code: [ ] (iv) CFI: [[ ]/Not Applicable]
| (v) | FISN: | [[ ]/Not Applicable] |
|---|---|---|
| (vi) | Any clearing system(s) other than [[ ]/Not Applicable] Euroclear Bank SA/NV and Clearstream Banking SA and the relevant identification number(s): |
[ ] |
| (vii) | Delivery: | Delivery [against/free of] payment [ ] |
| (viii) | Names and addresses of additional Paying Agent(s) (if any): |
[ ] |
| (ix) | Intended to be held in a manner which would allow Eurosystem eligibility: |
[Yes. Note that the designation "yes" simply means that the Notes are intended upon issue to be deposited with one of the ICSDs as common safekeeper [and registered in the name of a nominee |
simply means that the Notes are intended upon issue to be deposited with one of the ICSDs as common safekeeper [and registered in the name of a nominee of one of the ICSDs acting as common safekeeper, that is held under the New Safekeeping Structure for registered global securities,] and does not necessarily mean that the Notes will be recognised as eligible collateral for Eurosystem monetary policy and intraday credit operations by the Eurosystem either upon issue or at any or all times during their life. Such recognition will depend upon the ECB being satisfied that Eurosystem eligibility criteria have been met.]/
[No. Whilst the designation is specified as "no" at the date of these Final Terms, should the Eurosystem eligibility criteria be amended in the future such that the Notes are capable of meeting them the Notes may then be deposited with one of the ICSDs as common safekeeper [and registered in the name of a nominee of one of the ICSDs acting as common safekeeper, that is held under the New Safekeeping Structure for registered global securities]. Note that this does not necessarily mean that the Notes will then be recognised as eligible collateral for
Eurosystem monetary policy and intraday credit operations by the Eurosystem at any time during their life. Such recognition will depend upon the ECB being satisfied that Eurosystem eligibility criteria have been met.]
| (i) | Original Issue Discount: | [Yes/No] |
|---|---|---|
| (ii) | Contingent Payment Debt Instrument: |
[Yes/No] |
| (iii) | Intended U.S. Tax Characterisation: |
[Debt/equity] |
Prohibition of Sales to Belgium Consumers: [Applicable/Not Applicable]
| EU Benchmark Regulation - | Article 29(2) | [Not Applicable]/[Applicable: Amounts |
|
|---|---|---|---|
| statement on benchmarks: | payable under the Notes will be |
||
| calculated by reference to [specify |
|||
| benchmark(s) (as this term is defined in | |||
| the Benchmarks Regulation)] which |
|||
| [is/are] provided by [insert legal name(s) | |||
| of the benchmark administrator(s) – if |
|||
| more than one specify in relation to each | |||
| relevant benchmark]. | |||
| As at the date of these Final Terms, |
|||
| [insert legal name(s) of the benchmark | |||
| administrator(s)] [is/are] [not] included in | |||
[insert legal name(s) of the benchmark the register of administrators established and maintained by the European Securities and Markets Authority pursuant to Article 36 of Regulation (EU) 2016/1011 (the "Benchmarks Regulation").
[As far as the Issuer is aware, [specify benchmark(s) (as this term is defined in the Benchmarks Regulation)] [does/do] not fall within the scope of the Benchmarks Regulation/the transitional provisions in Article 51 of the
Benchmarks Regulation apply] such that [insert legal name(s) of the benchmark administrator(s)] [is/are] not currently required to obtain authorisation or registration (or, if located outside the EU, recognition, endorsement or equivalence).]]
Set out below is the form of Pricing Supplement which will be completed for each Tranche of Exempt Notes issued under the Programme (whatever their denomination) pursuant to this Prospectus.
[Date]
NO PROSPECTUS IS REQUIRED IN ACCORDANCE WITH DIRECTIVE 2003/71/EC AS AMENDED FOR THE ISSUE OF NOTES DESCRIBED BELOW. THE UK LISTING AUTHORITY HAS NEITHER APPROVED NOR REVIEWED THIS PRICING SUPPLEMENT AND THIS PRICING SUPPLEMENT SHALL NOT FORM PART OF THE BASE PROSPECTUS APPROVED BY THE UK LISTING AUTHORITY.
PLEASE CAREFULLY READ THE PROSPECTUS AND THE RISK FACTORS IN THE PROSPECTUS. EACH INVESTOR SHOULD CONSULT ITS OWN FINANCIAL AND LEGAL ADVISORS ABOUT THE RISKS ASSOCIATED WITH AN INVESTMENT IN THE NOTES AND THE SUITABILITY OF AN INVESTMENT IN THE NOTES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.
[PROHIBITION OF SALES TO EEA RETAIL INVESTORS – The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area ("EEA"). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, "MiFID II"); or (ii) a customer within the meaning of Directive 2002/92/EC (as amended, the "Insurance Mediation Directive"), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in the Prospectus Directive (where "Prospectus Directive" means Directive 2003/71/EC (as amended, including by Directive 2010/73/EU), and includes any relevant implementing measure in a relevant Member State of the European Economic Area). Consequently no key information document required by Regulation (EU) No 1286/2014 (as amended, the "PRIIPs Regulation") for offering or selling the Notes or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the Notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.]
[MIFID II product governance / Professional investors and eligible counterparties only target market – Solely for the purposes of [the/each] manufacturer's product approval process, the target market assessment in respect of the Notes has led to the conclusion that: (i) the target market for the Notes is eligible counterparties and professional clients only, each as defined in [Article 4(1) of Directive 2014/65/EU (as amended, "MiFID II")]/[MiFID II]; and (ii) all channels for distribution of the Notes to eligible counterparties and professional clients are appropriate. Any person subsequently offering, selling or recommending the Notes (a "distributor") should take into consideration the manufacturer['s/s'] target market assessment; however, a distributor subject to MiFID II is responsible for undertaking its own target market assessment in respect of the Notes (by either adopting or refining the manufacturer['s/s'] target market assessment) and determining appropriate distribution channels.]
[Notification under Section 309B(1)(c) of the Securities and Futures Act (Chapter 289) of Singapore (the "SFA") – In connection with Section 309B of the SFA and the Securities and Futures (Capital Markets Products) Regulations 2018 of Singapore (the "CMP Regulations 2018"), the Issuer has determined the classification of the Notes to be capital markets products other than prescribed capital markets products (as defined in the CMP Regulations 2018) and Specified Investment Products (as defined in the Singapore Monetary Authority (the "MAS") Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).]1
Any person making or intending to make an offer of the Notes may only do so in circumstances in which no obligation arises for the Issuer or any Dealer to publish a prospectus pursuant to Article 3 of the Prospectus Directive or to supplement a prospectus pursuant to Article 16 of the Prospectus Directive, in each case, in relation to such offer.
This document constitutes the Pricing Supplement for the Notes described herein. This document must be read in conjunction with the Prospectus dated [ ] [and the supplement[s] to it dated [ ]] (the "Prospectus"). Full information on the Issuer and the offer of the Notes is only available on the basis of the combination of this Pricing Supplement and the Prospectus. Copies of the Prospectus may be obtained from http://www.santander.co.uk/uk/aboutsantander-uk/investor-relations.
Terms used herein shall be deemed to be defined as such for the purposes of the Conditions (the "Conditions") set forth in the Prospectus [dated [ ] which are incorporated by reference in the Prospectus].
| 1. | Issuer: | [Santander UK plc / Santander UK Group 2 Holdings plc] |
|
|---|---|---|---|
| 2. | (i) | Series Number: | [ ] |
1 Legend to be included if the Notes do not constitute prescribed capital markets products as defined under the CMP Regulations 2018.
2 If Dated Subordinated Notes, the Issuer should be Santander UK Group Holdings plc.
| (ii) | Tranche Number: | ||
|---|---|---|---|
| (iii) | Date on which the Notes will be consolidated and form a single Series: |
The Notes will be consolidated and form a single Series with [ ] on [the Issue Date/exchange of the Temporary Bearer Global Note for interests in the Permanent Bearer Global Note, as referred to in paragraph 25 below, which is expected to occur on or about [ ]][Not Applicable] |
|
| 3. | Specified Currency or Currencies: | [ ] | |
| 4. | Nominal Amount: | ||
| (i) | Tranche: | [ ] | |
| (ii) | Series: | [ ] | |
| 5. | Issue Price of Tranche: | [ ] per cent. of the Nominal Amount [plus accrued interest from [ ]] |
|
| 6. | (i) | Specified Denominations: | [ ] |
| (ii) | Calculation Amount (in relation to calculation of interest in global form, see Conditions): |
[ ] | |
| 7. | (i) | Issue Date: | [ ] |
| (ii) | Interest Commencement Date (if different from the Issue Date): |
[ ]/Not Applicable] | |
| 8. | Maturity Date3 : |
[ ][not] subject to adjustment [in accordance with the Business Day Convention set out in paragraph 14(iii)/15(xvi)/16(vi)/17(iii)/18(iii)] below]/[Interest Payment Date falling in or nearest to [ ]] |
|
| 9. | Interest Basis: | [ ] per cent. Fixed Rate][Fixed Rate Reset] [[ ] month [ ]LIBOR/EURIBOR/HIBOR/ SIBOR/specify other] +/- [ ] per cent. Floating Rate] |
3 The Maturity Date for Dated Subordinated Notes will be at least five (5) years from the specified Issue Date.
| 10. | Redemption/Payment Basis: | [ ] per cent. minus [[ ] month [ ]LIBOR/ EURIBOR/HIBOR/SIBOR/specify other] Inverse Floating Rate] [ ] x [ ] month [[ ]LIBOR/EURIBOR/HIBOR/ SIBOR/specify other] Leveraged Floating Rate] [ ] per cent. minus ([[ ] x [ ] month [[ ] LIBOR/ EURIBOR/HIBOR/SIBOR/specify other]) Leveraged Inverse Floating Rate] [Zero Coupon/Discount] [Floating Rate: EONIA Linked Interest] [Floating Rate: SONIA Linked Interest] [Floating Rate: CMS Linked Interest] [Variable Interest] [Convertible Interest Basis] [specify other] [In respect of the period from (and including) [the Interest Commencement Date]/[ ] to (but excluding) ], [[ ] per cent. per annum Fixed Rate]/[[ ] month [ ]LIBOR/EURIBOR/HIBOR/SIBOR/ specify other] +/- [ ] per cent. Floating Rate]/[[ ] per cent. minus [ ] month [ ]LIBOR/EURIBOR/ HIBOR/SIBOR/specify other] Inverse Floating Rate]/ [[ ] x [ ] month [ ]LIBOR/EURIBOR/HIBOR/ SIBOR/specify other] Leveraged Floating Rate]/[[ ] per cent. minus ([ ] x [[ ] month [ ]LIBOR/ EURIBOR/HIBOR/SIBOR/specify other]) Leveraged Inverse Floating Rate]/[Floating Rate: EONIA Linked Interest]/[Floating Rate: SONIA Linked Interest]/[Floating Rate: CMS Linked Interest]] [specify other] (See paragraph[s] [11/14/15/16/17/18/19] below) Subject to any purchase and cancellation or early redemption, the Notes will be redeemed on the Maturity Date at [ ] per cent. of their nominal amount |
|---|---|---|
| 11. | Change of Interest Basis: | [Applicable (See paragraphs 9 above and [14/15/16/18/19] below)/[Not Applicable]] |
| 12. | Put/Call Options: | [Investor Put] [Issuer Call] [Regulatory Capital Event Call] [Loss Absorption Disqualification Event Call] [(See paragraph[s] [20/21/22/23] below)] [Not Applicable] |
| 13. | (i) | Status of the Notes: | [Senior/Dated Subordinated4 ] |
|---|---|---|---|
| (ii) | Restrictive Events of Default: | [Applicable/Not Applicable5 ] |
|
| (iii) | Date of [Board] approval for issuance of Notes obtained: |
[[ ]]/[Not Applicable] |
| 14. | Fixed Rate Note Provisions | [Applicable/Not Applicable] [Applicable in respect of the period from [the Interest Commencement Date]/ [ ]to[ ]] |
|
|---|---|---|---|
| (i) | Rate(s) of Interest: | [[ ] per cent. per annum payable [annually/semi annually/quarterly/[ ]] in arrear on each Interest Payment Date] |
|
| [In respect of the period from (and including) [the Interest Commencement Date]/[ ] to (but excluding) [ ], [ ] per cent. per annum Fixed Rate] |
|||
| (ii) | Interest Payment Date(s): |
[ ] in each year [commencing on [ ] and ending on the Maturity Date[, subject to adjustment in accordance with the Business Day Convention specified in paragraph 14(iii) below]] |
|
| [There will be a [short/long] first interest period from, and including, the Interest Commencement Date to, but excluding, [ ] (the "Stub Period")] |
|||
| [There will be a [short/long] final interest period from, and including, [ ] to, but excluding, the Maturity Date (the "Stub Period").] |
|||
| (iii) | Business Day Convention: |
[Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention/specify other] |
4 Dated Subordinated Notes may only be issued by Santander UK Group Holdings plc.
5 Restrictive Events of Default may only be selected as "Applicable" in the case of Senior Notes issued by Santander UK Group Holdings plc.
| (iv) | Business Day(s): Additional Business Centre(s): |
[ ] [ ] |
|
|---|---|---|---|
| (v) | Fixed Coupon Amount(s) in respect of definitive Fixed Rate Notes (and in relation to Notes in global form, see Conditions): |
[[ ] per Calculation Amount] [In respect of the period from (and including) [the Interest Commencement Date]/[ ] to (but excluding) [ ], [ ] per Calculation Amount] |
|
| (vi) | Broken Amount(s) in respect of definitive Fixed Rate Notes (and in relation to Notes in global form, see Conditions): |
[In respect of the Stub Period, [ ] per Calculation Amount, payable on the Interest Payment Date falling on [ ]]/[Not Applicable] |
|
| (vii) | Day Count Fraction: | [30/360 Actual/Actual (ICMA) RBA Bond Basis/specify other] [adjusted/unadjusted] |
|
| (viii) | Determination Date(s): | [[ ] in each year]/[Not Applicable] | |
| (ix) | Other terms relating to the method of calculating interest for Fixed Rate Notes which are Exempt Notes: |
[None/Give details] | |
| 15. | Fixed Rate Reset Note Provisions | [Applicable/Not Applicable] [Applicable in respect of the period from [the Interest Commencement Date]/[ ]to[ ]] |
|
| (i) | Initial Rate of Interest: | [ ] per cent. per annum | |
| (ii) | First Margin: | [ ] per cent. per annum | |
| (iii) | Subsequent Margin: | [ ] per cent. per annum | |
| (iv) | Interest Payment Date(s): |
[ ] in each year [commencing on [ ] and ending on the Maturity Date[, subject to adjustment in accordance with the Business Day Convention specified in paragraph 15(xvii) below]] |
|
| [There will be a [short/long] first interest period from, |
and including, the Interest Commencement Date to,
but excluding, [ ] (the "Stub Period")]
[There will be a [short/long] final interest period from, and including, [ ] to, but excluding, the Maturity Date (the "Stub Period").]
| (v) | Fixed Coupon Amount(s) in respect of definitive Fixed Rate Reset Notes in respect of the period from (and including) [the Interest Commencement Date]/[ ] to (but excluding) the First Reset Date: |
[ ] per Calculation Amount |
|---|---|---|
| (vi) | Broken Amount(s) in respect of definitive Fixed Rate Reset Notes: |
[In respect of the Stub Period, [ ] per Calculation Amount, payable on the Interest Payment Date falling on [ ]]/[Not Applicable] |
| (vii) | First Reset Date: | [ ] |
| (viii) | Second Reset Date: | [ ]/[Not Applicable] |
| (ix) | Subsequent Reset Date[(s)]: |
[ ]/[Not Applicable] |
| (x) | Reset Rate: | [Mid-Swap Rate/Benchmark Gilt Rate/Reference Bond] |
| (xi) | Reset Determination Date: |
[Condition 4(b) applies]/[specify other] |
| (xii) | Relevant Screen Page: | [ ]/[Not Applicable] |
| (xiii) | Mid-Swap Rate: | [Single Mid-Swap Rate/Mean Mid-Swap Rate][Not Applicable] |
| (xiv) | Mid-Swap Maturity: | [ ] / [Not Applicable] |
| (xv) | Day Count Fraction: | [Actual/Actual (ISDA) Actual/Actual (ICMA) Actual/365 (Fixed) Actual/360 [30/360][360/360][Bond Basis] 30E/360 30E/360 (ISDA) RBA Bond Basis] |
| [adjusted/unadjusted] | |
|---|---|
| ----------------------- | -- |
| (xvi) | Determination Time: | [ ]/[Not Applicable] | |
|---|---|---|---|
| (xvii) | Business Day Convention: |
[Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention] |
|
| (xviii) | Relevant Currency: | [ ]/[Not Applicable] | |
| (xix) | Business Day(s): Additional Business Centre(s): |
[ ] [ ] |
|
| 16. | Floating Rate Note Provisions | [Applicable/Not Applicable] [Applicable in respect of the period from [the Interest Commencement Date]/ [ ]to[ ]] |
|
| (i) | Straight Floating Rate: | [Applicable/Not Applicable] | |
| (ii) | Inverse Floating Rate: | [Applicable/Not Applicable] Set IFRN Rate: [ ] per cent. |
|
| (iii) | Leveraged Floating Rate: |
[Applicable/Not Applicable] Leverage Factor: [ ] |
|
| (iv) | Leveraged Inverse | [Applicable/Not Applicable] | |
| Floating Rate: | Leverage Factor: [ ] | ||
| Set IFRN Rate: [ ] per cent. | |||
| (v) | Interest Period(s)/ Interest Payment Dates: |
[ ] [There will be a [short/long] first interest period from, and including, the Interest Commencement Date to, but excluding, [ ] (the "Stub Period")] |
|
| [There will be a [short/long] last interest period from, and including, [ ] to, but excluding, the Maturity Date (the "Stub Period")] |
|||
| (vi) | Observation Look-back Period: |
[Not Applicable]/[Applicable] [[specify number] (to be not more than five (5))] [[London Banking Day[s]] (in the case of SONIA Linked Interest Notes)]/[[TARGET Business Day[s]] (in the case of EONIA Linked Interest Notes)] |
|
| (vii) | Business Day | [Following Business Day Convention/Modified Following Business Day Convention/Preceding |
| Convention: | Business Day Convention/Floating Rate Convention/specify other] |
||
|---|---|---|---|
| (viii) | Business Day(s): Additional Business Centre(s): |
[ ] [ ] |
|
| (ix) | Manner in which the Rate of Interest and Interest Amount is to be determined: |
[Screen Rate Determination/ISDA Determination/specify other] |
|
| (x) | Screen Rate | Determination: | |
| (A) | Reference Rate: | [[ ] month [ ] LIBOR/EURIBOR/HIBOR/SIBOR]/[EONIA]/[SONIA]/ [CMS Reference Rate/specify other] |
|
| (B) | Interest Determination Date(s): |
[ ] (Note that in the case of EONIA/SONIA Linked Interest Notes it is envisaged that the Interest Determination Date shall not be earlier than the completion of the Observation Period) |
|
| (C) | Relevant Screen Page: |
[ ] | |
| (D) | Interpolation for Stub Period: |
[Applicable for the Stub Period]/[Not Applicable] - Reference Rate 1: [[ ] month [ ] LIBOR/EURIBOR/HIBOR/SIBOR/ specify other]/[Not Applicable] - Relevant Screen Page 1: [ ]/[Not Applicable] - Reference Rate 2: [[ ] month [ ] LIBOR/EURIBOR/HIBOR/SIBOR/ specify other]/[Not Applicable] - Relevant Screen Page 2: [ ]/[Not Applicable] ]/Not Applicable] |
|
| (E) | Reference Currency: |
[[ ]/Not Applicable] | |
| (F) | Relevant Centre: |
[[ ]/Not Applicable] |
| (G) | Designated Maturity: |
[[ ]/Not Applicable] | ||
|---|---|---|---|---|
| (H) | Determination Time: |
[[ ] [a.m./p.m.] ([ ] time)]/[Not Applicable] | ||
| (I) | CMS Rate Fixing Centre(s): |
[ ] | ||
| (xi) | ISDA Determination: | |||
| (A) | Floating Rate Option: |
[ ] | ||
| (B) | Designated Maturity: |
[ ] | ||
| (C) | Reset Date: | E) below] | [ ] [, subject to adjustment in accordance with the Reset Date Business Day Convention referred to in |
|
| (D) | Interpolation for | Applicable for the Stub Period]/[Not Applicable] | ||
| Stub Period: | - | Floating Rate Option 1: [ ] | ||
| - | Designated Maturity 1: [ ] | |||
| - | Reset Date 1: [ ] [, subject to adjustment in accordance with the Reset Date Business Day Convention referred to in (E) below] |
|||
| - | Floating Rate Option 2: [ ] | |||
| - | Designated Maturity 2: [ ] | |||
| - | Reset Date 2: [ ] [, subject to adjustment in accordance with the Reset Date Business Day Convention referred to in (E) below] |
|||
| (E) | Reset Date Business Day Convention: |
[Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention/Floating Rate Convention/specify other] |
||
| (xii) | Margin(s): | [[plus/minus] [ ] per cent. per annum] [In respect of the period from (and including) [the Interest Commencement Date]/[ ] to (but excluding) |
| [ ], [plus/minus][ ] per cent. per annum] | |||
|---|---|---|---|
| (xiii) | Minimum Rate of Interest: |
[ ] per cent. per annum | |
| (xiv) | Maximum Rate of Interest: |
[ ] per cent. per annum | |
| (xv) | Day Count Fraction: | [Actual/Actual (ISDA) Actual/Actual (ICMA) Actual/365 (Fixed) Actual/360 [30/360][360/360][Bond Basis] 30E/360 30E/360 (ISDA) specify other] [adjusted/unadjusted] |
|
| (xvi) | Determination Date(s): | [[ ] in each year]/[Not Applicable] | |
| (xviii) | Additional fallback provisions, rounding provisions and any other terms relating to the method of calculating interest on Floating Rate Notes which are Exempt Notes, if different from those set out in the Conditions: |
[ ] | |
| 17. | Zero Coupon/Discount Note Provisions |
[Applicable/Not Applicable] | |
| (i) | Stated Yield: | [ ] per cent. per annum | |
| (ii) | Issue Price: | [ ] | |
| (iii) | Business Day Convention: |
[Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention] |
|
| (iv) | Business Day(s): Additional Business Centre(s): |
[ ] [ ] |
|
| (v) | Day Count Fraction in relation to Early Redemption Amounts |
[Actual/Actual (ICMA) 30/360 Actual/360 |
| and late payment: | Actual/365 (Fixed) specify other] [adjusted/unadjusted] |
|||
|---|---|---|---|---|
| (vi) | Notes: | Any other formula/basis of determining amount payable for Zero Coupon/Discount Notes which are Exempt |
[ ] | |
| 18. | Variable Interest Note Provisions | [Applicable/Not Applicable] | ||
| (i) | Accrual Interest Rate(s): | [[ ] per cent. Fixed Rate] [[LIBOR/EURIBOR/HIBOR/SIBOR/specify other] +/- [ ] per cent. Floating Rate] [specify other] [In respect of the period from (and including) [the Interest Commencement Date]/[ ] to (but excluding) [ ],[ ]] |
||
| (A) | Screen Rate Determination: |
[Applicable/Not Applicable] | ||
| - | Reference Rate: | [[[ ] month [ ]LIBOR/EURIBOR/HIBOR/SIBOR/specify other]/Not Applicable] |
||
| - | Interest Determination Date(s): |
[[ ]/Not Applicable] | ||
| - | Relevant Screen Page: |
[[ ]/Not Applicable] | ||
| (B) | ISDA Determination: |
[Applicable/Not Applicable] | ||
| - | Floating Rate Option: |
[ ] | ||
| - | Designated Maturity: |
[ ] | ||
| - | Reset Date: | [ ] [, subject to adjustment in accordance with the Reset Date Business Day Convention referred to below] |
| - | Reset Date Business Day Convention: |
[Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention/Floating Rate Convention/specify other] |
||
|---|---|---|---|---|
| (C) | Margin: | [ ]/[Not Applicable] | ||
| (D) | Minimum Rate of Interest: |
[[ ] per cent. per annum/Not Applicable] | ||
| (E) | Maximum Rate of Interest: |
[[ ] per cent. per annum/Not Applicable] | ||
| (ii) | Interest | Period(s)/Interest Payment Dates: |
[ ] | |
| (iii) | Business Day Convention: |
[Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention/Floating Rate Convention/specify other] |
||
| (iv) | Business Day: Additional Business Centre(s): |
[ ] | ||
| (v) | Day Count Fraction: | [ ] | ||
| (vi) | Determination Date(s): | 30/360 30E/360 |
[Actual/Actual (ISDA) Actual/Actual (ICMA) Actual/365 (Fixed) 30E/360 (ISDA) specify other] [adjusted/unadjusted] |
|
| (vii) | Rate: | Underlying Reference | [[ ] month [ ] | [[ ] in each year]/[Not Applicable] LIBOR/EURIBOR/HIBOR/SIBOR/specify other]/[EONIA]/[SONIA]/[CMS Reference Rate][specify other] |
| - | Relevant Screen Page: [ ] | |||
| - | Reference Currency: [[ ]/Not Applicable] Relevant Centre: [[ ]/Not Applicable] |
| - Designated Maturity: [[ ]/Not Applicable] |
|||
|---|---|---|---|
| - Determination Time: [[ ]/Not Applicable] |
|||
| (viii) | Lower Barrier(s): | [ ] | |
| [In respect of the period from (and including) [the Interest Commencement Date]/[ ] to (but excluding) [ ],[ ]] |
|||
| (ix) | Upper Barrier(s): | [ ] | |
| [In respect of the period from (and including) [the Interest Commencement Date]/[ ] to (but excluding) [ ],[ ]] |
|||
| (x) | Rate Cut-off Date: | [The [ ] [Fixing Business Day]/[calendar day] prior to the Interest Payment Date falling at the end of the relevant Interest Period] |
|
| (xi) | Additional Fixing Business Centre: |
[[ ]/Not Applicable] | |
| (xii) | Fallback provisions, rounding provisions and any other terms relating to the method of calculating interest on Variable Interest Notes which are Exempt Notes, if different from those set out in the Conditions: |
[ ] | |
| 19. | Provisions: | Convertible Interest Basis | [Applicable/Not Applicable] |
| (i) | First Interest Basis: | [[Fixed Rate/Floating Rate/Variable Interest] in accordance with paragraph [14/16/18] above and Condition 4(d)] |
|
| (ii) | Second Interest Basis: | [[Fixed Rate/Floating Rate/Variable Interest] [in accordance with paragraph [14/16/18] above and Condition 4(d)] |
|
| (iii) | Interest Basis Conversion Date: |
[ ] [subject to adjustment in accordance with the Business Day Convention][subject to no adjustment] |
| 20. | Issuer Call | [Applicable/Not Applicable] | ||
|---|---|---|---|---|
| (i) | Date(s): | Optional Redemption | [ ] | |
| (ii) | Optional Redemption Amount(s) and method of calculation of such amount(s) (if applicable): |
[[[ ] per cent. of [t]/[T]he outstanding aggregate nominal amount of Notes in [ ]] (if Notes are represented by a Global Note), [ ] per cent. of the Calculation Amount/[ ] per Calculation Amount (if Notes are in definitive form)/specify other/see Annex] |
||
| (iii) | If redeemable in part: | [Applicable/Not Applicable] | ||
| (1) | Minimum Redemption Amount: |
[[ ] (if Notes are represented by a Global Note), [ ] per Calculation Amount (if Notes are in definitive form)] |
||
| (2) | Maximum Redemption Amount: |
[[ ] (if Notes are represented by a Global Note), [ ] per Calculation Amount (if Notes are in definitive form)] |
||
| (3) | Minimum period: | [ ] days | ||
| (iv) | Notice periods: | Minimum period: [ ] [calendar days]/[Business Days] Maximum period: [ ] [calendar days]/[Business Days] |
||
| 21. | Regulatory Capital Event Call | [Applicable/Not Applicable6 ] |
||
| 22. | Investor Put | [Applicable/Not Applicable] | ||
| (i) | Optional Redemption Date(s): |
[ ] | ||
| (ii) | Optional Redemption Amount(s) and method of calculation of such amount(s) (if applicable): |
[[[ ] per cent. of [t]/[T]he outstanding aggregate nominal amount of Notes in [ ]] (if Notes are represented by a Global Note), [ ] per cent. of the Calculation Amount/[ ] per Calculation Amount (if Notes are in definitive |
6 Regulatory Capital Event will be specified as "Not Applicable" in the case of Senior Notes.
| (iii) | Notice periods: | Minimum period: [ days]/[Business Days] Maximum period: [ days]/[Business Days] |
] [calendar ] [calendar |
|
|---|---|---|---|---|
| 23. | Call | Loss Absorption Disqualification Event | [Applicable/Not Applicable7 | ] |
| (i) | Notice periods: | Minimum period: [ ] [calendar days]/[Business Days] Maximum period: [ ] [calendar days]/[Business Days] |
||
| (ii) | Loss Absorption Disqualification Redemption Amount(s) and method of calculation of such amount(s) (if applicable): |
[[[ ] per cent. of aggregate nominal amount of Notes in [ ]] (if Notes are represented by a Global Note), [ ] per cent. of the Calculation Amount/[ ] per Calculation Amount (if Notes are in definitive |
[t]/[T]he outstanding |
(iii) Basis of exclusion on amendment or change in Loss Absorption Regulation: [Fully excluded/Fully or partially excluded]
Temporary Bearer Global Note exchangeable for a Permanent Bearer Global Note which is exchangeable for definitive Bearer Notes [on 60 days' notice given at any time/only upon an Exchange Event at the expense of the
form) specify other/see Annex]
form) specify other/see Annex]
7 Loss Absorption Disqualification Event Call will be specified as "Not Applicable" in the case of Senior Notes issued by Santander UK plc and Dated Subordinated Notes.
Issuer]].
[Temporary Bearer Global Note exchangeable for definitive Bearer Notes on and after the Exchange Date.]
[Permanent Bearer Global Note exchangeable for definitive Bearer Notes [on 60 days' notice given at any time/only upon an Exchange Event at the expense of the Issuer]].
[Registered Notes:
Regulation S Global Note ([ ] of the Nominal Amount registered in the name of a nominee for [a common depositary for Euroclear and Clearstream, Luxembourg/a common safekeeper for Euroclear and Clearstream, Luxembourg])/Rule 144A Global Note[s] ([ ] of the Nominal Amount) registered in the name of a nominee for DTC]
D/TEFRA C/TEFRA Not Applicable; Rule
Other terms or special conditions: [Not Applicable/give details]
144A]
By: ……………………………………………… Duly authorised for and on behalf of the Issuer
1. LISTING [Not Applicable/give details]
[Not Applicable][Application [has been made/is expected to be made] by the Issuer (or on its behalf) for the Notes to be listed on [specify market - note this should not be a regulated market] with effect from [ ].]
Ratings: [The Notes [are expected to] have the following ratings:
[S & P: [ ]]
[Moody's: [ ]]
[[Fitch]: [ ]]]
[Not Applicable]
[Save for any fees [of [insert relevant fee disclosure]] payable to [ ] (the ["Dealer[s]"]/["Manager[s]"]), no person involved in the issue of the Notes has an interest material to the offer. The [Manager[s]/Dealer[s]] and [its/their] affiliates have engaged, and may in the future engage, in investment banking and/or commercial banking transactions with, and may perform other services for, the Issuer and its affiliates in the ordinary course of business.]
Indication of yield: [ ]
(i) ISIN Code: [ ] (ii) Common Code: [ ] (iii) CUSIP Code: [ ] (iv) CFI: [[ ]/Not Applicable] (v) FISN: [[ ]/Not Applicable] (vi) Any clearing system(s) other than Euroclear Bank SA/NV and Clearstream Banking SA [[ ]/Not Applicable]
and the relevant identification number(s):
(ix) Intended to be held in a manner which would allow Eurosystem eligibility:
(vii) Delivery: Delivery [against/free of] payment [ ]
[ ]
[Yes. Note that the designation "yes" simply means that the Notes are intended upon issue to be deposited with one of the ICSDs as common safekeeper [and registered in the name of a nominee of one of the ICSDs acting as common safekeeper, that is held under the New Safekeeping Structure for registered global securities,] and does not necessarily mean that the Notes will be recognised as eligible collateral for Eurosystem monetary policy and intra day credit operations by the Eurosystem either upon issue or at any or all times during their life. Such recognition will depend upon the ECB being satisfied that Eurosystem eligibility criteria have been met.]/
[No. Whilst the designation is specified as "no" at the date of this Pricing Supplement, should the Eurosystem eligibility criteria be amended in the future such that the Notes are capable of meeting them the Notes may then be deposited with one of the ICSDs as common safekeeper [and registered in the name of a nominee of one of the ICSDs acting as common safekeeper, that is held under the New Safekeeping Structure for registered global securities]. Note that this does not necessarily mean that the Notes will then be recognised as eligible collateral for Eurosystem monetary policy and intra day credit operations by the Eurosystem at any time during their life. Such recognition will depend upon the ECB being satisfied that Eurosystem eligibility criteria have been met.]
(i) Method of distribution: [Syndicated/Non-syndicated]
| (ii) | If syndicated, names of Managers: |
[Not Applicable/give names] | |
|---|---|---|---|
| (iii) | Stabilisation Manager(s) (if any): |
[Not Applicable/give name] | |
| (iv) | If non-syndicated, name of relevant Dealer: |
[Not Applicable/give name] | |
| (v) | Additional selling restrictions: | [Not Applicable/give details] | |
| (vi) | Prohibition of Sales to Belgian Consumers: |
[Applicable/Not Applicable] | |
| U.S. TAX INFORMATION (144A OFFERINGS ONLY) |
| (i) | Original Issue Discount: | [Yes/No] |
|---|---|---|
| (ii) | Contingent Payment Debt Instrument: |
[Yes/No] |
| (iii) | Intended U.S. Tax Characterisation: |
[Debt/equity] |
The following are the Terms and Conditions of the Notes which will be incorporated by reference into each Global Note (as defined below) and each definitive Note, in the latter case only if permitted by the relevant stock exchange or other relevant authority (if any) and agreed by the relevant Issuer and the relevant Dealer at the time of issue but, if not so permitted and agreed, such definitive Note will have endorsed thereon or attached thereto such Terms and Conditions. The applicable Pricing Supplement in relation to any Tranche of Exempt Notes may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with the following Terms and Conditions, replace or modify the following Terms and Conditions for the purpose of such Notes. The applicable Final Terms (or the relevant provisions thereof) will be endorsed upon, or attached to, each Global Note and definitive Note. Reference should be made to "Form of Final Terms" (or, in the case of a Tranche of Exempt Notes, to "Form of Pricing Supplement") for a description of the content of the applicable Final Terms (or Pricing Supplement, as applicable) which will specify which of such terms are to apply in relation to the relevant Notes.
This Note is one of a Series (as defined below) of Notes issued by either Santander UK Group Holdings plc ("Santander UK Group Holdings" or an "Issuer") or Santander UK plc ("Santander UK" or an "Issuer" and together with Santander UK Group Holdings the "Issuers") constituted by a Trust Deed (such Trust Deed, as modified and/or supplemented and/or restated from time to time, the "Trust Deed") dated 4 September 2015 and made between Santander UK Group Holdings and Citicorp Trustee Company Limited (the "Trustee", which expression shall include any successor as trustee) as trustee for the holders of the Notes (the "Noteholders" or "holders", which expressions shall mean, in relation to Notes in definitive bearer form, the bearers thereof and, in relation to Notes in definitive registered (or inscribed) form, the persons in whose names such Notes are registered and shall, in relation to Notes represented by a Global Note, be construed as provided below). By a Third Supplemental Trust Deed dated 30 August 2017 and made between Santander UK Group Holdings, Santander UK and the Trustee, Santander UK became an Issuer under the Programme (as defined in the Trust Deed).
References herein to "the Issuer" shall be to the entity specified as Issuer in the applicable Final Terms (or Pricing Supplement, as applicable) for this Note. Santander UK Group Holdings may issue Dated Subordinated Notes, Senior Notes subject to Non-Restrictive Events of Default and Senior Notes subject to Restrictive Events of Default. Santander UK may issue Senior Notes subject to Non-Restrictive Events of Default.
References herein to the "Notes" shall be references to the Notes of this Series and shall mean:
The Notes and the Coupons (as defined below) also have the benefit of an Agency Agreement dated 29 August 2018 (such Agency Agreement, as modified and/or supplemented and/or restated from time to time, the "Agency Agreement") whereby the Issuers appoint Citibank, N.A., London Branch as issuing and principal paying agent, agent bank, exchange agent (the "Exchange Agent", which expression shall include any successor exchange agent) and as a transfer agent, (the "Principal Paying Agent", which expression shall include any successor paying agent, agent bank, exchange agent and transfer agent), Citigroup Global Markets Europe AG as registrar (the "Registrar", which expression shall include any successor registrar), Citibank Europe plc (the "Additional Paying Agent", which expression shall include any successor additional paying agent) and the other paying agents named therein (the Additional Paying Agent and such other paying agents together with the Principal Paying Agent, the "Paying Agents", which expression shall include any additional or successor paying agents), the other transfer agents named therein (together with the Principal Paying Agent in its capacity as a transfer agent, the "Transfer Agents", which expression shall include any additional or successor transfer agents and such Transfer Agents, the Principal Paying Agent, the other Paying Agents and the Registrar being together referred to as the "Agents") and the Trustee.
References to the "Calculation Agency Agreement" and "Determination Agency Agreement" are to the calculation agency agreement or determination agency agreement (as the case may be) which may be entered into between the Issuers and the calculation agent or, as the case may be, the determination agent to be appointed thereby (the "Calculation Agent" and the "Determination Agent", respectively) and the Trustee, the form of which is contained in Schedule 1 to the Agency Agreement.
Interest bearing definitive Bearer Notes (as defined below) have interest coupons ("Coupons") and, in the case of Notes which, when issued in definitive form, have more than 27 interest payments remaining, talons for further Coupons ("Talons") attached on issue. Any reference in these Terms and Conditions to Coupons or coupons shall, unless the context otherwise requires, be deemed to include a reference to Talons or talons. Registered Notes (as defined below) and Global Notes do not have Coupons or Talons attached on issue.
The final terms for this Note (or the relevant provisions thereof) are set out in Part A of the Final Terms attached to or endorsed on this Note which supplement these Terms and Conditions or, if this Note is a Note which is neither admitted to trading on a regulated market in the European Economic Area nor offered in the European Economic Area in circumstances where a prospectus is required to be published under the Prospectus Directive (an "Exempt Note"), the final terms (or the relevant provisions thereof) are set out in Part A of the Pricing Supplement and may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with the Conditions, replace or modify the Conditions for the purposes of this Note. References to the "applicable Final Terms" are, unless otherwise stated, to Part A of the Final Terms (or the relevant provisions thereof) attached to or endorsed on this Note. Any reference in the Conditions to "applicable Final Terms" shall be deemed to include a reference to "applicable Pricing Supplement" where relevant. The expression "Prospectus Directive" means Directive 2003/71/EC (as amended, including by Directive 2010/73/EU) and includes any relevant implementing measure in a relevant Member State of the European Union.
Any reference in these Terms and Conditions to "Couponholders" shall mean the holders of the Coupons and shall, unless the context otherwise requires, include the holders of the Talons.
As used herein, "Tranche" means Notes which are identical in all respects (including as to listing) and "Series" means a Tranche of Notes together with any further Tranche or Tranches of Notes which are (i) expressed to be consolidated and form a single series and (ii) identical in all respects (including as to listing) except for their respective Issue Dates, Interest Commencement Dates and/or Issue Prices.
Copies of the Trust Deed and the Agency Agreement are available for inspection during normal business hours at the registered office for the time being of the Principal Paying Agent. If the Notes are to be admitted to trading on the regulated market of the London Stock Exchange plc the applicable Final Terms will be published on the website of the London Stock Exchange plc through a regulatory information service. The applicable Final Terms will be obtainable during normal business hours at the specified office of the Principal Paying Agent by a Noteholder upon such Noteholder producing evidence satisfactory to the Trustee and the Principal Paying Agent as to its holding of such Notes and identity. The Noteholders and the Couponholders are deemed to have notice of, are bound by, and are entitled to the benefit of, all the provisions of the Trust Deed, the Agency Agreement, the applicable Final Terms and any other documents specified in the applicable Final Terms which are applicable to them. The statements in these Terms and Conditions include summaries of, and are subject to, the detailed provisions of the Trust Deed and the Agency Agreement.
Words and expressions defined in the Trust Deed or the Agency Agreement or used in the applicable Final Terms shall have the same meanings where used in these Terms and Conditions unless the context otherwise requires or unless otherwise stated and provided that, in the event of inconsistency between the Trust Deed and the Agency Agreement, the Trust Deed shall prevail and, in the event of inconsistency between the Trust Deed, the Agency Agreement and the applicable Final Terms, the applicable Final Terms shall prevail.
The Notes are in bearer form ("Bearer Notes") or in registered (or inscribed) form ("Registered Notes") as specified in the applicable Final Terms in the currency (the "Specified Currency") and the denomination(s) (the "Specified Denomination(s)") specified in the applicable Final Terms and, in the case of definitive Notes, serially numbered. Notes of one Specified Denomination may not be exchanged for Notes of another Specified Denomination and Bearer Notes may not be exchanged for Registered Notes and vice versa.
This Note may be a Fixed Rate Note, a Floating Rate Note (which term shall include an EONIA Linked Interest Note, a SONIA Linked Interest Note or a CMS Linked Interest Note if this Note is specified as such in the applicable Final Terms), a Zero Coupon/Discount Note, a Variable Interest Note, a Convertible Interest Basis Note, a combination of any of the foregoing or a Fixed Rate Reset Note, depending upon the Interest Basis shown in the applicable Final Terms.
Definitive Bearer Notes are issued with Coupons attached, unless they are Zero Coupon/Discount Notes in which case references to Coupons and Couponholders in these Terms and Conditions are not applicable.
Subject as set out below, title to the Bearer Notes and Coupons will pass by delivery and title to the Registered Notes will pass upon registration of transfers in accordance with the provisions of the Agency Agreement. The Issuer, the Trustee and any Agent will (except as otherwise required by law) deem and treat the bearer of any Bearer Note or Coupon and the registered holder of any Registered Note as the absolute owner thereof (whether or not overdue and notwithstanding any notice of ownership or writing thereon or notice of any previous loss or theft thereof) for all purposes but, in the case of any Global Note, without prejudice to the provisions set out in the next succeeding paragraph.
For so long as any of the Notes are represented by a Bearer Global Note or a Regulation S Global Note held by or on behalf of or, as the case may be, registered in the name of a common nominee for, Euroclear Bank SA/NV ("Euroclear") and/or Clearstream Banking SA ("Clearstream, Luxembourg") (or, as the case may be, a nominee for the common safekeeper), each person (other than Euroclear or Clearstream, Luxembourg) who is for the time being shown in the records of Euroclear or of Clearstream, Luxembourg as the holder of a particular nominal amount of such Notes (in which regard any certificate or other document issued by Euroclear or Clearstream, Luxembourg as to the nominal amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes save in the case of manifest error) shall be treated by the Issuer, the Trustee and the Agents as the holder of such nominal amount of such Notes for all purposes other than with respect to the payment of principal or interest on such nominal amount of such Notes, for which purpose the bearer of the relevant Bearer Global Note or, as the case may be, the registered holder of the relevant Regulation S Global Note shall be treated by the Issuer, the Trustee and the Agents as the holder of such nominal amount of such Notes in accordance with and subject to the terms of the relevant Global Note and the expressions "Noteholder" and "holder of Notes" and related expressions shall be construed accordingly.
For so long as any of the Notes are represented by a Rule 144A Global Note registered in the name of The Depository Trust Company of New York ("DTC") or its nominee, each person who is for the time being shown in the records of DTC or such nominee as the holder of a particular nominal amount of such Notes shall be treated by the Issuer, the Trustee and the Agents as the holder of such nominal amount of such Notes for all purposes other than with respect to the payment of principal or interest on, or voting, giving consents or making requests in respect of, such nominal amount of such Notes, for which purpose DTC or, in the case of payments only, its nominee shall be treated by the Issuer, the Trustee and the Agents as the holder of such nominal amount of such Notes in accordance with and subject to the terms of such Registered Global Note, and the expressions "Noteholder" and "holder of Notes" and related expressions shall be construed accordingly.
Interests in a Global Note will be transferable only in accordance with the rules and procedures for the time being of DTC, Euroclear and Clearstream, Luxembourg, as the case may be. References to DTC, Euroclear and/or Clearstream, Luxembourg shall, whenever the context so permits, be deemed to include a reference to any successor operator and/or successor clearing system and/or any additional or alternative clearing system specified in the applicable Final Terms or otherwise approved by the Issuer, the Principal Paying Agent, the Registrar and the Trustee.
Transfers of beneficial interests in Registered Global Notes will be effected by DTC, Euroclear or Clearstream, Luxembourg, as the case may be, and, in turn, by other participants and, if appropriate, indirect participants in such clearing systems acting on behalf of beneficial transferors and transferees of such interests. A beneficial interest in a Registered Global Note will, subject to compliance with all applicable legal and regulatory restrictions, be transferable for Registered Notes in definitive form or for a beneficial interest in another Registered Global Note only in the Specified Denominations set out in the applicable Final Terms and only in accordance with the rules and operating procedures for the time being of DTC, Euroclear or Clearstream, Luxembourg, as the case may be and in accordance with the terms and conditions specified in the Agency Agreement. Transfers of a Rule 144A Global Note shall be limited to transfers of such Rule 144A Global Note, in whole but not in part, to a nominee of DTC or to a successor of DTC or such successor's nominee.
Subject as provided in Condition 2(d), (e) and (f) below, upon the terms and subject to the conditions set forth in the Agency Agreement, a Registered Note in definitive form may be transferred in whole or in part in the Specified Denominations set out in the applicable Final Terms. In order to effect any such transfer:
Any such transfer will be subject to such reasonable regulations as the Issuer and the Registrar may from time to time prescribe (the initial such regulations being set out in Schedule 4 to the Agency Agreement). Subject as provided above, the Registrar or, as the case may be, the relevant Transfer Agent will, within three business days (being for this purpose a day on which banks are open for business in the city where the specified office of the Registrar or, as the case may be, the relevant Transfer Agent is located) of the request (or such longer period as may be required to comply with any applicable fiscal or other laws or regulations) authenticate and deliver, or procure the authentication and delivery of, at its specified office to the transferee or (at the risk of the transferee) send by uninsured mail to such address as the transferee may request, a new Registered Note in definitive form for the same aggregate nominal amount as the Registered Note (or the relevant part of the Registered Note) transferred. In the case of a transfer of part only of a Registered Note in definitive form, a new Registered Note in definitive form in respect of the balance of the Registered Note not transferred will be so authenticated and delivered or (at the risk of the transferor) sent by uninsured mail to such address as the transferor may request.
Holders of Registered Notes in definitive form may exchange such Notes for interests in a Registered Global Note of the same type at any time.
In the event of a partial redemption of Notes under Condition 6, the Issuer shall not be required to register the transfer of any Registered Note, or part of a Registered Note, called for partial redemption.
Noteholders will not be required to bear the costs and expenses of effecting any registration of transfer as provided above, except for any costs or expenses of delivery other than by normal uninsured mail and except that the Issuer may require the payment of a sum sufficient to cover any stamp duty, tax or other governmental charge that may be imposed in relation to the registration.
Prior to expiry of the applicable Distribution Compliance Period (as defined below), transfers by the holder of, or of a beneficial interest in, a Regulation S Note to a transferee in the United States or who is a U.S. person will only be made:
and, in each case, in accordance with any applicable securities laws of any State of the United States or any other jurisdiction.
In the case of paragraph (i) above, such transferee may take delivery through a Rule 144A Note in global or definitive form. After expiry of the applicable Distribution Compliance Period (i) beneficial interests in Regulation S Global Notes may be held through DTC directly, by a participant in DTC, or indirectly through a participant in DTC and (ii) such certification requirements will no longer apply to such transfers.
Transfers of Rule 144A Notes or beneficial interests therein may be made:
and, in each case, in accordance with any applicable securities laws of any State of the United States or any other jurisdiction.
Upon the transfer, exchange or replacement of Rule 144A Notes, or upon specific request for removal of any United States securities law legend enfaced on Rule 144A Notes, the Registrar shall deliver only Rule 144A Notes or refuse to remove such legend, as the case may be, unless there is delivered to the Issuer such satisfactory evidence as may reasonably be required by the Issuer, which may include an opinion of U.S. counsel, that neither such legend nor the restrictions on transfer set forth therein are required to ensure compliance with the provisions of the Securities Act.
In this Condition, the following expressions shall have the following meanings:
"Distribution Compliance Period" means the period that ends 40 days after the completion of the distribution of each Tranche of Notes, as certified by the relevant Dealer (in the case of a non- syndicated issue) or the relevant Lead Manager (in the case of a syndicated issue);
"QIB" means a "qualified institutional buyer" within the meaning of Rule 144A;
"Regulation S" means Regulation S under the Securities Act;
"Regulation S Global Note" means a Registered Global Note representing Notes sold outside the United States in reliance on Regulation S;
"Regulation S Note" means a Note represented by a Regulation S Global Note or a Note issued in registered form in exchange or substitution therefor;
"Rule 144A" means Rule 144A under the Securities Act;
"Rule 144A Global Note" means a Registered Global Note representing Notes sold in the United States to QIBs pursuant to Rule 144A;
"Rule 144A Note" means a Note represented by a Rule 144A Global Note or a Note issued in registered form in exchange or substitution therefor;
"Securities Act" means the United States Securities Act of 1933, as amended; and
"U.S. person" has the meaning ascribed to it in Regulation S.
The Senior Notes (being those Notes the Final Terms in respect of which specify their Status as Senior) and the relative Coupons (if any) are direct, unconditional unsubordinated and unsecured obligations of the Issuer ranking pari passu and without any preference among themselves and (subject to any applicable statutory provisions) at least equally with all other present and future unsecured and unsubordinated obligations of the Issuer.
The Dated Subordinated Notes (being those Notes the Final Terms in respect of which specify their Status as Dated Subordinated and issued by Santander UK Group Holdings) and the relative Coupons (if any) are direct, subordinated and unsecured obligations of the Issuer ranking pari passu and without any preference among themselves. In the event of the winding-up of the Issuer (other than an Approved Winding-up) or the appointment of an administrator of the Issuer where the administrator has given notice that it intends to declare and distribute a dividend, the payment obligations of the Issuer under or arising from the Dated Subordinated Notes and the Trust Deed, including any damages awarded for breach of any obligations in respect of the Dated Subordinated Notes, shall be subordinated in the manner provided in the Trust Deed to the claims of all Senior Creditors of the Issuer, but shall rank at least pari passu with all other subordinated obligations or preference shares of the Issuer which constitute (or which, upon issue, constituted or were intended to constitute), or would but for any applicable limitation on the amount of such capital constitute, Tier 2 Capital ("Pari Passu Securities") and shall rank in priority to the claims of holders of: (i) all subordinated obligations of the Issuer the claims in respect of which rank, or are expressed to rank, junior to the Dated Subordinated Notes; (ii) all obligations of the Issuer which constitute (or which, upon issue, constituted or were
intended to constitute), or would but for any applicable limitation on the amount of such capital constitute, Tier 1 Capital; and (iii) all classes of share capital of the Issuer other than preference shares which are Pari Passu Securities (together, the "Junior Securities").
This Condition 3(c) is only applicable to Dated Subordinated Notes issued by Santander UK Group Holdings.
Subject to applicable law, no holder of the Dated Subordinated Notes and the relative Coupons (if any) may exercise, claim or plead any right of set-off, compensation or retention in respect of any amount owed to it by the Issuer arising under or in connection with the Dated Subordinated Notes and each holder of the Dated Subordinated Notes and the relative Coupons (if any) shall, by virtue of being the holder of any Dated Subordinated Note and the relative Coupons (if any), be deemed to have waived all such rights of set-off, compensation or retention. Notwithstanding the preceding sentence, if any of the amounts owing to any holder of the Dated Subordinated Notes and the relative Coupons (if any) by the Issuer is discharged by set-off, such holder shall, unless such payment is prohibited by law, immediately pay an amount equal to the amount of such discharge to the Issuer or, in the event of its winding-up or administration, the liquidator or administrator, as appropriate of the Issuer for payment to the Senior Creditors in respect of amounts owing to them by the Issuer, and, until such time as payment is made, shall hold an amount equal to such amount in trust for the Issuer, or the liquidator or administrator, as appropriate of the Issuer, for payment to the Senior Creditors in respect of amounts owing to them by the Issuer and accordingly any such discharge shall be deemed not to have taken place.
This Condition 3(d) is only applicable to Senior Notes issued by Santander UK Group Holdings.
Subject to applicable law, no holder of the Senior Notes issued by Santander UK Group Holdings and the relative Coupons (if any) may exercise, claim or plead any right of setoff, compensation or retention in respect of any amount owed to it by Santander UK Group Holdings arising under or in connection with the Senior Notes issued by Santander UK Group Holdings and each holder of the Senior Notes issued by Santander UK Group Holdings and the relative Coupons (if any) shall, by virtue of being the holder of any Senior Note issued by Santander UK Group Holdings and the relative Coupons (if any), be deemed to have waived all such rights of set-off, compensation or retention. Notwithstanding the preceding sentence, if any of the amounts owing to any holder of the Senior Notes issued by Santander UK Group Holdings and the relative Coupons (if any) by Santander UK Group Holdings is discharged by set-off, such holder shall, unless such payment is prohibited by law, immediately pay an amount equal to the amount of such discharge to Santander UK Group Holdings or, in the event of its winding-up or administration, the liquidator or administrator, as appropriate of Santander UK Group Holdings, and, until such time as payment is made, shall hold an amount equal to such amount in trust for Santander UK Group Holdings, or the liquidator or administrator, as appropriate of Santander UK Group Holdings and accordingly any such discharge shall be deemed not to have taken place.
In these Conditions:
"Approved Winding-up" means a solvent winding-up of Santander UK Group Holdings solely for the purposes of a reconstruction or amalgamation or the substitution in place of Santander UK Group Holdings of a successor in business of Santander UK Group Holdings, the terms of which reconstruction, amalgamation or substitution (i) have previously been approved in writing by the Trustee or by an Extraordinary Resolution (as defined in the Trust Deed) and (ii) do not provide that the Dated Subordinated Notes or, where applicable, the Senior Notes issued by Santander UK Group Holdings, shall thereby become payable;
"Capital Rules" means at any time the regulations, requirements, guidelines and policies relating to capital resources requirements or capital adequacy then in effect and applicable to the Group (including, without limitation, any regulations, requirements, guidelines and policies of the Regulator as may from time to time be applicable to the Group);
"Group" means, as the context admits, Santander UK Group Holdings and each other entity which is part of the UK prudential consolidation group (as that term, or its successor, is used in the Capital Rules) or the UK resolution group (as that term, or its successor, is used in the Loss Absorption Regulations) of which Santander UK Group Holdings is part from time to time;
"Regulator" means, as the context admits, the Prudential Regulation Authority of the UK, the Bank of England or such successor or other authority having primary responsibility with respect to prudential or resolution matters concerning the Issuer and/or the Group;
"Senior Creditors" means creditors of Santander UK Group Holdings (a) who are unsubordinated creditors of Santander UK Group Holdings; or (b) who are subordinated creditors of Santander UK Group Holdings (other than those whose claims constitute, or would but for any applicable limitation on the amount of any such capital constitute, Tier 1 Capital or Tier 2 Capital or whose claims rank, or are expressed to rank, pari passu with, or junior to, the claims of the holders of the Dated Subordinated Notes);
"Tier 1 Capital" has the meaning given to it in the Capital Rules;
"Tier 2 Capital" has the meaning given to it in the Capital Rules; and
the expression "obligations" includes any direct or indirect obligations of the Issuer and whether by way of guarantee, indemnity, other contractual support arrangement or otherwise and regardless of name or designation.
Each Fixed Rate Note bears interest from (and including) the Interest Commencement Date (which unless otherwise specified in the applicable Final Terms shall be the Issue Date) at the rate(s) per annum equal to the Rate(s) of Interest (in each case for the period(s) specified in the applicable Final Terms) payable in arrear on the Interest Payment Date(s) specified in the applicable Final Terms.
If the Notes are in definitive form, except as provided in the applicable Final Terms, the amount of interest payable on each Interest Payment Date in respect of the Interest Period ending on such date will amount to the Fixed Coupon Amount. In the case of any long or short interest period (the "Stub Period"), payments of interest on the relevant Interest Payment Date will, if so specified in the applicable Final Terms, amount to the Broken Amount so specified in respect of such Stub Period.
Except in the case of Notes in definitive form where a Fixed Coupon Amount or Broken Amount is specified in the applicable Final Terms, interest shall be calculated in respect of any period by applying the applicable Rate of Interest to:
and, in each case, multiplying such sum by the applicable Day Count Fraction, and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention. Where the Specified Denomination of a Fixed Rate Note in definitive form is a multiple of the Calculation Amount, the amount of interest payable in respect of such Fixed Rate Note shall be the product of the amount (determined in the manner provided above) for the Calculation Amount and the number by which the Calculation Amount is multiplied to reach the Specified Denomination without any further rounding.
"sub-unit" means, with respect to any currency other than euro, the lowest amount of such currency that is available as legal tender in the country of such currency and, with respect to euro, one cent.
As used in the Conditions, "Interest Period" means the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date, or such other period specified as the "Interest Period" in the applicable Final Terms.
(i) Each Fixed Rate Reset Note bears interest:
in each case, payable in arrear on the Interest Payment Date(s) specified in the applicable Final Terms.
If the Notes are in definitive form, except as provided in the applicable Final Terms, the amount of interest payable on each Interest Payment Date in respect of each Interest Period ending on or before the First Reset Date will amount to the Fixed Coupon Amount. In the case of any long or short interest period (the "Stub Period"), payments of interest on the relevant Interest Payment Date will, if so specified in the applicable Final Terms, amount to the Broken Amount so specified in respect of such Stub Period.
Except in the case of Notes in definitive form where a Fixed Coupon Amount or Broken Amount is specified in the applicable Final Terms, interest shall be calculated in respect of any period by applying the applicable Rate of Interest to:
and, in each case, multiplying such sum by the applicable Day Count Fraction, and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention. Where the Specified Denomination of a Fixed Rate Reset Note in definitive form is a multiple of the Calculation Amount, the amount of interest payable in respect of such Fixed Rate Reset Note shall be the product of the amount (determined in the manner provided above) for the Calculation Amount and the number by which the Calculation Amount is multiplied to reach the Specified Denomination without any further rounding.
"sub-unit" means, with respect to any currency other than euro, the lowest amount of such currency that is available as legal tender in the country of such currency and, with respect to euro, one cent.
As used in the Conditions, "Interest Period" means the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date, or such other period specified as the "Interest Period" in the applicable Final Terms.
If any Rate of Interest (or component thereof) remains to be determined by reference to the Mid-Swap Rate or Mid-Swap Floating Leg Benchmark Rate of which such Mid-Swap Rate or Mid-Swap Floating Leg Benchmark Rate (as applicable) is a component and:
(in circumstances where no successor administrator has been appointed that will continue publication of the relevant Mid-Swap Rate (or the relevant component part(s) thereof) or Mid-Swap Floating Leg Benchmark Rate (as applicable)); or
then the following provisions shall apply to the relevant series of Notes:
(ii) the Issuer is unable to appoint an Independent Adviser, or the Independent Adviser appointed by the Issuer in accordance with paragraph (a) of this Condition 4(b)(iii) fails to determine an Alternative Relevant Rate prior to the relevant IA Mid-Swap Determination Cut-off Date, the Issuer determines (acting in good faith and in a commercially reasonable manner) no later than three Business Days prior to the Reset Determination Date relating to the next Reset Period (the "Issuer Mid-Swap Determination Cut-off Date") that an Alternative Relevant Rate has succeeded or replaced the Mid-Swap Rate or Mid-Swap Floating Leg Benchmark Rate (as applicable) in customary market usage in the international debt capital markets for setting rates comparable to the Mid-Swap Rate or Mid-Swap Floating Leg Benchmark Rate (as applicable),
then the Mid-Swap Rate or Mid-Swap Floating Leg Benchmark Rate (as applicable) for all future Reset Periods (subject to the subsequent operation of this Condition 4(b)(iii) during any other future Reset Period(s)) shall be such Alternative Relevant Rate.
Without prejudice to the definition thereof, for the purposes of determining an Alternative Relevant Rate and/or applicable adjustments thereto (if any), the Independent Adviser or the Issuer (as applicable) will take into account relevant and applicable market precedents, as well as any published guidance from relevant associations involved in the establishment of market standards and/or protocols in the international debt capital markets and such other materials as the Independent Adviser or the Issuer (as applicable), in its sole discretion, considers appropriate.
(iii) an Alternative Relevant Rate is not otherwise determined in accordance with paragraph (b) of this Condition 4(b)(iii) prior to the Issuer Mid-Swap Determination Cut-off Date,
the Subsequent Reset Rate shall be determined as at the last preceding Reset Determination Date or, in the case of the first Reset Determination Date, the Subsequent Reset Rate shall be the Initial Rate of Interest (though substituting, where a different Margin is to be applied to the relevant Reset Period from that which applied to the last preceding Reset Period, the Margin relating to the relevant Reset Period in place of the Margin relating to that last preceding Reset Period).
This paragraph (c) shall apply to the relevant Reset Period only. Any subsequent Reset Period(s) shall be subject to the operation of this Condition 4(b)(iii).
(d) Promptly following the determination of any Alternative Relevant Rate as described in this Condition 4(b)(iii), the Issuer shall give notice thereof and of any adjustments (and the effective date(s) thereof) pursuant to this Condition 4(b)(iii) to the Trustee, the Principal Paying Agent, any Calculation Agent and, in accordance with Condition 13, the Noteholders.
The Trustee and the Principal Paying Agent shall, at the direction of the Issuer (following consultation with the Principal Paying Agent, the Determination Agent and/or, where applicable, the Calculation Agent), effect such waivers and consequential amendments to the Trust Deed, the Agency Agreement, these Terms and Conditions and any other document as the Independent Adviser (in consultation with the Issuer) or the Issuer (as applicable) determines may be required to give effect to any application of this Condition 4(b)(iii). Prior to any such waivers and/or consequential amendments taking effect, the Issuer shall provide a certificate signed by two authorised signatories of the Issuer to the Trustee, the Principal Paying Agent and, where applicable, the Calculation Agent which (i) provides details of such waivers and/or consequential amendments and (ii) certifies that such waivers and/or consequential amendments are required to give effect to any application of this Condition 4(b)(iii), and the Trustee, the Principal Paying Agent and, where applicable, the Calculation Agent shall be entitled to rely on such certificate without further enquiry or liability to any person. For the avoidance of doubt, the Trustee shall not be liable to the Noteholders or any other person for so acting or relying, irrespective of whether any such modification is or may be materially prejudicial to the interests of any such person. Such changes shall apply to the Notes for all future Reset Periods (subject to the subsequent operation of this Condition 4(b)(iii)). No consent of the Noteholders shall be required in connection with effecting the relevant Alternative Relevant Rate as described in this Condition 4(b)(iii) or such other relevant adjustments pursuant to this
Condition 4(b)(iii), including for the execution of, or amendment to, any documents or the taking of other steps by the Issuer or any of the parties to the Trust Deed and/or the Agency Agreement (if required).
Notwithstanding the foregoing, the Trustee shall not be obliged to agree to any modification if in the sole opinion of the Trustee doing so would impose more onerous obligations upon it or expose it to any additional duties, responsibilities or liabilities or reduce rights and/or the protective provisions afforded to the Trustee in these Terms and Conditions or the Trust Deed.
Notwithstanding any other provision of this Condition 4(b)(iii) no Alternative Relevant Rate will be adopted, and no other amendments to the terms of the Notes will be made pursuant to this Condition 4(b)(iii), if and to the extent that, in the sole determination of the Issuer, the same could reasonably be expected to prejudice (i) the qualification of the Dated Subordinated Notes as Tier 2 Capital of the Issuer or of the Group or (ii) the eligibility of the Senior Notes issued by Santander UK Group Holdings to qualify in full towards the Issuer's and/or the Group's minimum requirements for (A) own funds and eligible liabilities and/or (B) loss absorbing capacity instruments.
calculation shall be deemed to have been made by the Principal Paying Agent or the Calculation Agent, as applicable.
"Alternative Relevant Rate" means the rate which has replaced the Mid-Swap Rate or Mid-Swap Floating Leg Benchmark Rate (as applicable) in customary market usage in the international debt capital markets for the purposes of determining floating rates of interest (or the relevant component part thereof) in respect of notes denominated in the Specified Currency and with an interest period of a comparable duration to the relevant Reset Period, or, if the Independent Adviser (in consultation with the Issuer) or the Issuer (as applicable) determines that there is no such rate, such other rate as such Independent Adviser (in consultation with the Issuer) or the Issuer (as applicable) determines in its discretion is most comparable to the Mid-Swap Rate or Mid-Swap Floating Leg Benchmark Rate (as applicable);
"Benchmark Gilt" means, in respect of a Reset Period, such United Kingdom government security having a maturity date on or about the last day of such Reset Period as the Calculation Agent, with the advice of the Reference Banks, may determine to be appropriate;
"Benchmark Gilt Rate" means, in respect of a Reset Period, the gross redemption yield (as calculated by the Calculation Agent in accordance with generally accepted market practice at such time) on a semi-annual compounding basis (converted to an annualised yield and rounded up (if necessary) to four decimal places) of the Benchmark Gilt in respect of that Reset Period, with the price of the Benchmark Gilt for this purpose being the arithmetic average (rounded up (if necessary) to the nearest 0.001 per cent. (0.0005 per cent. being rounded upwards)) of the bid and offered prices of such Benchmark Gilt quoted by the Reference Banks at 3.00 p.m. (London time) on the relevant Reset Determination Date on a dealing basis for settlement on the next following dealing day in London. If at least four quotations are provided, the Benchmark Gilt Rate will be the rounded arithmetic mean of the quotations provided, eliminating the highest quotation (or, in the event of equality, one of the highest) and the lowest quotation (or, in the event of equality, one of the lowest). If only two or three quotations are provided, the Benchmark Gilt Rate will be the rounded arithmetic mean of the quotations provided. If only one quotation is provided, the Benchmark Gilt Rate will be the rounded quotation provided. If no quotations are provided, the Benchmark Gilt Rate will be determined by the Calculation Agent in its sole discretion following consultation with the Issuer;
"Calculation Agent" shall have the meaning specified in the applicable Final Terms;
"dealing day" means a day, other than a Saturday or Sunday, on which the London Stock Exchange (or such other stock exchange on which the Benchmark Gilt is at the relevant time listed) is ordinarily open for the trading of securities;
"First Margin" means the margin specified in the applicable Final Terms;
"First Reset Date" means the date specified in the applicable Final Terms;
"First Reset Period" means the period from (and including) the First Reset Date until (but excluding) the Second Reset Date or, if no such Second Reset Date is specified in the applicable Final Terms, the Maturity Date;
"First Reset Rate of Interest" means, in respect of the First Reset Period and subject to Conditions 4(b)(ii) and (iii) (where applicable), the rate of interest determined by the Calculation Agent on the relevant Reset Determination Date as the sum of the relevant Reset Rate and the First Margin;
"Independent Adviser" means an independent financial institution of international repute or other independent financial adviser experienced in the international debt capital markets, in each case appointed by the Issuer at the Issuer's expense;
"Initial Rate of Interest" has the meaning specified in the applicable Final Terms;
"Mid-Market Swap Rate" means for any Reset Period the mean of the bid and offered rates for the fixed leg payable with a frequency equivalent to the frequency with which scheduled interest payments are payable on the Notes during the relevant Reset Period (calculated on the day count basis customary for fixed rate payments in the Relevant Currency as determined by the Calculation Agent) of a fixed-for-floating interest rate swap transaction in the Relevant Currency which transaction (i) has a term equal to the relevant Reset Period and commencing on the relevant Reset Date, (ii) is in an amount that is representative for a single transaction in the relevant market at the relevant time with an acknowledged dealer of good credit in the swap market and (iii) has a floating leg based on the Mid-Swap Floating Leg Benchmark Rate for the Mid-Swap Maturity (calculated on the day count basis customary for floating rate payments in the Relevant Currency as determined by the Calculation Agent);
"Mid-Market Swap Rate Quotation" means a quotation (expressed as a percentage rate per annum) for the relevant Mid-Market Swap Rate;
"Mid-Swap Floating Leg Benchmark Rate" means EURIBOR if the Relevant Currency is euro or LIBOR for the Relevant Currency if the Relevant Currency is not euro;
"Mid-Swap Maturity" has the meaning specified in the applicable Final Terms;
"Mid-Swap Rate" means, in relation to a Reset Determination Date and subject to Conditions 4(b)(ii) and (iii), either:
which appears on the Relevant Screen Page; or
which appear on the Relevant Screen Page,
in either case, as at approximately 11.00 a.m. in the principal financial centre of the Relevant Currency on such Reset Determination Date, all as determined by the Calculation Agent;
"Rate of Interest" means the Initial Rate of Interest, the First Reset Rate of Interest or the Subsequent Reset Rate of Interest, as applicable;
"Reference Bond" means for any Reset Period a government security or securities issued by the government of the state responsible for issuing the Relevant Currency (which, if the Relevant Currency is euro, shall be Germany) selected by the Calculation Agent in its discretion after consultation with the Issuer as having an actual or interpolated maturity comparable with the relevant Reset Period and that (in the opinion of the Calculation Agent, after consultation with the Issuer) would be utilised, at the time of selection and in accordance with customary financial practice, in pricing new issuances of corporate debt securities denominated in the Relevant Currency and of a comparable maturity to the relevant Reset Period;
"Reference Bond Dealer" means each of five banks which are primary government securities dealers or market makers in pricing corporate bond issuances, as selected by the Calculation Agent in its discretion after consultation with the Issuer;
"Reference Bond Dealer Quotations" means, with respect to each Reference Bond Dealer and the Reset Determination Date, the arithmetic mean, as determined by the Calculation Agent, of the bid and offered prices for the Reference Bond (expressed in each case as a percentage of its nominal amount) as at approximately 11.00 a.m. in the principal financial centre of the Relevant Currency on the Reset Determination Date and quoted in writing to the Calculation Agent by such Reference Bond Dealer;
"Reference Bond Price" means, with respect to a Reset Determination Date, (a) the arithmetic mean of the Reference Bond Dealer Quotations for that Reset Determination Date, after excluding the highest and lowest such Reference Bond Dealer Quotations, or (b) if the Calculation Agent obtains fewer than four such Reference Bond Dealer Quotations, the arithmetic mean of all such quotations or (c) if the Calculation Agent obtains only one Reference Bond Dealer Quotation or if the Calculation Agent obtains no Reference Bond Dealer Quotations, the First Reset Rate of Interest or Subsequent Reset Rate of Interest, as applicable, shall be determined by the Calculation Agent in its sole discretion following consultation with the Issuer;
"Reference Bond Rate" means, in respect of a Reset Period, the annual yield to maturity or interpolated yield to maturity (on the relevant day count basis) of the Reference Bond, assuming a price for such Reference Bond (expressed as a percentage of its nominal amount) equal to the Reference Bond Price;
"Relevant Currency" means the currency specified in the applicable Final Terms or, if none is specified, the currency in which the Notes are denominated;
"Relevant Screen Page" has the meaning specified in the applicable Final Terms;
"Reset Date" means the First Reset Date, the Second Reset Date (if any) and each Subsequent Reset Date (if any), as applicable, in each case as adjusted in accordance with Condition 4(f);
"Reset Determination Date" means, unless otherwise stated in the applicable Final Terms, in respect of the First Reset Period, the second Business Day prior to the First Reset Date, in respect of the first Subsequent Reset Period, the second Business Day prior to the Second Reset Date and, in respect of each Subsequent Reset Period thereafter, the second Business Day prior to the first day of each such Subsequent Reset Period;
"Reset Period" means the First Reset Period or a Subsequent Reset Period, as the case may be;
(i) if Mid-Swap Rate is specified in the applicable Final Terms, the relevant Mid-Swap Rate;
"Second Reset Date" means the date specified in the applicable Final Terms;
"Subsequent Margin" means the margin specified in the applicable Final Terms;
"Subsequent Reset Date" means the date or dates specified in the applicable Final Terms;
"Subsequent Reset Period" means the period from (and including) the Second Reset Date to (but excluding) the next Subsequent Reset Date (or, if no such Subsequent Reset Date is specified in the applicable Final Terms, the Maturity Date), and each successive period (if any) from (and including) a Subsequent Reset Date to (but excluding) the next succeeding Subsequent Reset Date (or, if no such Subsequent Reset Date is specified in the applicable Final Terms, the Maturity Date); and
"Subsequent Reset Rate of Interest" means, in respect of any Subsequent Reset Period and subject to Conditions 4(b)(ii) and (iii) (where applicable), the rate of interest determined by the Calculation Agent on the relevant Reset Determination Date as the sum of the relevant Reset Rate and the relevant Subsequent Margin.
(i) Interest Payment Dates
Each Floating Rate Note and Variable Interest Note bears interest from (and including) the Interest Commencement Date (which unless otherwise specified in the applicable Final Terms shall be the Issue Date) and such interest will be payable in arrear on either:
Such interest will be payable in respect of each Interest Period. In the Conditions, "Interest Period" means the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next
(or first) Interest Payment Date, or such other period specified as the "Interest Period" in the applicable Final Terms.
(ii) Rate of Interest
The Rate of Interest payable from time to time will be determined (i) in respect of Floating Rate Notes, in the manner specified in the applicable Final Terms and (ii) in respect of Variable Interest Notes, in the manner described in subparagraph (C).
(A) ISDA Determination for Floating Rate Notes
Where ISDA Determination is specified in the applicable Final Terms as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will be (1) if Straight Floating Rate is specified as being applicable in the applicable Final Terms, the relevant ISDA Rate plus or minus (as indicated in the applicable Final Terms) the Margin (if any), (2) if Inverse Floating Rate is specified as being applicable in the applicable Final Terms, the Set IFRN Rate specified in the applicable Final Terms minus the relevant ISDA Rate, (3) if Leveraged Floating Rate is specified as being applicable in the applicable Final Terms, the product of the Leverage Factor specified in the applicable Final Terms and the relevant ISDA Rate, plus or minus (as indicated in the applicable Final Terms) the Margin (if any), or (4) if Leveraged Inverse Floating Rate is specified as being applicable in the applicable Final Terms, the difference between (i) the Set IFRN Rate specified in the applicable Final Terms and (ii) the product of the Leverage Factor specified in the applicable Final Terms and the relevant ISDA Rate.
For the purposes of this sub-paragraph (A):
"ISDA Rate" for an Interest Period (other than a Stub Period) means a rate equal to the Floating Rate that would be determined by the Principal Paying Agent under an interest rate swap transaction if the Principal Paying Agent were acting as Calculation Agent for that swap transaction under the terms of an agreement incorporating the 2006 ISDA Definitions, as published by the International Swaps and Derivatives Association, Inc. and as amended and updated as at the Issue Date of the first Tranche of the Notes of the relevant Series, (the "ISDA Definitions") and under which:
(3) unless otherwise stated in the applicable Final Terms, the relevant Reset Date is the first day of that Interest Period and, if so specified in the applicable Final Terms, the relevant Reset Date shall be subject to adjustment in accordance with the Reset Date Business Day Convention specified in the applicable Final Terms.
"ISDA Rate" for a Stub Period means a rate calculated by the Principal Paying Agent or (if specified in the applicable Final Terms) the Calculation Agent or Determination Agent, as applicable, by means of linear interpolation of the relevant ISDA Rate 1 and the relevant ISDA Rate 2 in accordance with market convention.
"ISDA Rate 1" and "ISDA Rate 2" shall be determined for a Stub Period pursuant to this sub-paragraph (A) on the same basis as the determination of the "ISDA Rate" for an Interest Period that is not a Stub Period save that references in this sub-paragraph (A) to the Floating Rate Option, the Designated Maturity and the Reset Date shall be (i) in the case of the ISDA Rate 1, to the Floating Rate Option 1, the Designated Maturity 1 and the Reset Date 1, respectively, and (ii) in the case of the ISDA Rate 2, the Floating Rate Option 2, the Designated Maturity 2 and the Reset Date 2, respectively, in each case as specified in the applicable Final Terms.
"Stub Period" shall have the meaning specified in the applicable Final Terms.
For the purposes of this sub-paragraph (A), "Floating Rate", "Calculation Agent", "Floating Rate Option", "Designated Maturity" and "Reset Date" have the meanings given to those terms in the ISDA Definitions, and "Margin", "Set IFRN" and "Leverage Factor" have the meanings given to those terms in the applicable Final Terms.
Rate, (3) if Leveraged Floating Rate is specified as being applicable in the applicable Final Terms, the product of the Leverage Factor specified in the applicable Final Terms and the relevant Screen Rate, plus or minus (as indicated in the applicable Final Terms) the Margin (if any), or (4) if Leveraged Inverse Floating Rate is specified as being applicable in the applicable Final Terms, the difference between (i) the Set IFRN Rate specified in the applicable Final Terms and (ii) the product of the Leverage Factor specified in the applicable Final Terms and the relevant Screen Rate, in each case as determined by the Principal Paying Agent.
"Screen Rate" for an Interest Period (other than a Stub Period) means, subject as provided below, either:
(expressed as a percentage rate per annum) for the Reference Rate which appears or appear, as the case may be, on the Relevant Screen Page as at 11.00 a.m. (Relevant Financial Centre time) on the Interest Determination Date in question, all as determined by the Principal Paying Agent. If five or more of such offered quotations are available on the Relevant Screen Page, the highest (or, if there is more than one such highest quotation, one only of such quotations) and the lowest (or, if there is more than one such lowest quotation, one only of such quotations) shall be disregarded by the Principal Paying Agent for the purpose of determining the arithmetic mean (rounded as provided above) of such offered quotations. "Screen Rate" for a Stub Period means a rate calculated by the Principal Paying Agent or (if specified in the applicable Final Terms) the Calculation Agent or Determination Agent, as applicable, by means of linear interpolation of the relevant Screen Rate 1 and the relevant Screen Rate 2 in accordance with market convention.
"Screen Rate 1" and "Screen Rate 2" shall be determined for a Stub Period pursuant to this subparagraph (B)(I) on the same basis as the determination of the "Screen Rate" for an Interest Period that is not a Stub Period save that references in
this sub-paragraph (B)(I) to the Reference Rate and the Relevant Screen Page shall be (i) in the case of the Screen Rate 1, to the Reference Rate 1 and the Relevant Screen Page 1, respectively, and (ii) in the case of the Screen Rate 2, to the Reference Rate 2, and the Relevant Screen Page 2, respectively, in each case as specified in the applicable Final Terms.
Paying Agent, the Calculation Agent or the Determination Agent (as applicable) by the Reference Banks or any two or more of them, at which such banks were offered, at approximately 11.00 a.m. (Relevant Financial Centre time) on the Interest Determination Date in question, deposits in the Specified Currency for a period equal to that which would have been used for the Reference Rate by leading banks in (i) if the Reference Rate is LIBOR, the London inter-bank market, (ii) if the Reference Rate is EURIBOR, the Euro-zone inter-bank market, (iii) if the Reference Rate is HIBOR, the Hong Kong inter-bank market or (iv) if the Reference Rate is SIBOR, the Singapore inter-bank market, as the case may be, plus or minus (as indicated in the applicable Final Terms) the Margin (if any) or, if fewer than two of the Reference Banks provide the Principal Paying Agent, the Calculation Agent or the Determination Agent (as applicable) with such offered rates, the offered rate for deposits in the Specified Currency for a period equal to that which would have been used for the Reference Rate, or the arithmetic mean (rounded as provided above) of the offered rates for deposits in the Specified Currency for a period equal to that which would have been used for the Reference Rate, at which, at approximately 11.00 a.m. (Relevant Financial Centre time) on the Interest Determination Date in question, any one or more banks (which bank or banks is or are in the opinion of the relevant Issuer suitable for such purpose) informs the Principal Paying Agent, the Calculation Agent or the Determination Agent (as applicable) it is quoting to leading banks in (A) if the Reference Rate is LIBOR, the London inter-bank market, (B) if the Reference Rate is EURIBOR, the Euro-zone inter-bank market, (C) if the Reference Rate is HIBOR, the Hong Kong inter-bank market or (D) if the Reference Rate is SIBOR, the Singapore inter-bank market, as the case may be, plus or minus (as indicated in the applicable Final Terms) the Margin (if any), provided that, if the Rate of Interest cannot be determined in accordance with the foregoing provisions of this paragraph, the Rate of Interest shall be determined as at the last preceding Interest Determination Date (though substituting, where a different Margin is to be applied to the relevant Interest Period from that which applied to the last preceding Interest Period, the Margin relating to the relevant Interest Period, in place of the Margin relating to that last preceding Interest Period).
(iv) For the purposes of this sub-paragraph (B)(I):
"Interest Determination Date" shall have the meaning specified in the applicable Final Terms provided that, if any day specified as an Interest Determination Date in the applicable Final Terms is not a Reference Rate Business Day, the relevant Interest Determination Date shall be the immediately preceding Reference Rate Business Day;
"Leverage Factor" shall have the meaning specified in the applicable Final Terms;
"Margin" shall have the meaning specified in the applicable Final Terms;
"Reference Rate" shall mean (i) the London interbank offered rate ("LIBOR"), (ii) the Euro- zone interbank offered rate ("EURIBOR"), (iii) the Hong Kong interbank offered rate ("HIBOR") or (iv) the Singapore interbank offered rate ("SIBOR"), in each case for the relevant currency and/or period, all as specified in the applicable Final Terms;
"Reference Rate Business Day" means a day (other than a Saturday or a Sunday) on which banks and foreign exchange markets are open for business in the Relevant Financial Centre;
"Relevant Financial Centre" shall mean (i) London, where the Reference Rate is LIBOR, (ii) Brussels, where the Reference Rate is EURIBOR, (iii) Hong Kong, where the Reference Rate is HIBOR or (iv) Singapore, where the Reference Rate is SIBOR;
"Relevant Screen Page" shall have the meaning specified in the applicable Final Terms;
"Set IFRN Rate" shall have the meaning specified in the applicable Final Terms; and
"Stub Period" shall have the meaning specified in the applicable Final Terms.
(II) Reference Rate Replacement
If:
Issuer to determine or use such Reference Rate,
then the following provisions shall apply to the relevant Notes:
commercially reasonable manner), no later than three Business Days prior to the Interest Determination Date relating to the next Interest Period (the "Issuer Determination Cut-off Date"), determines an Alternative Reference Rate and an Adjustment Spread (if any) (in any such case, acting in good faith and in a commercially reasonable manner) for the purposes of determining the Rate of Interest applicable to the Notes for all future Interest Periods (subject to the subsequent operation of this subparagraph (B)(II) during any other future Interest Period(s)),
then:
(A) such Alternative Reference Rate shall be the Reference Rate for all future Interest Periods (subject to the subsequent operation of this sub-paragraph (B)(II) during any other future Interest Period(s)).
Without prejudice to the definition thereof, for the purposes of determining an Alternative Reference Rate, the Independent Adviser or the Issuer (as applicable) will take into account relevant and applicable market precedents, as well as any published guidance from relevant associations involved in the establishment of market standards and/or protocols in the international debt capital markets and such other materials as the Independent Adviser or the Issuer (as applicable), in its sole discretion, considers appropriate; and
formula or methodology for determining, such Adjustment Spread, then such Adjustment Spread shall be applied to such Alternative Reference Rate for all future Interest Periods (subject to the subsequent operation of this sub-paragraph (B)(II)); or
(y) is unable to determine the quantum of, or a formula or methodology for determining, an Adjustment Spread, or determines that no such Adjustment Spread is required, then such Alternative Reference Rate will apply without an Adjustment Spread for all future Interest Periods (subject to the subsequent operation of this subparagraph (B)(II)).
Without prejudice to the definition thereof, for the purposes of determining an Adjustment Spread (if any), the Independent Adviser or the Issuer (as applicable) will take into account relevant and applicable market precedents, as well as any published guidance from relevant associations involved in the establishment of market standards and/or protocols in the international debt capital markets and such other materials as the Issuer, in its sole discretion, considers appropriate.
good faith and in a commercially reasonable manner) determines prior to the Issuer Determination Cut-off Date that no Alternative Reference Rate exists; or
(iii) no Alternative Reference Rate is otherwise determined in accordance with sub-paragraph (B)(II)(b) prior to the Issuer Determination Cut-off Date,
the relevant Rate of Interest shall be determined as at the last preceding Interest Determination Date (though substituting, where a different Margin is to be applied to the relevant Interest Period from that which applied to the last preceding Interest Period, the Margin relating to the relevant Interest Period in place of the Margin relating to that last preceding Interest Period).
This sub-paragraph (B)(II)(c) shall apply to the relevant Interest Period only. Any subsequent Interest Period(s) shall be subject to the operation of this sub-paragraph (B)(II).
the Issuer) or the Issuer (as applicable) determines may be required in order to follow market practice (determined according to factors including, but not limited to, public statements, opinions and publications of industry bodies and organisations) in relation to such Alternative Reference Rate, including, but not limited to (A) the relevant Business Centre(s), Business Day, Business Day Convention, Day Count Fraction, and/or Interest Determination Date applicable to the Notes and (B) the method for determining the fallback to the Rate of Interest in relation to the Notes if such Alternative Reference Rate is not available; and
(ii) any other changes which the Independent Adviser (in consultation with the Issuer) or the Issuer (as applicable) determines are reasonably necessary to ensure the proper operation and comparability to the relevant Reference Rate of such Alternative Reference Rate.
Prior to any such waivers and/or consequential amendments taking effect, the Issuer shall provide a certificate signed by two authorised signatories of the Issuer to the Trustee, the Principal Paying Agent and, where applicable, the Calculation Agent or the Determination Agent, which (i) provides details of the Floating Rate Calculation Changes and (ii) certifies that the Floating Rate Calculation Changes are required to give effect to any application of this sub-paragraph (B)(II), and the Trustee, the Principal Paying Agent and, where applicable, the Calculation Agent or the Determination Agent shall be entitled to rely on such certificate without further enquiry or liability to any person. For the avoidance of doubt, the Trustee shall not be liable to the Noteholders or any other person for so acting or relying, irrespective of whether any such modification is or may be materially prejudicial to the interests of any such person. Such changes shall apply to the Notes for all future Interest Periods (subject to the subsequent operation of this sub-paragraph (B)(II)).
The Trustee shall not be obliged to agree to any modification if in the sole opinion of the Trustee doing so would impose more onerous obligations upon it or expose it to any additional duties, responsibilities or
liabilities or reduce rights and/or the protective provisions afforded to the Trustee in these Terms and Conditions or the Trust Deed.
No consent of the Noteholders shall be required in connection with effecting the relevant Alternative Reference Rate as described in this sub-paragraph (B)(II) or such other relevant adjustments pursuant to this sub-paragraph (B)(II), or any Adjustment Spread, including for the execution of, or amendment to, any documents or the taking of other steps by the Issuer or any of the parties to the Trust Deed and/or the Agency Agreement (if required).
Notwithstanding any other provision of this subparagraph (B)(II) no Alternative Reference Rate will be adopted, and no other amendments to the terms of the Notes will be made pursuant to this sub-paragraph (B)(II), if and to the extent that, in the sole determination of the Issuer, the same could reasonably be expected to prejudice (i) the qualification of the Dated Subordinated Notes as Tier 2 Capital of the Issuer or of the Group or (ii) the eligibility of the Senior Notes issued by Santander UK Group Holdings to qualify in full towards the Issuer's and/or the Group's minimum requirements for (A) own funds and eligible liabilities and/or (B) loss absorbing capacity instruments.
(f) For the purposes of this sub-paragraph (B)(II):
"Adjustment Spread" means a spread (which may be positive or negative) or formula or methodology for calculating a spread, which is required to be applied to an Alternative Reference Rate in order to reduce or eliminate, to the extent reasonably practicable in the circumstances, any economic prejudice or benefit (as applicable) to Noteholders as a result of the replacement of the relevant Reference Rate with such Alternative Reference Rate and is the spread, formula or methodology which:
(a) the Independent Adviser (in consultation with the Issuer) or, failing which, the Issuer, determines is recognised or acknowledged as being in customary market usage in international debt capital markets transactions which reference the relevant Reference Rate, where such rate has been replaced by such Alternative Reference Rate; or
(b) if no such customary market usage is recognised or acknowledged, the Independent Adviser in its discretion (in consultation with the Issuer), or failing which, the Issuer in its discretion, determines (acting in good faith and in a commercially reasonable manner) to be appropriate;
"Alternative Reference Rate" means the rate that has replaced the relevant Reference Rate in customary market usage in the international debt capital markets for the purposes of determining floating rates of interest (or the relevant component part thereof) in respect of notes denominated in the Specified Currency and with an interest period of a comparable duration to the relevant Interest Periods, or, if the Independent Adviser (in consultation with the Issuer) or, failing which, the Issuer (in consultation with the Principal Paying Agent, the Calculation Agent and/or the Determination Agent, as applicable, and acting in good faith and a commercially reasonable manner) determines that there is no such rate, such other rate as the Independent Adviser (in consultation with the Issuer) or, failing which, the Issuer (in consultation with the Principal Paying Agent, the Calculation Agent and/or the Determination Agent, as applicable, and acting in good faith and in a commercially reasonable manner) determines in its or the Issuer's sole discretion is most comparable to the relevant Reference Rate; and
"Independent Adviser" means an independent financial institution of international repute or other independent financial adviser experienced in the international debt capital markets, in each case appointed by the Issuer at the Issuer's expense.
Where Screen Rate Determination is specified in the applicable Final Terms as the manner in which the Rate of Interest is to be determined and the Reference Rate is specified as being EONIA, the Rate of Interest for each Interest Period will, subject as provided below, be Capitalised EONIA plus or minus (as indicated in the applicable Final Terms) the Margin, all as determined by the Calculation Agent or Determination Agent (as applicable).
For the purposes of this sub-paragraph (B)(III):
"Capitalised EONIA" means the resultant figure of the following formula (expressed as a percentage per annum rounded to the nearest ten-thousandths of a percentage point, with 0.00005 being rounded upwards):
$$
\left[\prod_{i=1}^{d_o} \left(1 + \frac{EONIA_{i-pTBD} \times n_i}{360}\right) - 1\right] \times \frac{360}{d}
$$
"do" means, for the relevant Interest Period, the number of TARGET Business Days in such Interest Period;
"i" means a series of whole numbers from one to do, each representing the relevant TARGET Business Days in chronological order from, and including, the first TARGET Business Day in the relevant Interest Period;
"p" means, for any Interest Period, the number of TARGET Business Days included in the Observation Look-back Period specified in the applicable Final Terms;
"Observation Period" means, in respect of an Interest Period, the period from, and including, the date which is "p" TARGET Business Days prior to the first day of such Interest Period (and the first Interest Period shall begin on and include the Interest Commencement Date) and ending on, but excluding the date which is "p" TARGET Business Days prior to the Interest Payment Date for such Interest Period (and the last Interest Period shall end on but exclude the Maturity Date);
"EONIAi" means, in respect of any TARGET Business Day, "i", in the relevant Observation Period, a reference rate equal to the Euro Overnight Index Average ("EONIA") rate for such TARGET Business Day as calculated by the European Central Bank and appearing on the Relevant Screen Page on the TARGET Business Day immediately following such TARGET Business Day). Therefore EONIAi-pTBD is the relevant EONIA fixing in the Observation Period as per the above definition;
"ni" means the number of calendar days in the relevant Interest Period on which the rate is EONIAi ;
"d" means the number of calendar days in the relevant Interest Period;
"Margin" shall have the meaning specified in the applicable Final Terms;
"Relevant Screen Page" shall have the meaning specified in the applicable Final Terms or, if no meaning is so specified, Reuters Screen EONIA Page or any successor; and
"TARGET Business Day" or "TBD" means a day on which the TARGET2 System is open.
If, in respect of any TARGET Business Day in the relevant Observation Period, the Calculation Agent or the Determination Agent (as applicable) determines that either the Relevant Screen Page is not available or no such overnight rate as referred to in EONIAi appears for any reason for any day "i" on the TARGET Business Day immediately following such TARGET Business Day as provided above, the Calculation Agent or the Determination Agent (as applicable) shall determine EONIAi for such day in its sole and absolute discretion on a commercial basis as it shall consider appropriate and in accordance with standard market practice.
(IV) Floating Rate Notes which are SONIA Linked Interest Notes
Where Screen Rate Determination is specified in the applicable Final Terms as the manner in which the Rate of Interest is to be determined and the Reference Rate is specified as being SONIA, the Rate of Interest for each Interest Period will, subject as provided below, be Compounded Daily SONIA plus or minus (as indicated in the applicable Final Terms) the Margin, all as determined by the Calculation Agent or Determination Agent (as applicable).
For the purposes of this sub-paragraph (B)(IV):
"Compounded Daily SONIA" will be the rate of return of a daily compound interest investment (with the daily Sterling overnight reference rate as reference rate for the calculation of interest) and will be calculated by the Calculation Agent or Determination Agent (as applicable) on the Interest Determination Date, as follows, and the resulting percentage will be rounded, if necessary, to the nearest one ten-thousandth of a percentage point, with 0.00005 being rounded upwards:
$$
\left[\prod_{i=1}^{d_o} \left(1 + \frac{SONIA_{i\text{-}pLBD} \times n_i}{365}\right) - 1\right] \times \frac{365}{d}
$$
"do" means, for the relevant Interest Period, the number of London Banking Days such Interest Period;
"i" means a series of whole numbers from one to do, each representing the relevant London Banking Days in chronological order from, and including, the first London Banking Day in the relevant Interest Period;
"p" means, for any Interest Period, the number of London Banking Days included in the Observation Look-back Period specified in the applicable Final Terms;
"London Banking Day" or "LBD" means any day on which commercial banks are open for general business (including dealing in foreign exchange and foreign currency deposits) in London;
"Observation Period" means, in respect of an Interest Period, the period from, and including, the date which is "p" London Banking Days prior to the first day of such Interest Period (and the first Interest Period shall begin on and include the Interest Commencement Date) and ending on, but excluding the date which is "p" London Banking Days prior to the Interest Payment Date for such Interest Period (and the last Interest Period shall end on but exclude the Maturity Date);
"SONIAi" means, in respect of any London Banking Day, "i", in the relevant Observation Period, a reference rate equal to the daily Sterling Overnight Index Average ("SONIA") rate for such London Banking Day appearing on the Relevant Screen Page on the London Banking Day immediately following such London Banking Day. Therefore SONIAi-pLBD is the relevant SONIA fixing in the Observation Period as per the above definition;
"ni" means, for any day "i", the number of calendar days from, and including, such day "i" up to, but excluding, the following London Banking Day;
"d" means the number of calendar days in the relevant Interest Period;
"Margin" shall have the meaning specified in the applicable Final Terms; and
"Relevant Screen Page" shall have the meaning specified in the applicable Final Terms or, if no meaning is so specified, Reuters page SONIA 1 or any successor.
If, in respect of any London Banking Day in the relevant Observation Period, the Calculation Agent or the Determination Agent (as applicable) determines that either the Relevant Screen Page is not available or no such overnight rate as referred to in SONIAi appears for any reason for any day "i" on the London Banking Day immediately following such London Banking Day as provided above, the Calculation Agent or the Determination Agent (as applicable) shall determine SONIAi for such day in its sole and absolute discretion on a commercial basis as it shall consider appropriate and in accordance with standard market practice.
(V) Floating Rate Notes which are CMS Linked Interest Notes
Where Screen Rate Determination is specified in the applicable Final Terms as the manner in which the Rate of Interest is to be determined and the Reference Rate is specified as being the CMS Reference Rate, the Rate of Interest for each Interest Period will, subject as provided below, be the CMS Rate plus or minus (as indicated in the applicable Final Terms) the Margin, as determined by the Calculation Agent or Determination Agent (as applicable).
"CMS Rate" for an Interest Period means the Relevant Swap Rate for swap transactions in the Reference Currency with a maturity of the Designated Maturity (expressed as a percentage rate per annum) which appears on the Relevant Screen Page as at (i) the Determination Time specified in the applicable Final Terms or (ii) if no Determination Time is specified in the applicable Final Terms, 11.00 a.m. (Relevant Centre time) on the Interest Determination Date in question, all as determined by the Calculation Agent or Determination Agent (as applicable).
If the Relevant Screen Page is not available, the Calculation Agent or Determination Agent (as applicable) shall request each of the Reference Banks (as defined below) to provide the Calculation Agent or Determination Agent (as applicable) with its quotation for the Relevant Swap Rate (expressed as a percentage rate per annum) at approximately (i) the Determination Time specified in the applicable Final Terms or (ii) if no Determination Time is specified in the applicable Final Terms, 11.00 a.m. (Relevant Centre time) on the Interest Determination Date in question. If two or more of the Reference Banks provide the Calculation Agent or Determination Agent (as applicable) such quotations, the CMS Rate for such Interest Period shall be the arithmetic mean (rounded if necessary to the fifth decimal place, with 0.000005 being rounded upwards) of the quotations, eliminating the highest quotation (or, in the event of equality, one of the highest) and the lowest quotation (or, in the event of equality, one of the lowest).
If on any Interest Determination Date one only or none of the Reference Banks provides the Calculation Agent or Determination Agent (as applicable) with such quotations as provided in the preceding paragraph, the CMS Rate shall be determined by the Calculation Agent or Determination Agent (as applicable) in its sole and absolute discretion on a commercial basis as it shall consider appropriate and in accordance with standard market practice.
For the purposes of this sub-paragraph (B)(V):
"Calculation Agent" shall have the meaning specified in the applicable Final Terms;
"CMS Rate Fixing Day" means a day (other than a Saturday or a Sunday) on which banks and foreign exchange markets are open for business in each CMS Rate Fixing Centre specified in the applicable Final Terms;
"Designated Maturity" shall have the meaning specified in the applicable Final Terms;
"Determination Agent" shall have the meaning specified in the applicable Final Terms;
"Interest Determination Date" shall have the meaning specified in the applicable Final Terms provided that, if any day specified as an Interest Determination Date in the applicable Final Terms is not a CMS Rate Fixing Day, the relevant Interest Determination Date shall be the immediately preceding CMS Rate Fixing Day;
"Margin" shall have the meaning specified in the applicable Final Terms;
"Reference Banks" means (i) where the Reference Currency is euro, the principal office of five leading swap dealers in the Euro-zone inter-bank market, (ii) where the Reference Currency is Sterling, the principal London office of five leading swap dealers in the London inter-bank market, (iii) where the Reference Currency is U.S. dollars, the principal New York City office of five leading swap dealers in the New York City interbank market, or (iv) in the case of any other Reference Currency, the principal Relevant Centre office of five leading swap dealers in the Relevant Centre inter-bank market, in each case as selected by the Calculation Agent or Determination Agent (as applicable);
"Relevant Centre" shall have the meaning specified in the applicable Final Terms;
"Relevant Screen Page" shall have the meaning specified in the applicable Final Terms;
Maturity commencing on the first day of the relevant Interest Period and in a Representative Amount with an acknowledged dealer of good credit in the swap market, where the floating leg, calculated on an Actual/360 day count basis, is equivalent to USD-LIBOR-BBA (as defined in the ISDA Definitions) with a designated maturity of three months; and
(iv) where the Reference Currency is any other currency, the mid-market swap rate as determined by the Calculation Agent or Determination Agent (as applicable) in its sole and absolute discretion on a commercial basis as it shall consider appropriate and in accordance with standard market practice;
"Representative Amount" means an amount that is representative for a single transaction in the relevant market at the relevant time; and
"Stub Period" shall have the meaning specified in the applicable Final Terms.
(C) Interest Determination for Variable Interest Notes
In the case of Variable Interest Notes, the Rate of Interest for each Interest Period will, subject as provided below, be the product of (i) the Accrual Interest Rate and (ii)(A) the number of calendar days in an Interest Period where the Underlying Rate is less than or equal to the Upper Barrier (if any) and greater than or equal to the Lower Barrier (if any) divided by (B) the total number of calendar days in such corresponding Interest Period, all as determined by the Calculation Agent or Determination Agent (as applicable).
If the Underlying Reference Rate is specified in the applicable Final Terms as being any of LIBOR, EURIBOR, HIBOR or SIBOR, the Calculation Agent or Determination Agent (as applicable) shall determine the Underlying Rate for a calendar day in accordance with Condition 4(c)(ii)(B)(I) on the basis that:
(ii) if the rate determination relates to a calendar day (other than a calendar day that falls in the Rate Cut-off Period) that is not a Fixing Business Day, the Fixing Business Day immediately preceding such calendar day; and
(iii) if the rate determination relates to a calendar day that falls in the Rate Cut-off Period, the Rate Cut-Off Date, unless the Rate Cut-Off Date is not a Fixing Business Day, in which case the Fixing Business Day immediately preceding the Rate Cut-Off Date;
If the Underlying Reference Rate is specified in the applicable Final Terms as being EONIA, the Calculation Agent or Determination Agent (as applicable) shall determine the Underlying Rate for a calendar day on the basis that:
If the Calculation Agent or the Determination Agent (as applicable) determines that either the Relevant Screen Page is not available or no such overnight rate as referred to in Underlying Rate appears for any reason for the relevant calendar day on the TARGET Business Day following that day as provided above, the Calculation Agent or the Determination Agent (as applicable) shall determine the Underlying Rate for such day in its sole and absolute discretion on a commercial basis as it shall consider appropriate and in accordance with standard market practice.
If the Underlying Reference Rate is specified in the applicable Final Terms as being SONIA, the Calculation Agent or Determination Agent (as applicable) shall determine the Underlying Rate for a calendar day on the basis that:
(a) "Underlying Rate" shall, for any calendar day, be deemed to be to a reference rate equal to the Sterling Overnight Index Average (SONIA) rate as calculated by the Bank of England and appearing on the Relevant Screen Page on the first London Banking Day following that day;
If the Calculation Agent or the Determination Agent (as applicable) determines that either the Relevant Screen Page is not available or no such overnight rate as referred to in Underlying Rate appears for any reason for the relevant calendar day on the London Banking Day following that day as provided above, the Calculation Agent or the Determination Agent (as applicable) shall determine the Underlying Rate for such day in its sole and absolute discretion on a commercial basis as it shall consider appropriate and in accordance with standard market practice.
If the Underlying Reference Rate is specified in the applicable Final Terms as being CMS Reference Rate, the Calculation Agent or Determination Agent (as applicable) shall determine the Underlying Rate for a calendar day in accordance with Condition 4(c)(ii)(B)(IV) on the basis that:
The applicable Final Terms will specify if the Accrual Interest Rate is a "Fixed Rate" or a "Floating Rate".
If the Accrual Interest Rate is specified in the applicable Final Terms to be a "Floating Rate" and "Screen Rate Determination" is specified in the applicable Final Terms as being applicable, the Accrual Interest Rate for each Interest Period shall be determined by the Calculation Agent or Determination Agent (as applicable) in accordance with Condition 4(c)(ii)(B)(I) and on the basis that:
(a) references to "Rate of Interest" shall be deemed to be to "Accrual Interest Rate";
If the Accrual Interest Rate is specified in the applicable Final Terms to be a "Floating Rate" and "ISDA Determination" is specified in the applicable Final Terms as being applicable, the Accrual Interest Rate for each Interest Period shall be determined by the Calculation Agent or Determination Agent (as applicable) in accordance with Condition 4(c)(ii)(A) and on the basis that:
For the purposes of this sub-paragraph (C):
"Calculation Agent" shall have the meaning specified in the applicable Final Terms;
"Determination Agent" shall have the meaning specified in the applicable Final Terms;
"Fixing Business Day" means a day which is a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in London and, where applicable, any Additional Fixing Business Centre specified in the applicable Final Terms and which is:
exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in the principal financial centre of the country of the currency to which such Reference Rate relates.
"Lower Barrier" shall have the meaning specified in the applicable Final Terms;
"Upper Barrier" shall have the meaning specified in the applicable Final Terms;
"Rate Cut-off Date" means, for each Interest Period, the date specified in the applicable Final Terms;
"Rate Cut-Off Period" means, for each Interest Period, the period from (and including) the Rate Cut-off Date to (but excluding) the Interest Payment Date falling at the end of such Interest Period; and
"Underlying Reference Rate" shall have the meaning specified in the applicable Final Terms.
(iii) Minimum Rate of Interest and/or Maximum Rate of Interest
If the applicable Final Terms specifies a Minimum Rate of Interest for any Interest Period, then, in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of paragraph (ii) above is less than such Minimum Rate of Interest, the Rate of Interest for such Interest Period shall be such Minimum Rate of Interest.
If the applicable Final Terms specify a Maximum Rate of Interest for any Interest Period, then, in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of paragraph (ii) above is greater than such Maximum Rate of Interest, the Rate of Interest for such Interest Period shall be such Maximum Rate of Interest.
(iv) Determination of Rate of Interest and calculation of Interest Amounts
The Principal Paying Agent or, where specified in these Conditions or the applicable Final Terms, the Calculation Agent or the Determination Agent (as applicable) will at, or as soon as practicable after, each time at which the Rate of Interest is to be determined, determine the Rate of Interest for the relevant Interest Period. In the case of Variable Interest Notes or CMS Linked Interest Notes, the Calculation Agent or Determination Agent (as applicable) will notify the Principal Paying Agent of the Rate of Interest for the relevant Interest Period as soon as practicable after calculating the same.
The Principal Paying Agent or Calculation Agent or Determination Agent (as applicable) will calculate the amount of interest (the "Interest Amount") payable on the Floating Rate Notes and Variable Interest Notes for the relevant Interest Period by applying the Rate of Interest to:
and, in each case, multiplying such sum by the applicable Day Count Fraction, and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention. Where the Specified Denomination of a Floating Rate Note or an Variable Interest Note in definitive form is a multiple of the Calculation Amount, the Interest Amount payable in respect of such Note shall be the product of the amount (determined in the manner provided above) for the Calculation Amount, and the amount by which the Calculation Amount is multiplied to reach the Specified Denomination without any further rounding.
For the avoidance of doubt, where the Rate of Interest applicable to Floating Rate Notes for any Interest Period is determined to be less than zero, the Rate of Interest for such Interest Period shall (unless otherwise stated in the applicable Final Terms) be zero.
(v) Notification of Rate of Interest and Interest Amounts
The Principal Paying Agent (or, in the case of CMS Linked Interest Notes and Variable Interest Notes, the relevant Calculation Agent or Determination Agent) will cause the Rate of Interest and each Interest Amount for each Interest Period and the relevant Interest Payment Date to be notified to the Issuer and, if required by applicable law or regulation, any stock exchange or other relevant authority on which the relevant Floating Rate Notes or Variable Interest Notes are for the time being listed or by which they have been admitted to listing and, if applicable, notice thereof to be published in accordance with Condition 13 as soon as possible after their determination but in no event later than the fourth London Business Day thereafter. Each Interest Amount and Interest Payment Date so notified may subsequently be amended (or appropriate alternative arrangements made by way of adjustment) without prior notice in the event of an extension or shortening of the Interest Period. Any such amendment will, if required by applicable law or regulation, be promptly notified to each stock exchange or other relevant authority on which the relevant Floating Rate Notes or Variable Interest Notes are for the time being listed or by which they have been admitted to listing and to the Noteholders in accordance with Condition 13. For the purposes of this paragraph, the expression "London Business Day" means a day (other than a Saturday or a Sunday) on which banks and foreign exchange markets are open for business in London.
If for any reason at any relevant time the Principal Paying Agent or, as the case may be, the Calculation Agent or the Determination Agent (as applicable) defaults in its obligation to determine the Rate of Interest or the Calculation Agent or the Determination Agent (as applicable) defaults in its obligation to calculate any Interest
Amount in accordance with sub-paragraph (ii) above and in accordance with paragraph (iv) above, the Trustee shall determine the Rate of Interest at such rate as, in its absolute discretion (having such regard as it shall think fit to the foregoing provisions of this Condition 4, but subject always to any Minimum Rate of Interest or Maximum Rate of Interest specified in the applicable Final Terms), it shall deem fair and reasonable in all the circumstances or, as the case may be, the Trustee shall calculate the Interest Amount(s) in such manner as it shall deem fair and reasonable in all the circumstances. In making any such determination or calculation, the Trustee may at the Issuer's expense appoint and rely without liability on a determination or calculation by a calculation agent or a determination agent (which shall be an investment bank or other suitable entity of international repute). Each such determination or calculation shall be deemed to have been made by the Principal Paying Agent or, the Calculation Agent or the Determination Agent, as applicable.
All certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions of this Condition 4(c), whether by the Principal Paying Agent or, if applicable, the Calculation Agent or the Determination Agent or the Trustee or its agent, shall (in the absence of wilful default, bad faith or manifest error) be binding on the Issuer, the Trustee, the Principal Paying Agent and (as applicable) the Calculation Agent or the Determination Agent, the other Agents and all Noteholders and Couponholders and (in the absence as aforesaid) no liability to the Issuer, the Noteholders or the Couponholders shall attach to the Principal Paying Agent or (as applicable) the Calculation Agent or the Determination Agent or the Trustee or its agent in connection with the exercise or non-exercise by it of any of its powers, duties and discretions pursuant to such provisions.
If the Convertible Interest Basis is specified as being applicable in the applicable Final Terms, each Note bears interest from (and including) the Interest Commencement Date (which unless otherwise specified in the applicable Final Terms shall be the Issue Date) at the applicable Rates of Interest determined in accordance with this Condition 4(d), and such interest will be payable in arrear on the relevant Interest Payment Date (as defined below).
If the Convertible Interest Basis is specified as being applicable in the applicable Final Terms, the basis upon which interest accrues (and on which the Rate of Interest shall be determined) will (unless the Notes are redeemed or purchased and cancelled prior to the Interest Basis Conversion Date) change from one interest basis (the "First Interest Basis") to another (the "Second Interest Basis"). The First Interest Basis shall apply to any Interest Period in the First Interest Basis Period and the Second Interest Basis shall apply to any Interest Period in the Second Interest Basis Period.
The Rate of Interest for any Interest Period, and the amount of interest payable on each Interest Payment Date in respect of such Interest Period, shall be determined by the Principal Paying Agent or (if specified in the applicable Final Terms) the Calculation Agent or Determination Agent, as applicable, in accordance with (i) if the relevant
Interest Basis is specified in the applicable Final Terms to be Fixed Rate, Condition 4(a) or (ii) if the relevant Interest Basis is specified in the applicable Final Terms to be Floating Rate or Variable Interest, Condition 4(c). If an Interest Basis for an Interest Basis Period is specified in the applicable Final Terms as being Floating Rate or Variable Interest, the notification and publication requirements of Condition 4(c)(v) shall apply in respect of each Interest Period falling within such Interest Basis Period.
For the purposes of this Condition 4(d):
"First Interest Basis Period" means the period from (and including) the Interest Commencement Date to (but excluding) the Interest Basis Conversion Date;
"Interest Basis" means the First Interest Basis or the Second Interest Basis, as applicable;
"Interest Basis Conversion Date" shall have the meaning specified in the applicable Final Terms;
"Interest Basis Period" means the First Interest Basis Period or the Second Interest Basis Period, as applicable;
"Interest Payment Date(s)" means, in relation to each Interest Basis:
"Second Interest Basis Period" means the period from (and including) the Interest Basis Conversion Date to (but excluding) the Maturity Date.
Each Note (or in the case of the redemption of part only of a Note, that part only of such Note) will cease to bear interest (if any) from the date fixed for its redemption unless payment of principal is improperly withheld or refused. In such event, interest will continue to accrue as provided in Condition 6(k).
In these Terms and Conditions, "Business Day" means a day which is:
(i) a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in London and any Additional Business Centre specified in the applicable Final Terms; and
If a Business Day Convention (or, in respect of any Reset Date in respect of Floating Rate Notes or Variable Interest Notes, a Reset Date Business Day Convention) is specified in the applicable Final Terms and if any Interest Payment Date, Maturity Date or any other date (as specified in the applicable Final Terms) would otherwise fall on a day which is not a Business Day, then, if the Business Day Convention (or the Reset Date Business Day Convention, as applicable) specified is:
month which falls the Interest Period after the preceding applicable Interest Payment Date unless (B) such Business Day would thereby fall into the next calendar month, in which event (C) such Interest Payment Date shall be brought forward to the immediately preceding Business Day and (D) each subsequent Interest Payment Date shall be the last Business Day in the month which falls the Interest Period after the preceding applicable Interest Payment Date; or
(ii) in the case where there is no numerically corresponding day in the calendar month on which an Interest Payment Date should occur, shall be the last day that is a Business Day in the relevant month and the provisions of Condition 4(c)(i)(B) above shall apply mutatis mutandis.
"Day Count Fraction" means, in respect of the calculation of an amount of interest for any Interest Period:
(b) in the case of Notes where the Accrual Period is longer than the Determination Period during which the Accrual Period ends, the sum of:
(2) if "Actual/Actual (ISDA)" is specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 365 (or, if any portion of that Interest Period falls in a leap year, the sum of (A) the actual number of days in that portion of the Interest Period falling in a leap year divided by 366 and (B) the actual number of days in that portion of the Interest Period falling in a non-leap year divided by 365);
| [360 x (Y2 – Y1)] + [30 x (M2 - M1)] + (D2 - D1) |
|
|---|---|
| Day Count Fraction = | 360 |
where:
"Y1" is the year, expressed as a number, in which the first day of the Interest Period falls;
"Y2" is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls;
"M1" is the calendar month, expressed as a number, in which the first day of the Interest Period falls;
"M2" is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls;
"D1" is the first calendar day, expressed as a number, of the Interest Period, unless such number is 31, in which case D1 will be 30; and
"D2" is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless such number would be 31 and D1 is greater than 29, in which case D2 will be 30;
(6) if "30E/360" is specified in the applicable Final Terms, the number of days in the Interest Period divided by 360, calculated on a formula basis as follows:
[360 x (Y2 – Y1)] + [30 x (M2 - M1)] + (D2 - D1) Day Count Fraction = 360
where:
"Y1" is the year, expressed as a number, in which the first day of the Interest Period falls;
"Y2" is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls;
"M1" is the calendar month, expressed as a number, in which the first day of the Interest Period falls;
"M2" is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls;
"D1" is the first calendar day, expressed as a number, of the Interest Period, unless such number would be 31, in which case D1 will be 30; and
"D2" is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless such number would be 31, in which case D2 will be 30;
(7) if "30E/360 (ISDA)" is specified in the applicable Final Terms, the number of days in the Interest Period divided by 360, calculated on a formula basis as follows:
$$
Day Count Fraction = \frac{[360 \times (Y_2 - Y_1)] + [30 \times (M_2 - M_1)] + (D_2 - D_1)}{360}
$$
where:
"Y1" is the year, expressed as a number, in which the first day of the Interest Period falls;
"Y2" is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls;
"M1" is the calendar month, expressed as a number, in which the first day of the Interest Period falls;
"M2" is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls;
"D1" is the first calendar day, expressed as a number, of the Interest Period, unless (i) that day is the last day of February or (ii) such number would be 31, in which case D1 will be 30; and
"D2" is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless (i) that day is the last day of February but not the Maturity Date or (ii) such number would be 31, in which case D2 will be 30.
(8) if "RBA Bond Basis" is specified in the applicable Final Terms, one divided by the number of Interest Payment Dates in each twelve-month period (or, where the calculation period does not constitute an Interest Period, one divided by the number of Interest Payment Dates in each twelve-month period multiplied by the actual number of days in the calculation period divided by the number of days in the Interest Period ending on the next Interest Payment Date).
"Determination Period" means each period from (and including) a Determination Date to (but excluding) the next Determination Date (including, where either the Interest Commencement Date or the final Interest Payment Date is not a Determination Date, the period commencing on the first Determination Date prior to, and ending on the first Determination Date falling after, such date); and
"Interest Period" means the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date.
If "adjusted" is specified in the applicable Final Terms in the Day Count Fraction item, interest in respect of the relevant Interest Period shall be payable in arrear on the relevant Interest Payment Date and calculated from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date, as such Interest Payment Date shall, where applicable, be adjusted in accordance with the Business Day Convention.
If "unadjusted" is specified in the applicable Final Terms in the Day Count Fraction item, interest in respect of the relevant Interest Period shall be payable in arrear on the relevant Interest Payment Date, as adjusted in accordance with the Business Day Convention, but shall be calculated in respect of the period from (and including) a Period End Date (or the Interest Commencement Date) to (but excluding) the next (or first) Period End Date. For the purpose of this paragraph "Period End Date" means an Interest Payment Date prior to any modification as result of any Business Day Convention.
Subject as provided below:
(i) payments in a Specified Currency other than euro will be made by credit or transfer to an account in the relevant Specified Currency maintained by the payee with, or, at the option of the payee, by a cheque in such Specified Currency drawn on, a bank in the principal financial centre of the country of such Specified Currency; and
(ii) payments in euro will be made by credit or transfer to a euro account (or any other account to which euro may be credited or transferred) specified by the payee or, at the option of the payee, by a euro cheque.
Payments will be subject in all cases to: (A) any fiscal or other laws and regulations applicable thereto in any jurisdiction, but without prejudice to the provisions of Condition 7; and (B) any withholding or deduction required pursuant to an agreement described in Section 1471(b) of the U.S. Internal Revenue Code of 1986 (the "Code") or otherwise imposed pursuant to Sections 1471 through 1474 of the Code, any regulations or agreements thereunder, official interpretations thereof, or any law implementing an intergovernmental approach thereto, and the Issuer shall not be required to pay any additional amounts under Condition 7 (Taxation) on account of any such deduction or withholding described in this limb (B).
Payments of principal in respect of definitive Bearer Notes will (subject as provided below) be made in the manner provided in paragraph (a) above only against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of definitive Bearer Notes, and payments of interest in respect of definitive Bearer Notes will (subject as provided below) be made as aforesaid only against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of Coupons, in each case at the specified office of any Paying Agent outside the United States (which expression, as used herein, means the United States of America (including the States and the District of Columbia, its territories, its possessions and other areas subject to its jurisdiction)).
Fixed Rate Notes in definitive bearer form (other than Long Maturity Notes (as defined below)) should be presented for payment together with all unmatured Coupons appertaining thereto (which expression shall for this purpose include Coupons falling to be issued on exchange of matured Talons), failing which the amount of any missing unmatured Coupon (or, in the case of payment not being made in full, the same proportion of the amount of such missing unmatured Coupon as the sum so paid bears to the sum due) will be deducted from the sum due for payment. Each amount of principal so deducted will be paid in the manner mentioned above against surrender of the relative missing Coupon at any time before the expiry of 10 years after the Relevant Date (as defined in Condition 7) in respect of such principal (whether or not such Coupon would otherwise have become void under Condition 8) or, if later, five years from the date on which such Coupon would otherwise have become due, but in no event thereafter.
Upon any Fixed Rate Note in definitive bearer form becoming due and repayable prior to its Maturity Date, all unmatured Talons (if any) appertaining thereto will become void and no further Coupons will be issued in respect thereof.
Upon the date on which any Floating Rate Note, Fixed Rate Reset Note, Variable Interest Note or Long Maturity Note in definitive bearer form becomes due and repayable, unmatured Coupons and Talons (if any) relating thereto (whether or not attached) shall become void and no payment or, as the case may be, exchange for
further Coupons shall be made in respect thereof. A "Long Maturity Note" is a Fixed Rate Note (other than a Fixed Rate Note which on issue had a Talon attached) whose nominal amount on issue is less than the aggregate interest payable thereon provided that such Note shall cease to be a Long Maturity Note on the Interest Payment Date on which the aggregate amount of interest remaining to be paid after that date is less than the nominal amount of such Note.
If the due date for redemption of any definitive Bearer Note is not an Interest Payment Date, interest (if any) accrued in respect of such Note from (and including) the preceding Interest Payment Date or, as the case may be, the Interest Commencement Date shall be payable only against presentation and surrender of the relevant definitive Bearer Note.
Payments of principal and interest (if any) in respect of Notes represented by any Bearer Global Note will (subject as provided below) be made in the manner specified above in relation to definitive Bearer Notes or otherwise in the manner specified in the relevant Bearer Global Note, where applicable, against presentation or surrender, as the case may be, of such Bearer Global Note at the specified office of any Paying Agent outside the United States. A record of each payment, distinguishing between any payment of principal and any payment of interest, will be made on such Bearer Global Note either by the Paying Agent to which it was presented, and such record shall be prima facie evidence that the payment in question has been made, or in the records of Euroclear and Clearstream, Luxembourg, as applicable.
No payments of principal, interest or other amounts due in respect of a Bearer Global Note will be made by mail to an address in the United States or by transfer to an account maintained in the United States.
Payments of principal in respect of each Registered Note (whether or not in global form) will be made against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of the Registered Note at the specified office of the Registrar or any of the Paying Agents. Such payments will be made by transfer to the Designated Account (as defined below) of the holder (or the first named of joint holders) of the Registered Note appearing in the register of holders of the Registered Notes maintained by the Registrar (the "Register") (i) where in global form, at the close of the business day (being for this purpose a day on which Euroclear and Clearstream, Luxembourg or any other relevant clearing system are open for business) before the relevant due date, and (ii) where in definitive form, at the close of business on the fifteenth calendar day before the relevant due date (in each case, the "Record Date"). Notwithstanding the previous sentence, if (i) a holder does not have a Designated Account or (ii) the nominal amount of the Notes held by a holder is less than U.S.\$100,000 (or its equivalent), payment will instead be made by a cheque in the Specified Currency drawn on a Designated Bank (as defined below). For these purposes, "Designated Account" means the account maintained by a holder with a Designated Bank and identified as such in the Register and "Designated Bank" means (in the case of payment in a
Specified Currency other than euro) a bank in the principal financial centre of the country of such Specified Currency and (in the case of a payment in euro) any bank which processes payments in euro.
Payments of interest in respect of each Registered Note (whether or not in global form) will be made by a cheque in the Specified Currency drawn on a Designated Bank and mailed by uninsured mail on the business day in the city where the specified office of the Registrar is located immediately preceding the relevant due date to the holder (or the first named of joint holders) of the Registered Note appearing in the Register at the close of business on the Record Date at his address shown in the Register on the Record Date and at his risk. Upon application of the holder to the specified office of the Registrar not less than three business days in the city where the specified office of the Registrar is located before the due date for any payment of interest in respect of a Registered Note, the payment may be made by transfer on the due date in the manner provided in the preceding paragraph. Any such application for transfer shall be deemed to relate to all future payments of interest (other than interest due on redemption) in respect of the Registered Notes which become payable to the holder who has made the initial application until such time as the Registrar is notified in writing to the contrary by such holder. Payment of the interest due in respect of each Registered Note on redemption will be made in the same manner as payment of the principal amount of such Registered Note.
Holders of Registered Notes will not be entitled to any interest or other payment for any delay in receiving any amount due in respect of any Registered Note as a result of a cheque posted in accordance with this Condition arriving after the due date for payment or being lost in the post. No commissions or expenses shall be charged to such holders by the Registrar in respect of any payments of principal or interest in respect of the Registered Notes.
All amounts payable to DTC or its nominee as registered holder of a Rule 144A Global Note in respect of Notes denominated in a Specified Currency other than U.S. dollars shall be paid by transfer by the Registrar to an account in the relevant Specified Currency of the Exchange Agent on behalf of DTC or its nominee for payment in such Specified Currency for conversion into U.S. dollars in accordance with the provisions of the Agency Agreement.
None of the Issuer, the Trustee and the Agents will have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial ownership interests in the Registered Global Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.
For so long as the Notes of a Series are listed on the Official List and admitted to trading on the London Stock Exchange's market for listed securities and for so long as the rules of the UK Listing Authority so require, the Issuer shall procure that there is a Paying Agent approved in writing by the Trustee in the City of London for the payment of principal and interest, if any, on the Notes.
The holder of a Global Note shall be the only person entitled to receive payments in respect of Notes represented by such Global Note and the Issuer will be discharged by payment to, or to the order of, the holder of such Global Note in respect of each amount so paid. Each of the persons shown in the records of DTC, Euroclear or Clearstream, Luxembourg as the beneficial holder of a particular nominal amount of Notes represented by such Global Note must look solely to DTC, Euroclear or Clearstream, Luxembourg, as the case may be, for his share of each payment so made by the Issuer to, or to the order of, the holder of such Global Note.
Notwithstanding the foregoing provisions of this Condition, if any amount of principal and/or interest in respect of Bearer Notes is payable in U.S. dollars, such U.S. dollar payments of principal and/or interest in respect of such Notes will be made at the specified office of a Paying Agent in the United States if:
If the date for payment of any amount in respect of any Note or Coupon is not a Payment Day, the holder thereof shall not be entitled to payment until the next following Payment Day and shall not be entitled to any further payment in respect of such delay. "Payment Day" means any day which (subject to Condition 8):
Any reference in these Terms and Conditions to principal in respect of the Notes shall be deemed to include, as applicable:
Any reference in these Terms and Conditions to interest in respect of the Notes shall be deemed to include, as applicable, any additional amounts which may be payable with respect to interest under Condition 7.
Unless previously redeemed or purchased and cancelled as specified below or in the applicable Final Terms, each Note will be redeemed by the Issuer at its Final Redemption Amount specified in the applicable Final Terms in the relevant Specified Currency on the Maturity Date.
amount of the Notes) in computing its taxation liabilities or the amount of the deduction would be materially reduced; or
(each such event, a "Tax Event") then the Issuer may (subject, in the case of Dated Subordinated Notes and Senior Notes issued by Santander UK Group Holdings, to Condition 6(j)), provided that in the case of each Tax Event, the consequences of the Tax Event cannot be avoided by the Issuer taking reasonable measures available to it, having given not less than 30 nor more than 60 days' notice to the Trustee, the Principal Paying Agent and, in accordance with Condition 13, the Noteholders (which notice shall be irrevocable), redeem all, but not some only, of the Notes at any time (if this Note is neither a Floating Rate Note nor a Variable Interest Note) or on the next Interest Payment Date (in the case of Floating Rate Notes or Variable Interest Notes). Upon the expiry of such notice the Issuer shall be bound to redeem the Notes accordingly.
Prior to the publication of any notice of redemption pursuant to this Condition 6(b), the Issuer shall deliver to the Trustee a certificate signed by two authorised signatories of the Issuer stating that the relevant requirement or circumstance referred to in this Condition 6(b) applies and the consequences of the relevant Tax Event cannot be avoided by the Issuer taking reasonable measures available to it. Such certificate shall, in the absence of manifest error, be treated and accepted by the Issuer, the Trustee, the Noteholders and all other interested parties as correct, conclusive and sufficient evidence thereof and the Trustee is entitled to rely on such certificate without liability to any person.
In these Conditions:
"Tax Law Change" means a change in, or amendment to, the laws or regulations of the United Kingdom or the taxing jurisdiction of any territory in which the Issuer is incorporated or resident for tax purposes, or any political subdivision or authority therein or thereof having the power to tax, including any treaty to which the UK is a party, or any change in the application of such laws by a decision of any court or tribunal, that provides for a position with respect to such laws or regulations that differs from the previously generally accepted position in relation to similar transactions (in respect of securities similar to the relevant Notes and which, in the case of the Dated Subordinated Notes, are capable of constituting Tier 2 Capital) or which differs from any specific written confirmation given by a tax authority in respect of the relevant Notes, which change or amendment becomes effective or, in the case of a change in law, if such change is enacted by a UK Act of Parliament or by Statutory Instrument, on or after the Issue Date of the first Tranche of Notes of the relevant Series.
Notes redeemed pursuant to this Condition 6(b) will be redeemed at their Early Redemption Amount determined pursuant to Condition 6(g) below.
If the Issuer Call is specified as being applicable in the applicable Final Terms, the Issuer may (subject, in the case of Dated Subordinated Notes and Senior Notes issued by Santander UK Group Holdings, to Condition 6(j)) having given not less than the minimum period nor more than the maximum period of notice specified in the applicable Final Terms to the Trustee, the Principal Paying Agent, the Noteholders, and in the case of a redemption of Registered Notes, the Registrar, (which notice shall be irrevocable and shall specify the date fixed for redemption) redeem all or (if so specified in the applicable Final Terms) some only of the Notes then outstanding on any Optional Redemption Date and at the Optional Redemption Amount(s) specified in, or determined in the manner specified in, the applicable Final Terms together, if appropriate, with interest accrued to (but excluding) the relevant Optional Redemption Date. Any such redemption must be of a nominal amount not less than the Minimum Redemption Amount and not more than the Maximum Redemption Amount (if any). In the case of a partial redemption of Notes, the Notes to be redeemed ("Redeemed Notes") will be selected individually by lot, in the case of Redeemed Notes represented by definitive Notes, and in accordance with the rules of DTC and/or Euroclear and/or Clearstream, Luxembourg, (to be reflected in the records of Euroclear and Clearstream, Luxembourg as either a pool factor or a reduction in nominal amount, at their discretion) in the case of Redeemed Notes represented by a Global Note, not more than 30 days prior to the date fixed for redemption (such date of selection being hereinafter called the "Selection Date"). In the case of Redeemed Notes represented by definitive Notes, a list of the serial numbers of such Redeemed Notes will be published in accordance with Condition 13 not less than the minimum period specified in the applicable Final Terms prior to the date fixed for redemption. No exchange of the relevant Global Note will be permitted during the period from (and including) the Selection Date to (and including) the date fixed for redemption pursuant to this paragraph (c) and notice to that effect shall be given by the Issuer to the Noteholders in accordance with Condition 13 at least five days prior to the Selection Date.
This Condition 6(d) is only applicable to Dated Subordinated Notes issued by Santander UK Group Holdings.
If the Regulatory Capital Event Call is specified as being applicable in the applicable Final Terms relating to Dated Subordinated Notes and a Regulatory Capital Event has occurred and is continuing, the Issuer may (subject to Condition 6(j)), having given not less than 30 nor more than 60 days' notice to the Trustee, the Principal Paying Agent and, in accordance with Condition 13, the Noteholders (which notice shall be irrevocable), redeem all, but not some only, of the Dated Subordinated Notes at any time (if this Dated Subordinated Note is neither a Floating Rate Note nor a Variable Interest Note) or on the next Interest Payment Date (in the case of Floating Rate Notes or Variable Interest Notes). Upon the expiry of such notice the Issuer shall be bound to redeem the Dated Subordinated Notes accordingly. Prior to the publication of any notice of redemption pursuant to this Condition 6(d), the Issuer shall deliver to the Trustee a certificate signed by two authorised signatories of the Issuer stating that the relevant requirement or circumstance referred to in this Condition 6(d) applies. Such certificate shall, in the absence of manifest error, be treated and accepted by the Issuer, the Trustee, the Noteholders and all other interested parties as correct, conclusive and sufficient evidence thereof and the Trustee is entitled to rely on such certificate without liability to any person.
Dated Subordinated Notes redeemed pursuant to this Condition 6(d) will be redeemed at their Early Redemption Amount determined pursuant to Condition 6(g) below.
In these Conditions, a "Regulatory Capital Event" will occur if at any time there is a change in the regulatory classification of the Dated Subordinated Notes occurring after the Issue Date of the first Tranche of Notes of the relevant Series that does, or will, result in the Dated Subordinated Notes being fully excluded from the Tier 2 Capital of the Group.
This Condition 6(e) is only applicable to Senior Notes issued by Santander UK Group Holdings or Senior Notes issued by Santander UK.
If Investor Put is specified as being applicable in the applicable Final Terms in respect of any Senior Notes, upon the holder of any Senior Note giving to the Issuer in accordance with Condition 13 not less than the minimum period nor more than the maximum period of notice specified in the applicable Final Terms specified in the applicable Final Terms (which notice shall be irrevocable) the Issuer will, upon the expiry of such notice, redeem in whole (but not, in the case of a Bearer Note in definitive form, in part), such Note on the Optional Redemption Date and at the Optional Redemption Amount together, if appropriate, with interest accrued to (but excluding) the Optional Redemption Date. Registered Notes may be redeemed under this Condition 6(e) in any multiple of their lowest Specified Denomination.
If this Note is in definitive form, to exercise the right to require redemption of this Note, the holder of this Note must deliver such Note at the specified office of any Paying Agent (in the case of Bearer Notes) or the Registrar (in the case of Registered Notes) at any time during normal business hours of such Paying Agent or, as the case may be, the Registrar falling within the notice period, accompanied by a duly completed and signed notice of exercise in the form (for the time being current) obtainable from any specified office of any Paying Agent or, as the case may be, the Registrar (a "Put Notice") and in which the holder must specify a bank account (or, if payment is required to be made by cheque, an address) to which payment is to be made under this Condition and, in the case of Registered Notes, the nominal amount thereof to be redeemed and, if less than the full nominal amount of the Registered Notes so surrendered is to be redeemed, an address to which a new Registered Note in respect of the balance of such Registered Notes is to be sent subject to and in accordance with the provisions of Condition 2(b). Holders of Notes represented by a Global Note or in definitive form and held through DTC, Euroclear and/or Clearstream, Luxembourg must exercise the right to require redemption of their Notes by giving notice (including all information required in the applicable Put Notice) through DTC, Euroclear or Clearstream, Luxembourg, as the case may be (which notice may be in electronic form) in accordance with their standard procedures.
This Condition 6(f) is only applicable to Senior Notes issued by Santander UK Group Holdings.
If the Loss Absorption Disqualification Event Call is specified as being applicable in the applicable Final Terms relating to Senior Notes issued by Santander UK Group Holdings and a Loss Absorption Disqualification Event has occurred and is continuing, the Issuer may (subject to Condition 6(j)), having given not less than the minimum period nor more than the maximum period of notice specified in the applicable Final Terms to the Trustee, the Principal Paying Agent, the Noteholders and, in the case of a redemption of Registered Notes, the Registrar, (which notice shall be irrevocable and shall specify the date fixed for redemption (the "Loss Absorption Disqualification Redemption Date")) redeem all, but not some only, of such Senior Notes at any time (if this Senior Note is neither a Floating Rate Note nor a Variable Interest Note) or on the next Interest Payment Date (in the case of Floating Rate Notes or Variable Interest Notes) and at the Loss Absorption Disqualification Redemption Amount(s) specified in, or determined in the manner specified in, the applicable Final Terms together, if appropriate, with interest accrued to (but excluding) the Loss Absorption Disqualification Redemption Date. Upon the expiry of such notice the Issuer shall be bound to redeem such Senior Notes accordingly. Prior to the publication of any notice of redemption pursuant to this Condition 6(f), the Issuer shall deliver to the Trustee a certificate signed by two duly authorised signatories of the Issuer stating that the relevant requirement or circumstance referred to in this Condition 6(f) applies and any preconditions to the exercise of the Loss Absorption Disqualification Event Call specified in any Loss Absorption Regulation are satisfied. Such certificate shall, in the absence of manifest error, be treated and accepted by the Issuer, the Trustee, the Noteholders and all other
interested parties as correct, conclusive and sufficient evidence thereof and the Trustee is entitled to rely on such certificate without liability to any person.
In these Conditions, a "Loss Absorption Disqualification Event" will occur if:
in each case as such minimum requirements are applicable to the Issuer of such Senior Notes and/or the Group and determined in accordance with, and pursuant to, the relevant Loss Absorption Regulations; provided that in the case of (i) and (ii) above, a Loss Absorption Disqualification Event shall not occur where the exclusion of such Senior Notes from the relevant minimum requirement(s) is due to the remaining maturity of such Senior Notes being less than any period prescribed by any applicable eligibility criteria for such minimum requirements under the relevant Loss Absorption Regulations effective with respect to the Issuer and/or the Group on the Issue Date of such Senior Notes.
In these Conditions, "Loss Absorption Regulations" means, at any time, the laws, regulations, requirements, guidelines, rules, standards and policies relating to minimum requirements for own funds and eligible liabilities and/or loss absorbing capacity instruments of the United Kingdom, the PRA, the United Kingdom resolution authority, the Financial Stability Board and/or of the European Parliament or of the Council of the European Union then in effect in the United Kingdom including, without limitation to the generality of the foregoing, any delegated or implementing acts (such as regulatory technical standards) adopted by the European Commission which are applicable to the United Kingdom and any regulations, requirements, guidelines, rules, standards and policies relating to minimum requirements for own funds and eligible liabilities and/or loss absorbing capacity instruments adopted by the PRA and/or the United Kingdom resolution authority from time to time (whether or not such regulations, requirements, guidelines, rules, standards or policies are applied generally or specifically to the Issuer or to the Group).
For the purpose of Conditions 6(b) and 6(d) above and Condition 9, each Note will be redeemed at its Early Redemption Amount calculated as follows:
The Issuer or any Subsidiary of the Issuer may (subject, in the case of Dated Subordinated Notes and Senior Notes issued by Santander UK Group Holdings, to Condition 6(j)) at any time purchase Notes (provided that, in the case of definitive Bearer Notes, all unmatured Coupons and Talons appertaining thereto are purchased therewith) at any price in the open market or otherwise. Such Notes may be held, reissued, resold or, at the option of the Issuer or the relevant Subsidiary (as applicable), surrendered to any Paying Agent and/or the Registrar.
For the purposes of this Condition 6(h), a company is a "Subsidiary" of another company if that other company:
(c) is a member of it and controls alone, pursuant to an agreement with other members, a majority of the voting rights in it,
or if it is a Subsidiary of a company that is itself a Subsidiary of that other company.
All Notes which are redeemed will forthwith be cancelled (together with all unmatured Coupons and Talons attached thereto or surrendered therewith at the time of redemption). All Notes so cancelled and Notes purchased and cancelled pursuant to paragraph (f) above (together with all unmatured Coupons and Talons cancelled therewith) shall be forwarded to the Principal Paying Agent and cannot be reissued or resold.
Any redemption or purchase of Dated Subordinated Notes (and/or Senior Notes issued by Santander UK Group Holdings, if applicable pursuant to any Loss Absorption Regulations) pursuant to Conditions 6(b), 6(c), 6(d), 6(f) or 6(h) is subject to:
For the purposes of this Condition 6:
"Regulatory Approval" means, at any time, such approval, consent or prior permission by, or notification required within prescribed periods to, the Regulator, or such waiver of the then prevailing Capital Rules in the case of Dated Subordinated Notes, or the then prevailing Loss Absorption Regulations in the case of Senior Notes issued by Santander UK Group Holdings, from the Regulator, as is required under the then prevailing Capital Rules in the case of Dated Subordinated Notes, or the then prevailing Loss Absorption Regulations in the case of Senior Notes issued by Santander UK Group Holdings, at such time; and
(b) in the case of a redemption pursuant to Conditions 6(b) or 6(d) occurring prior to the fifth anniversary of the Issue Date of the first Tranche of the relevant Series of the Dated Subordinated Notes only,
(i) the Regulator being satisfied (such satisfaction to be evidenced by the granting of Regulatory Approval) that the Issuer has demonstrated to the satisfaction of the Regulator that the circumstance that entitles the Issuer to exercise its right of redemption was not reasonably foreseeable, judged at the Issue Date of the first Tranche of the relevant Series of the Dated Subordinated Notes and is (in the case of a redemption pursuant to Condition 6(d)) sufficiently certain or (in the case of a redemption pursuant to Condition 6(b)) material; or
If any amount payable in respect of any Note is improperly withheld or refused upon its becoming due and repayable or is paid after its due date or on or after accelerated maturity following an Event of Default (as defined in Condition 9), the principal amount due and repayable in respect of such Note (the "Late Payment") shall itself accrue (in the case of Zero Coupon Notes only) or continue to accrue (in the case of any other Notes) interest (both before and after any judgment or other order of a court of competent jurisdiction) from (and including) the date on which such payment was improperly withheld or refused or, as the case may be, became due, to (but excluding) the Late Payment Date in accordance with the following provisions:
in each case on the basis of the Day Count Fraction specified in the applicable Final Terms or, if none is specified, on a 30/360 basis.
For the purpose of this paragraph (h) the "Late Payment Date" shall mean the earlier of:
interest as aforesaid) in the relevant currency in respect of such Note is available for payment,
provided that in the case of both (A) and (B), upon further presentation thereof being duly made, such payment is made.
All payments of principal and interest in respect of the Notes and Coupons by or on behalf of the Issuer will be made without withholding of or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatsoever nature imposed or levied by or on behalf of the United Kingdom or the taxing jurisdiction of any territory in which the Issuer is incorporated or resident for taxation purposes, or any political subdivision of either of the same or by any authority therein or thereof having power to tax, unless the withholding or deduction of such taxes, duties, assessments or governmental charges is required by law. In that event (but not in respect of any payment of principal in respect of Dated Subordinated Notes) the Issuer will pay such additional amounts as may be necessary in order that the net amounts receivable by the holders after such withholding or deduction shall equal the respective amounts of principal, and interest, if applicable, which would have been receivable in respect of the Notes or Coupons, as the case may be, in the absence of any requirement to make such withholding or deduction, except that no such additional amounts shall be payable in relation to any payment with respect to any Note or Coupon:
The "Relevant Date" means the date on which the payment in respect of the Note or Coupon first becomes due and payable but, if the full amount of the moneys payable on such date has not been received by the Principal Paying Agent or the Trustee on or prior to such date, the "Relevant Date" means the date on which such moneys shall
have been so received and notice to that effect shall have been given to the Noteholders in accordance with Condition 13.
All payments in respect of the Notes will be made subject to any withholding or deduction required pursuant to an agreement described in Section 1471(b) of the Code or otherwise imposed pursuant to Sections 1471 through 1474 of the Code, any regulations or agreements thereunder, official interpretations thereof, or any law implementing an intergovernmental approach thereto, and the Issuer shall not be required to pay any additional amounts under this Condition on account of any such deduction or withholding described in this paragraph.
The Notes and, if applicable, the Coupons (which for this purpose shall not include Talons) will become void unless claims in respect of principal and/or interest are made within a period of 10 years in the case of principal and five years in the case of interest from the Relevant Date (as defined in Condition 7) relating hereto. The Issuer shall be discharged from its obligation to pay principal on a Registered Note to the extent that the relevant Registered Note certificate has not been surrendered to the Registrar by, or a cheque which has been duly despatched in the Specified Currency remains uncashed at, the end of the period of 10 years from the Relevant Date in respect of such payment. The Issuer shall be discharged from its obligation to pay interest on a Registered Note to the extent that a cheque which has been duly despatched in the Specified Currency remains uncashed at the end of the period of five years from the Relevant Date in respect of such payment. There shall not be included in any Coupon sheet issued on exchange of a Talon any Coupon the claim for payment in respect of which would be void pursuant to this Condition or Condition 5(b) or any Talon which would be void pursuant to Condition 5(b).
Subject to Condition 9(b) and Condition 9(c) in the case of any Series of Senior Notes issued by Santander UK Group Holdings, the Trustee at its discretion may, and if so requested in writing by the holders of at least one-quarter in nominal amount of the Senior Notes then outstanding or if so directed by an Extraordinary Resolution of the Noteholders shall (subject in each case to being indemnified and/or secured and/or prefunded to its satisfaction), give notice to the Issuer that the Senior Notes are, and they shall accordingly thereby become, immediately due and repayable each at their Early Redemption Amount (determined pursuant to Condition 6(g)) together with accrued interest as provided in the Trust Deed, in any of the following events ("Events of Default"):
(i) if default is made for a period of 14 days or more in the payment of any principal or interest due in respect of the Notes or any of them and such sum has not been duly paid within a further 14 days following written notice from the Trustee to the Issuer requiring the non-payment to be made good, provided that it shall not be such a default if, during the 14 days after the Trustee's notice it satisfies the Trustee that such payment was refused or withheld in order to comply with any fiscal or other law or regulation or with the order of any court of competent jurisdiction. Where there is doubt as to the validity or applicability of any such law, regulation or order, it shall not be such a default to refuse or withhold any such payment in accordance with advice given at any time during the said period of 14 days by independent legal advisers acceptable to the Trustee; or
provided that, in the case of an Event of Default described in paragraph (ii) above, the Trustee shall have certified to the Issuer that such Event of Default is, in its opinion, materially prejudicial to the interests of the Noteholders.
At any time after the Senior Notes or any of them shall have become immediately due and repayable and have not been repaid, the Trustee may, at its discretion and without further notice, institute such steps, actions or proceedings against the Issuer as it may think fit to enforce repayment thereof together with accrued interest, if any, and to enforce the provisions of the Trust Deed, but it shall not be bound to institute any such steps, actions or proceedings unless (a) it shall have been so directed by an Extraordinary Resolution of the Noteholders or so requested in writing by the holders of at least one-quarter of the nominal amount of the Notes then outstanding and (b) it shall have been indemnified and/or secured and/or prefunded to its satisfaction. No Noteholder or Couponholder shall be entitled to proceed against the Issuer unless the Trustee, having become bound so to proceed, fails to do so within a reasonable time and such failure is continuing.
This Condition 9(b) is only applicable to Notes issued by Santander UK Group Holdings.
In the case of (i) Dated Subordinated Notes (ii) any Series of Senior Notes issued by Santander UK Group Holdings for which Restrictive Events of Default is specified as being applicable in the applicable Final Terms or (iii) any Series of Senior Notes issued by Santander UK Group Holdings to which this Condition 9(b) applies pursuant to Condition 9(c):
payable by it. Nothing in this Condition 9(b)(iii) shall, subject to Condition 9(b)(i), prevent the Trustee instituting steps, actions or proceedings for the winding-up of the Issuer, proving in any winding-up of the Issuer and/or claiming in any liquidation of the Issuer in respect of any payment obligations of the Issuer arising from the Dated Subordinated Notes or, if applicable, the Senior Notes issued by Santander UK Group Holdings, and the relative Coupons (if any) or the Trust Deed (including without limitation, payment of any principal or interest in respect of the Dated Subordinated Notes or, if applicable, the Senior Notes issued by Santander UK Group Holdings, and the relative Coupons (if any) and any damages awarded for any breach of any obligations);
This Condition 9(c) is only applicable to Senior Notes issued by Santander UK Group Holdings.
Should any Note or, if applicable, Coupon or Talon be lost, stolen, mutilated, defaced or destroyed it may be replaced, in the case of Bearer Notes or Coupons, at the specified office of the Principal Paying Agent or, in the case of Registered Notes, at the specified office of the Registrar (or in any case such other place of which notice shall have been given to the Noteholders in accordance with Condition 13) upon payment in any such case by the claimant of the expenses incurred in connection therewith and on such terms as to evidence and indemnity as the Issuer may reasonably require. Mutilated or defaced Notes or, if applicable, Coupons or Talons must be surrendered before replacements will be issued.
The names of the initial Agents and their initial specified offices are set out below. If any additional Paying Agent(s) are appointed in connection with any Series, the names of such Paying Agent(s) will be specified in Part B of the applicable Final Terms.
The Issuer is entitled, subject to the prior written approval of the Trustee, to vary or terminate the appointment of any Agent and/or approve any change in the specified office through which any Agent acts and/or, subject to prior consultation with the Trustee, appoint additional or other Agents, provided that:
(b) so long as the Notes are listed on any stock exchange or admitted to listing by any other relevant authority, there will at all times be a Paying Agent (in the case of Bearer Notes) and a Transfer Agent (in the case of Registered Note) with a specified office in such place as may be required by the rules and regulations of the relevant stock exchange or other relevant authority;
(c) there will at all times be a Paying Agent with a specified office in a city approved in writing by the Trustee in continental Europe other than any such jurisdiction in which the Issuer is incorporated or resident for tax purposes; and
In addition, the Issuer shall forthwith appoint a Paying Agent having a specified office in New York City in the circumstances described in Condition 5(e). Notice of any variation, termination, appointment or change in respect of the Agents relating to the Notes will be given to the Noteholders promptly by the Issuer in accordance with Condition 13.
In acting under the Agency Agreement, the Agents act solely as agents or, as the case may be, registrars of the Issuer and, in certain circumstances, of the Trustee and do not assume any obligation to, or relationship of agency or trust with, any Noteholders or Couponholders. The Agency Agreement contains provisions permitting any entity into which any Agent is merged or converted or with which it is consolidated or to which it transfers all or substantially all of its assets to become the successor agent.
On and after the Interest Payment Date on which the final Coupon comprised in any Coupon sheet matures, the Talon (if any) forming part of such Coupon sheet may be surrendered at the specified office of the Principal Paying Agent or any other Paying Agent in exchange for a further Coupon sheet including (if such further Coupon sheet does not include Coupons to (and including) the final date for the payment of interest due in respect of the Note to which it appertains) a further Talon, subject to the provisions of Condition 8.
All notices regarding the Bearer Notes will be deemed to be validly given if published in one leading English language daily newspaper of general circulation in London. It is expected that such publication will be made in the Financial Times in London. The Issuer shall also ensure that notices are duly published in a manner which complies with the rules and regulations of any stock exchange or any other relevant authority on which the Bearer Notes are for the time being listed or by which they have been admitted to listing. Any such notice will be deemed to have been given on the date of the first publication. If publication as provided above is not practicable, notice will be given in such other manner, and will be deemed to have been given on such date, as the Trustee shall approve.
All notices regarding the Registered Notes will be deemed to be validly given if sent by first class mail or (if posted to an address overseas) by airmail to the holders (or the first named of joint holders) at their respective addresses recorded in the Register and will be deemed to have been given on the fourth day after mailing and, in addition, for so long as any Registered Notes are listed on a stock exchange or admitted to listing by any other relevant authority and the rules of that stock exchange or other relevant
authority so require, the relevant notice will be published in a daily newspaper of general circulation in the place or places required by the rules of that stock exchange or other relevant authority. Any such notice will be deemed to have been given on the date of such publication. If the giving of notice as provided above is not practicable, notice will be given in such other manner, and will be deemed to have been given on such date, as the Trustee shall approve.
Until such time as any definitive Notes are issued, notice may be given (so long as any Global Notes representing the Notes are held in their entirety on behalf of DTC, Euroclear and/or Clearstream, Luxembourg (and so long as the rules of any stock exchange on which the Notes are listed, or the rules of any other relevant authority by which the Notes have been admitted to listing, permit)) by delivery of the relevant notice to DTC, Euroclear and/or Clearstream, Luxembourg (instead of by way of publication or mailing) for communication by them to the holders of the Notes provided that, in addition, for so long as any Notes are listed on a stock exchange or admitted to listing by any other relevant authority and the rules of that stock exchange or other relevant authority so require, such notice will be published in a daily newspaper of general circulation in a place or places required by the rules of that stock exchange or other relevant authority. Any such notice shall be deemed to have been given to the holders of the Notes the day after the day on which the said notice was given to DTC, Euroclear and/or Clearstream, Luxembourg, as the case may be.
Notices to be given by any Noteholder shall be in writing and given by lodging the same, together (in the case of any Note in definitive form) with the relative Note or Notes, with the Principal Paying Agent (in the case of Bearer Notes) or the Registrar (in the case of Registered Notes). Whilst any of the Notes are represented by a Global Note, such notice may be given by any holder of a Note to the Principal Paying Agent or the Registrar through DTC, Euroclear and/or Clearstream, Luxembourg, as the case may be, in such manner as the Principal Paying Agent, the Registrar and DTC, Euroclear and/or Clearstream, Luxembourg, as the case may be, may approve for this purpose.
The Trust Deed contains provisions for convening meetings of the Noteholders to consider any matter affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of any of the provisions of these Terms and Conditions, the Notes, the Coupons or any of the provisions of the Trust Deed. Such a meeting may be convened by the Issuer or the Trustee and shall be convened by the Issuer at the request of Noteholders holding not less than ten per cent. in nominal amount of the Notes for the time being outstanding. The quorum at any such meeting for passing an Extraordinary Resolution is one or more persons holding or representing a clear majority in nominal amount of the Notes for the time being outstanding, or at any adjourned such meeting one or more persons being or representing Noteholders whatever the nominal amount of the Notes so held or represented, except that at any meeting the business of which includes the modification of certain provisions of these Terms and Conditions, the Notes, the Coupons or the Trust Deed as detailed in the Trust Deed, the quorum shall be one or more persons holding or representing not less than two-thirds, or at any adjourned such meeting one or more persons holding or representing not less than one-third, in nominal amount of the Notes for the time being
outstanding. An Extraordinary Resolution passed at any meeting of the Noteholders shall be binding on all the Noteholders, whether or not they are present at the meeting, and on all Couponholders.
The Trustee may agree, without the consent of the Noteholders or Couponholders, to:
The Issuer and the Principal Paying Agent may agree, without the consent of the Trustee, the Noteholders or Couponholders, to any modification of any of the provisions of any applicable Final Terms which is of a formal, minor or technical nature or is made to correct a manifest error.
The Trustee may also determine, without the consent of the Noteholders or the Couponholders, that any Event of Default or Potential Event of Default (as defined in the Trust Deed) shall not be treated as such if the Trustee is satisfied that so to do will not be materially prejudicial to the interests of the Noteholders.
Subject as provided in the Trust Deed, the Trustee, if it is satisfied that so to do would not be materially prejudicial to the interests of the Noteholders, may agree, without the consent of the Noteholders or Couponholders, to the substitution of any other person or persons incorporated in any country in the world in place of the Issuer as principal debtor under the Trust Deed, the Notes and, if applicable, the Coupons. The Trustee may also agree without the consent of the Noteholders or Couponholders to the addition of another company as an issuer of Notes under the Programme and the Trust Deed. Any such addition shall be subject to the relevant provisions of the Trust Deed and to such amendment thereof and such other conditions as the Trustee may require.
In connection with the exercise by it of any of its trusts, powers, authorities or discretions (including, but without limitation, any modification, waiver, authorisation, determination or substitution), the Trustee shall have regard to the general interests of the Noteholders as a class but shall not have regard to any interests arising from circumstances particular to individual Noteholders or Couponholders (whatever their number) and, in particular, but without limitation, shall not have regard to the consequences (including any tax consequences) of such exercise for individual Noteholders or Couponholders (whatever their number) resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory and the Trustee shall not be entitled to require, nor shall any Noteholder or Couponholder be entitled to claim, from the Issuer or any other person any indemnification or payment in respect of any tax consequence of any such
exercise upon individual Noteholders or Couponholders except, in the case of the Issuer to the extent provided for in Condition 7 and/or any undertaking given in addition to, or in substitution for, Condition 7 pursuant to the Trust Deed.
Any such modification, waiver, authorisation, determination, substitution or addition as aforesaid shall be binding on the Noteholders the Couponholders and, unless the Trustee agrees otherwise, any such modification or substitution shall be notified to the Noteholders in accordance with Condition 13 as soon as practicable thereafter.
No such modification, waiver, authorisation, determination, substitution or addition as aforesaid which relates to any Dated Subordinated Notes (and/or any Senior Notes issued by Santander UK Group Holdings, if applicable pursuant to any Loss Absorption Regulations) shall become effective unless the Issuer shall have received the consent of the Regulator (unless such consent is not then required under the Capital Rules in the case of Dated Subordinated Notes, or the Loss Absorption Regulations in the case of Senior Notes issued by Santander UK Group Holdings).
The Issuer shall be at liberty from time to time without the consent of the Noteholders or the Couponholders to create and issue further notes having terms and conditions the same as the Notes or the same in all respects save for the issue price and date of issue thereof and the amount and date of the first payment of interest thereon and so as to be consolidated and form a single series with the outstanding Notes; provided, however, that if such further notes are not issued as part of the same "issue", in a "qualified reopening" or with no more than a de minimis amount of original issue discount, in each case for U.S. federal income tax purposes, the further notes will have a separate Common Code, ISIN and (where applicable) CUSIP and CINS from such numbers assigned to the previously issued Notes. The Trust Deed contains provisions for convening a single meeting of the Noteholders and the holders of notes of other Series in certain circumstances where the Trustee so decides.
The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility, including provisions relieving it from taking action unless indemnified and/or secured and/or pre-funded to its satisfaction.
A person who is not a Noteholder has no right by virtue of the Contracts (Rights of Third Parties) Act 1999 to enforce any term of the Notes, but this does not affect any right or remedy which exists or is available apart from that Act.
The Trust Deed, the Agency Agreement, the Notes and the Coupons, and any noncontractual obligations arising out of, or in connection with, the Trust Deed, the Agency Agreement, the Notes and/or the Coupons, are governed by, and shall be construed in accordance with, English law.
The net proceeds from each issue of Notes will be used to fund the business of the Group.
Santander UK Group Holdings is a public limited company incorporated and registered in England and Wales under the Companies Act 2006. It was incorporated on 23 September 2013 as a private limited company with registered number 08700698 with the name Nuevo Topco Limited. On 16 December 2013, Santander UK Group Holdings changed its name to Santander UK Group Limited. On 22 January 2014, Santander UK Group Holdings changed its name to Santander UK Group Holdings Limited. On 25 March 2015, Santander UK Group Holdings reregistered as a public limited company. On 10 January 2014, Santander UK Group Holdings became the holding company of Santander UK following its acquisition of Santander UK from Banco Santander, S.A. ("Banco Santander") and Santusa Holding SL.
The principal executive office and registered office of Santander UK Group Holdings is at 2 Triton Square, Regent's Place, London, NW1 3AN. The telephone number of Santander UK Group Holdings is +44 (0) 800 389 7000.
Santander UK Group Holdings' principal operating subsidiary is Santander UK. Santander UK was originally formed as a building society in 1944 under the name Abbey National Building Society and is now a public limited liability company incorporated and registered in England and Wales under the Companies Act 1985. It was incorporated on 12 September 1988 with registered number 2294747.
Santander UK Group Holdings is a subsidiary of Banco Santander and Santusa Holding SL Banco Santander and its subsidiary Santusa Holding SL together hold the entire issued share capital of Santander UK Group Holdings.
The principal executive office and registered office of Santander UK is at 2 Triton Square, Regent's Place, London, NW1 3AN. The telephone number of Santander UK is +44 (0) 870 607 6000.
Santander UK is a wholly-owned subsidiary of Santander UK Group Holdings.
Santander UK Group Holdings and Santander UK operate on the basis of a unified business strategy and have common boards, albeit the principal business activities of the Group are carried on by Santander UK and its subsidiaries.
The Group's purpose is to help people and businesses prosper.
The Group, headed by Nathan Bostock, Chief Executive Officer, operates four business divisions as follows:
Retail Banking offers a wide range of products and financial services to individuals and small businesses through a network of branches and ATMs, as well as through telephony, digital, mobile and intermediary channels. Retail Banking includes business banking customers, small businesses with an annual turnover of up to £6.5 million, and Santander Consumer Finance, predominantly a vehicle finance business.
Commercial Banking offers a wide range of products and financial services provided by relationship teams that are based in a network of regional Corporate Business Centres ("CBCs") and through telephony and digital channels. The management of the Group's customers is organised across two relationship teams - the Regional Corporate Bank ("RCB") that covers non-property backed trading businesses that are UK domiciled with annual turnover above £6.5 million and Specialist Sector Groups ("SSG") that cover real estate, social housing, education, healthcare, and hotels.
Corporate and Investment Banking services corporate clients with a turnover of £500 million and above per annum and financial institutions. Corporate and Investment Banking clients require specially tailored solutions and value-added services due to their size, complexity and sophistication. The Corporate and Investment Banking division provides these clients with products to manage currency fluctuations, protect against interest rate risk, and arrange capital markets finance and specialist trade finance solutions, as well as providing support to the rest of the Group's business.
Corporate Centre predominantly consists of the non-core corporate and treasury legacy portfolios. Corporate Centre is also responsible for managing capital and funding, balance sheet composition and structure and strategic liquidity risk. The non-core corporate and treasury legacy portfolios are being run-down and/or managed for value.
The following table sets forth the directors of each of the Issuers
| Position | Name | Other principal activities |
|---|---|---|
| Chair | Baroness Shriti Vadera | Senior Independent Director of BHP Billiton plc; Independent Non-Executive Director of BHP BHPBilliton Limited; Independent Non-Executive Director of Astrazeneca; AstraZeneca plc; Chair European Financial Services Chairmen's Advisory Committee; |
| Member of the International Advisory Council of Asia House; Member of the International Chamber of Commerce G20 CEO Advisory Group; Member of Global Leadership Council of the Said Business School; Director of Dawfree Limited. |
||
|---|---|---|
| Deputy Chair and Non Executive Director |
Juan Rodríguez Inciarte | Director of Santander Consumer Finance, S.A.; Chairman of Saarema Inversiones; SHonorary Chairman .A.; of the U.S.-Spain Council; |
| Trustee of Carlos V International Centre of the Autonomous University of Madrid; |
||
| Director of Compania Logistica de Hidrocarburos S.A.; |
||
| Director of Vista Capital de Expanion S.A. SGECR; Senior Adviser to Omers Infrastructure UK Limited. |
||
| Executive Director and Chief Executive Officer |
Nathan Bostock | Member of the PRA Practitioner Panel; Member of the Financial Services Trade and Investment Board (FSTIB). |
| Executive Director and Chief Financial Officer |
Antonio Roman | Member of Financial and Risk & Policy Committees of British Bankers Association (BBA). |
| Executive Director | Javier San Felix | Member of the Administrative Body of AKUNA Inversiones 2020 SL; |
| Director of SAM Investment Holdings Limited. |
||
| Senior Independent Non Executive Director |
Scott Wheway | Director of Centrica plc; Chairman of AXA UK plc; Director of AXA Equity & Law plc. |
| Independent Non-Executive Directors |
Alain Dromer | Non- Executive Director of Majid Al Futtaim Trust LLC; |
|---|---|---|
| Non-Executive Director of Henderson European Focus Trust plc; |
||
| Director – Alain Dromer Advisory SPRL. | ||
| Julie Chakraverty | Director of The Girl's Day School Trust Director of Rungway Limited |
|
| Banco Santander Nominated Non-Executive Directors |
Ana Botín | Executive Chair of Banco Santander, S.A.; |
| Non-Executive Director The Coca-Cola Company; Founder and Vice-Chair of Fundación Empresa y Crecimiento; Member of the MIT's CEO Advisory Board; Vice-Chair of the Executive Committee of the World Business Council for Sustainable Development; Board member of the Institute of International Finance; Chairman of Portal Universaria, S.A.; Chairman of Universaria Holding, S.L.; Member of the European Financial Services Round Table (EFR); Trustee of Fundacion Botín; Trustee of Fundacion Euroamerica; Chair of Fundacion Conoimiento y Desarrollo; Chair of Fundacion Empieza pa Educar; Trustee of Fundacion Alberiz. |
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| Chris Jones | Non-Executive Director of Redburn (Europe) Limited; Investment Trustee of the Civil Service Benevolent Fund; Audit Committee member of the Wellcome Trust; |
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| Member of Advisory Board to Financial Services Faculty of ICAEW. |
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| Genevieve Shore | Independent Non-Executive Director of Moneysupermarket.com Group plc; Non-Executive Director of Arup Limited; |
| Non-Executive Director of Next Fifteen Communications Group plc; Founder of Skelbo Global Ventures; Independent Non-Executive Director of Rugby Football Union. |
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| Ed Giera | Non-Executive Director of Pension Insurance Corporation Group Limited; Non-Executive Director ICBC Standard Bank Plc; Non-Executive Director of Renshaw Bay GP1 Limited; Director REFF (Lux) Holding S.à.r.l.; Director of REFF (Lux) Investments S.à.r.l.; Partner of RB St James's Place LP. |
| Annemarie Durbin | Non-Executive Director of WH Smith. |
| Lyndsay Argalas | PLC; Chairman of Santander Fintech Limited. |
| Gerald Byrne | Supervisory Board Chairman of Bank Zachodni WBK SA. |
The business address of each of the directors is 2 Triton Square, Regent's Place, London NW1 3AN with telephone number +44 (0) 800 389 7000.
There are no potential conflicts of interest between the duties to each of the Issuers of the persons listed above and their private interests and/or other duties.
As at the date of this Prospectus, the long-term obligations of Santander UK are rated A by S&P, Aa3 by Moody's and A by Fitch, and the short-term obligations of Santander UK are rated A-1 by S&P, P-1 by Moody's and F1 by Fitch.
As at the date of this Prospectus, the long-term obligations of Santander UK Group Holdings are rated BBB by S&P, Baa1 by Moody's and A by Fitch, and the short-term obligations of Santander UK Group Holdings are rated A-2 by S&P, P-2 by Moody's and F1 by Fitch.
The information set out below is subject to any change in or reinterpretation of the rules, regulations and procedures of DTC, Euroclear or Clearstream, Luxembourg (together, the "Clearing Systems") currently in effect. The information in this section concerning the Clearing Systems has been obtained from sources that the Issuers believe to be reliable. Investors wishing to use the facilities of any of the Clearing Systems are advised to confirm the continued applicability of the rules, regulations and procedures of the relevant Clearing System. None of the Issuers, the Trustee, the Dealers and the Agents will have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial ownership interests in the Notes held through the facilities of any Clearing System or for maintaining, supervising or reviewing any records or payments relating to such beneficial ownership interests.
DTC has advised the Issuers that it is a limited purpose trust company organised under the New York Banking Law, a "banking organisation" within the meaning of the New York Banking Law, a member of the Federal Reserve System a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to Section 17A of the Exchange Act. DTC holds and provides asset servicing for securities that its participants ("Participants") deposit with DTC. DTC also facilitates the post trade settlement among Participants of sales and other securities transactions in deposited securities through electronic computerised book-entry changes between Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations and certain other organisations ("Direct Participants"). DTC is a wholly-owned subsidiary of the Depositary Trust & Clearing Corporation ("DTCC") DTCC, in turn, is owned by a number of Direct Participants and Members of the National Securities Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation and Emerging Markets Clearing Corporation (NSCC, GSCC, MBSCC and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc.. Access to the DTC System is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has S&P's highest rating: AAA. The DTC Rules applicable to its Direct or Indirect Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.
Under the rules, regulations and procedures creating and affecting DTC and its operations (the "Rules"), DTC makes book-entry transfers of Registered Notes among Direct Participants on whose behalf it acts with respect to Notes accepted into DTC's book-entry settlement system ("DTC Notes") as described below and receives and transmits distributions of principal and interest on DTC Notes. The Rules are on file with the United States Securities and Exchange Commission. Direct Participants and Indirect Participants with which beneficial owners of DTC Notes ("Beneficial Owners") have accounts with respect to the DTC Notes are required to make book-entry transfers and receive and transmit such payments on behalf of their respective Owners. Accordingly, although Beneficial Owners who hold DTC Notes through Direct Participants or Indirect Participants will not possess Registered Notes, the Rules, by virtue of the requirements described above, provide a mechanism by which Direct Participants can receive payments and transfer their interest with respect to the DTC Notes.
Purchases of DTC Notes under the DTC System must be made by or through Direct Participants, which will receive a credit for the DTC Notes on DTC's records. The ownership interest of each actual purchaser of each DTC Note is in turn to be recorded on the Direct and Indirect Participant's records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the DTC Notes are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in DTC Notes, except in the event that use of the bookentry system for the DTC Notes is discontinued.
To facilitate subsequent transfers, all DTC Notes deposited by Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. or such other nominee as may be requested by an authorised representative of DTC. The deposit of DTC Notes with DTC and their registration in the name of Cede & Co. or such other nominee effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the DTC Notes; DTC's records reflect only the identity of the Direct Participants to whose accounts such DTC Notes are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping an account of their holdings of DTC Notes on behalf of their customers.
Delivery of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.
Redemption notices shall be sent to DTC. If less than all of the DTC Notes of a Series are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such Series to be redeemed.
Neither DTC nor Cede & Co. nor such other nominee will consent or vote with respect to DTC Notes. Under its usual procedures, DTC will mail an Omnibus Proxy to the relevant Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the DTC Notes are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the DTC Notes will be made to Cede & Co., or such other nominee as may be requested by an authorised representative of DTC. DTC's practice is to credit Direct Participants' accounts on the due date for payment in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payment on the due date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name", and will be the responsibility of such Direct or Indirect Participant and not of DTC or its nominee or the relevant Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to Cede & Co., or such other nominee as may be requested by an authorised representative of DTC is the responsibility of the relevant Issuer, disbursement of such payments to Direct Participants is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners is the responsibility of Direct and Indirect Participants. The Issuers do not accept any responsibility or liability for any such payments to be made by DTC or by Direct or Indirect Participants.
Euroclear and Clearstream, Luxembourg each hold securities for their customers and facilitate the clearance and settlement of securities transactions by electronic book-entry transfer between their respective account holders. Euroclear and Clearstream, Luxembourg provide various services including safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Euroclear and Clearstream, Luxembourg also deal with domestic securities markets in several countries through established depository and custodial relationships. Euroclear and Clearstream, Luxembourg have established an electronic bridge between their two systems across which their respective participants may settle trades with each other.
Euroclear and Clearstream, Luxembourg customers are world-wide financial institutions, including underwriters, securities brokers and dealers, banks, trust companies and clearing corporations. Indirect access to Euroclear and Clearstream, Luxembourg is available to other institutions that clear through or maintain a custodial relationship with an account holder of either system.
The relevant Issuer will apply to DTC in order to have each Tranche of Notes represented by Rule 144A Global Notes accepted in its book-entry settlement system. Upon the issue of any Rule 144A Global Notes, DTC or its custodian will credit, on its internal book-entry system, the respective nominal amounts of the individual beneficial interests represented by such Rule 144A Global Notes to the accounts of DTC Participants. Such accounts initially will be designated by or on behalf of the relevant Dealer. Ownership of beneficial interests in a Rule 144A Global Note will be held through Direct Participants or Indirect Participants of DTC, including the respective depositaries of Euroclear and Clearstream, Luxembourg. Ownership of beneficial interests in a Rule 144A Global Note will be shown on, and the transfer of such ownership will be effected only through, records maintained by DTC or its nominee (with respect to the interests of Direct Participants) and the records of Direct Participants (with respect to interests of Indirect Participants).
Payments in U.S. dollars of principal and interest in respect of a Rule 144A Global Note registered in the name of DTC's nominee will be made to the order of such nominee as the registered holder of such Note. In the case of any payment in a currency other than U.S. dollars, payment will be made by the relevant Issuer to the Exchange Agent on behalf of DTC's nominee and the Exchange Agent will (in accordance with instructions received by it) remit all or a portion of such payment for credit directly to the beneficial holders of interests in the Rule 144A Notes in
the currency in which such payment was made and/or cause all or a portion of such payment to be converted into U.S. dollars and credited to the applicable Participants' account.
Transfers of any interests in Notes represented by a Registered Global Note within DTC, Euroclear and Clearstream, Luxembourg will be effected in accordance with the customary rules and operating procedures of the relevant clearing system. The laws in some States within the United States require that certain persons take physical delivery of securities in definitive form. Similarly, because DTC can only act on behalf of Direct Participants in the DTC system who in turn act on behalf of Indirect Participants, the ability of a person having an interest in Notes represented by a Rule 144A Global Note to pledge such Notes to persons or entities that do not participate in the DTC system or to otherwise take action in respect of such Notes may depend upon the ability to exchange such Notes for Notes in definitive form. The ability of any holder of Notes represented by a Rule 144A Global Note to resell, pledge or otherwise transfer such Notes may be impaired if the proposed transferee of such Notes is not eligible to hold such Notes through a Direct or Indirect Participant in the DTC system.
Subject to compliance with the transfer restrictions applicable to the Registered Notes described under "Subscription and Sale and Transfer and Selling Restrictions", cross-market transfers between DTC, on the one hand, and directly or indirectly through Euroclear or Clearstream, Luxembourg accountholders, on the other, will be effected by the relevant clearing system in accordance with its rules and through action taken by the Registrar, the Principal Paying Agent and any custodian ("Custodian") with whom the relevant Registered Global Notes have been deposited.
On or after the Issue Date for any Series, transfers of Notes of such Series between accountholders in Euroclear and Clearstream, Luxembourg and transfers of Notes of such Series between participants in DTC will generally have a settlement date three business days after the trade date (T+3). The customary arrangements for delivery versus payment will apply to such transfers.
Cross-market transfers between accountholders in Euroclear or Clearstream, Luxembourg and DTC Participants will need to have an agreed settlement date between the parties to such transfer. Because there is no direct link between DTC, on the one hand, and Euroclear and Clearstream, Luxembourg, on the other, transfers of interests in the relevant Registered Global Notes will be effected through the Registrar, the Principal Paying Agent and the Custodian receiving instructions (and where appropriate certification) from the transferor and arranging for delivery of the interests being transferred to the credit of the designated account for the transferee. In the case of cross- market transfers, settlement between Euroclear or Clearstream, Luxembourg accountholders and DTC participants cannot be made on a delivery versus payment basis. The securities will be delivered on a delivery free of payment basis and arrangements for payment must be made separately.
DTC, Euroclear and Clearstream, Luxembourg have each published rules and operating procedures designed to facilitate transfers of beneficial interests in Registered Global Notes among participants and accountholders of DTC, Euroclear and Clearstream, Luxembourg. However, they are under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued or changed at any time. None of the Issuers, the Trustee, the Agents or any Dealer will be responsible for any performance by DTC, Euroclear or Clearstream, Luxembourg or their respective Direct or Indirect Participants or accountholders of their respective obligations under the rules and procedures governing their operations and none of them will have any liability for any aspect of the records relating to or payments made on account of beneficial interests in the Notes represented by Registered Global Notes or for maintaining, supervising or reviewing any records relating to such beneficial interests.
The comments below are of a general nature and are based on the Issuers' understanding of current United Kingdom law and HM Revenue & Customs' ("HMRC") published practice as at the date of this Prospectus. They relate only to the position of persons who are the absolute beneficial owners of the Notes. They are not exhaustive. They relate only to the deduction from interest (as that term is understood for United Kingdom tax purposes) on the Notes for or on account of tax in the United Kingdom (and do not deal with any other United Kingdom tax implications of acquiring, holding or disposing of the Notes). The United Kingdom tax treatment of Noteholders depends on their individual circumstances and may be subject to change in the future. Prospective Noteholders who may be unsure of their tax position or who may be subject to tax in a jurisdiction other than the United Kingdom should seek their own professional advice.
In the United Kingdom, the UK Listing Authority is a competent authority and the London Stock Exchange is a recognised stock exchange. So long as this remains the case, the Notes will constitute "quoted Eurobonds" provided they carry a right to interest and are and continue to be admitted to the Official List (within the meaning of Part 6 of the Financial Services and Markets Act 2000) by the UK Listing Authority and admitted to trading on the London Stock Exchange's Regulated Market.
to pay interest to the Noteholder without deduction of tax (or for interest to be paid with tax deducted at the rate provided for in the relevant double tax treaty).
The following is a summary of certain U.S. federal income tax considerations that may be relevant to a holder of a Note that is a citizen or resident of the United States, a U.S. domestic corporation or otherwise is subject to U.S. federal income tax on a net income basis in respect of the Note (a "U.S. holder"). This summary is based on laws, regulations, rulings and decisions now in effect, all of which are subject to change. This summary deals only with U.S. holders that hold Notes as capital assets. It does not address all aspects of U.S. federal income taxation that may be relevant to particular investors, and does not address tax considerations applicable to investors that may be subject to special tax rules, such as banks, tax-exempt entities, insurance companies, dealers in securities or currencies, traders in securities electing to mark to market, persons that will hold Notes as a position in a "straddle" or conversion transaction or as part of a "synthetic security" or other integrated financial transaction, persons that actually or constructively own 10% or more of the relevant Issuer's voting stock, nonresident alien individuals present in the United States for more than 182 days in a taxable year, persons that hold Notes through partnerships or other pass-through entities, persons that hold Notes in bearer form or persons that have a "functional currency" other than the U.S. dollar. This summary also does not address the alternative minimum tax or the Medicare tax on net investment income. Moreover, the summary does not address Notes with a term of over 30 years or other special tax considerations.
Investors should consult their own tax advisors in determining the tax consequences to them of holding Notes, including the application to their particular situation of the U.S. federal income tax considerations discussed below, as well as the application of state, local, foreign or other tax laws.
A U.S. holder that uses the accrual method of accounting for tax purposes ("accrual method holder") generally is required to include certain amounts in income no later than the time such amounts are reflected on certain financial statements (the "book/tax conformity rule"). The application of the book/tax conformity rule thus may require the accrual of income earlier than would be the case under the general tax rules described below, although it is not clear to what types of income the book/tax conformity rule applies. This rule generally is effective for tax years beginning after 31 December 2017 or, for "Original Issue Discount Notes" (as defined below under "Original issue discount"), for tax years beginning after 31 December 2018. Accrual method holders should consult their own tax advisors regarding the potential applicability of the book/tax conformity rule to their particular situation.
No statutory, judicial or administrative authority directly addresses the characterization of the Dated Subordinated Notes or Senior Notes for which Restrictive Events of Default are specified in the applicable Final Terms (or Pricing Supplement, as applicable), or instruments similar to such Notes for U.S. federal income tax purposes. As a result, significant aspects of the U.S. tax consequences of an investment in the such Notes are uncertain. Santander UK Group Holdings expects, however, absent a change in law and depending on the precise terms of any issuance, that it is more likely than not that the Dated Subordinated Notes will be treated as debt
instruments for U.S. federal income tax purposes, and that any Senior Notes for which Restrictive Events of Default are specified in the applicable Final Terms (or Pricing Supplement, as applicable) should be treated as debt instruments for U.S. federal income tax purposes.
The following discussion assumes that the Dated Subordinated Notes will be treated as debt instruments for U.S. federal income tax purposes. If the Dated Subordinated Notes are treated as equity for U.S. tax purposes, the U.S. tax consequences to a U.S. holder should be substantially similar to those described below (excluding the discussions of the rules applicable to CPDI Notes and Short-Term Notes, which are only relevant to instruments characterized as debt for U.S. tax purposes). While interest payments on Dated Subordinated Notes treated as equity will be characterized as dividends for U.S. tax purposes, the payments will be taxable to a U.S. holder as ordinary income at the time they are accrued or received (in accordance with the U.S. holder's method of tax accounting). If Dated Subordinated Notes treated as equity for U.S. tax purposes are issued with more than a de minimis amount of OID (defined below), a U.S. holder will generally be required to include OID in ordinary gross income on a constant-yield basis as it accrues. Upon the sale, exchange or retirement of a Dated Subordinated Note treated as equity for U.S. tax purposes, a U.S. holder generally will recognize gain or loss equal to the difference between the amount realized on the sale, exchange or retirement and the U.S. holder's tax basis in such Note.
The relevant Issuer will indicate in the applicable Final Terms or Pricing Supplement for any Rule 144A Notes the relevant Issuer's intended characterization of the Notes for U.S. federal income tax purposes. In general, under the U.S. Internal Revenue Code of 1986 (the "Code"), the characterization of an instrument for U.S. tax purposes as debt or equity of a corporation by its issuer as of the time of issuance is binding on a holder unless the holder discloses on its tax return that it is taking an inconsistent position. The relevant Issuer's characterization, however, is not binding on the IRS.
Payments of "qualified stated interest" (as defined below under "Original issue discount") on a Note will be taxable to a U.S. holder as ordinary interest income at the time that such payments are accrued or are received (in accordance with the U.S. holder's method of tax accounting). If such payments of interest are made with respect to a Note denominated in a currency other than the U.S. dollar (a "Foreign Currency Note"), the amount of interest income realized by a U.S. holder that uses the cash method of tax accounting will be the U.S. dollar value of the foreign currency payment based on the exchange rate in effect on the date of receipt regardless of whether the payment in fact is converted into U.S. dollars. An accrual method holder will accrue interest income on the Note in the relevant foreign currency and translate the amount accrued into U.S. dollars based on the average exchange rate in effect during the interest accrual period (or portion thereof within the U.S. holder's taxable year), or, at the accrual method holder's election, at the spot rate of exchange on the last day of the accrual period (or the last day of the taxable year within such accrual period if the accrual period spans more than one taxable year), or at the spot rate of exchange on the date of receipt, if such date is within five business days of the last day of the accrual period. A U.S. holder that makes such election must apply it consistently to all debt instruments from year to year and cannot change the election without the consent of the U.S. Internal Revenue Service (the "IRS"). An accrual method holder will recognize foreign currency gain or loss, as the case may be, on the receipt of an interest payment made with respect to a Foreign Currency Note if the exchange rate in effect on the date the payment is received differs from the rate applicable to a previous accrual of that interest income. This foreign currency gain or loss will be treated as ordinary income or loss but generally will not be treated as an adjustment to interest income received on the Note.
A U.S. holder's tax basis in a Note generally will equal the cost of such Note to such U.S. holder, increased by any amount includible in income by the U.S. holder as original issue discount or market discount and reduced by any amortized premium (each as described below) and any payments other than payments of qualified stated interest made on such Note. In the case of a Foreign Currency Note, the cost of such Note to a U.S. holder will be the U.S. dollar value of the foreign currency purchase price on the date of purchase. In the case of a Foreign Currency Note that is traded on an established securities market, a cash basis U.S. holder (and, if it so elects, an accrual method holder) will determine the U.S. dollar value of such Note by translating the amount paid at the spot rate of exchange on the settlement date of the purchase. The amount of any subsequent adjustments to a U.S. holder's tax basis in a Note in respect of original issue discount, market discount, and premium denominated in a foreign currency will be determined in the manner described under "Original issue discount" and "Premium and market discount" below. The conversion of U.S. dollars to the relevant foreign currency and the immediate use of the foreign currency to purchase such a Note generally will not result in taxable gain or loss for a U.S. holder.
Upon the sale, exchange or retirement of a Note, a U.S. holder generally will recognize gain or loss equal to the difference between the amount realized on the sale, exchange or retirement (less any accrued qualified stated interest, which will be taxable as such) and the U.S. holder's tax basis in such Note. If a U.S. holder receives a currency other than the U.S. dollar in respect of the sale, exchange or retirement of a Note, the amount realized will be the U.S. dollar value of the foreign currency received calculated at the exchange rate in effect on the date the Note is sold, exchanged or retired. In the case of a Foreign Currency Note that is traded on an established securities market, a cash basis U.S. holder (and, if it so elects, an accrual method holder) will determine the U.S. dollar value of the amount realized by translating such amount at the spot rate on the settlement date of the sale. The election available to accrual method holders in respect of the purchase and sale of Foreign Currency Notes that are traded on an established securities market, discussed above, must be applied consistently to all debt instruments from year to year and cannot be changed without the consent of the IRS.
Except as discussed below with respect to market discount, Short-Term Notes (as defined below) and foreign currency gain or loss, gain or loss recognized by a U.S. holder generally will be long-term capital gain or loss if the U.S. holder has held the Note for more than one year at the time of disposition. Long-term capital gains recognized by an individual holder generally are subject to tax at a lower rate than short-term capital gains or ordinary income. The ability of U.S. holders to offset capital losses against ordinary income is limited.
Gain or loss recognized by a U.S. holder on the sale, exchange or retirement of a Foreign Currency Note generally will be treated as ordinary income or loss to the extent that the gain or loss is attributable to changes in exchange rates during the period in which the U.S. holder held such Note. This foreign currency gain or loss will not be treated as an adjustment to interest income received on the Notes.
As discussed above in the risk factor entitled "Bail-in and write down powers under the Banking Act and the BRRD may adversely affect the Group's business and the value of securities it may issue", the relevant UK resolution authority may take certain actions in respect of the Notes, including the write-down and cancellation of some or all of the principal and/or accrued interest on the Notes. No statutory, judicial or administrative authority directly addresses the U.S. federal income tax treatment of such a write-down, including whether a U.S. holder would be entitled to a deduction for loss at the time it occurs. U.S. holders may, for example, be required to wait to take a deduction until there is an actual or deemed sale, exchange or other taxable disposition of the remaining Notes for which recognition of losses is permitted under the Code. U.S. holders of Notes should consult their own tax advisers regarding the tax consequences to them of a write-down of their Notes by the relevant UK resolution authority.
If the relevant Issuer issues Notes at a discount from their stated redemption price at maturity, and the discount is equal to or more than the product of one-fourth of one per cent. (0.25%) of the stated redemption price at maturity of the Notes multiplied by the number of full years to their maturity (the "de minimis threshold"), the Notes will be "Original Issue Discount Notes." The difference between the issue price and the stated redemption price at maturity of the Notes will be the "original issue discount." The "issue price" of the Notes will be the first price at which a substantial amount of the Notes are sold to the public (that is, excluding sales of Notes to underwriters, placement agents, wholesalers or similar persons). The "stated redemption price at maturity" will include all payments under the Notes other than payments of qualified stated interest. The term "qualified stated interest" generally means stated interest that is unconditionally payable in cash or property (other than debt instruments issued by the relevant Issuer) at least annually during the entire term of a Note at a single fixed interest rate or, subject to certain conditions, based on one or more interest indices.
U.S. holders of Original Issue Discount Notes generally will be subject to the special tax accounting rules for obligations issued with original issue discount ("OID") provided by the Code, and certain regulations promulgated thereunder (the "OID Regulations"). U.S. holders of Original Issue Discount Notes should be aware that, as described in greater detail below, they generally must include OID in ordinary gross income for U.S. federal income tax purposes as it accrues, in advance of the receipt of cash attributable to that income.
In general, each U.S. holder of an Original Issue Discount Note, whether such holder uses the cash or the accrual method of tax accounting, will be required to include in ordinary gross income the sum of the "daily portions" of OID on the Note for all days during the taxable year that the U.S. holder owns the Note. The daily portions of OID on an Original Issue Discount Note are determined by allocating to each day in any accrual period a ratable portion of the OID allocable to that accrual period. Accrual periods may be any length and may vary in length over the term of an Original Issue Discount Note, provided that no accrual period is longer than one year and each scheduled payment of principal or interest occurs on either the final day or the first day of an accrual period. In the case of an initial holder, the amount of OID on an Original Issue Discount Note allocable to each accrual period is determined by (a) multiplying the "adjusted issue price" (as defined below) of the Original Issue Discount Note at the beginning of the accrual period by the yield to maturity of such Original Issue Discount Note (appropriately adjusted to reflect the length of the accrual period) and (b) subtracting from that product the amount (if any) of qualified stated interest allocable to that accrual period. The yield to maturity of a Note is the discount rate that causes the present value of all payments on the Note as of its original issue date to equal the issue price of such Note. The "adjusted issue price" of an Original Issue Discount Note at the beginning of any accrual period will generally be the sum of its issue price (generally including accrued interest, if any) and the amount of OID allocable to all prior accrual periods, reduced by the amount of all payments other than payments of qualified stated interest (if any) made with respect to such Note in all prior accrual periods. In the case of an Original Issue Discount Note that is a Floating Rate Note, both the "yield to maturity" and "qualified stated interest" will generally be determined for these purposes as though the Original Issue Discount Note will bear interest in all periods at a fixed rate generally equal to the rate that would be applicable to the interest payments on the Note on its date of issue or, in the case of certain Floating Rate Notes, the rate that reflects the yield that is reasonably expected for the Note. (Additional rules may apply if interest on a Floating Rate Note is based on more than one interest index.) As a result of this "constant yield" method of including OID in income, the amounts includible in income by a U.S. holder in respect of an Original Issue Discount Note denominated in U.S. dollars generally are lesser in the early years and greater in the later years than the amounts that would be includible on a straight-line basis.
A U.S. holder generally may make an irrevocable election to include in its income its entire return on a Note (that is, the excess of all remaining payments to be received on the Note, including payments of qualified stated interest, over the amount paid by such U.S. holder for such Note) under the constant-yield method described above. For Notes purchased at a premium or bearing market discount in the hands of the U.S. holder, the U.S. holder making such election will also be deemed to have made the election (discussed below in "Premium and market discount") to amortize premium or to accrue market discount in income currently on a constant-yield basis.
In the case of an Original Issue Discount Note that is also a Foreign Currency Note, a U.S. holder should determine the U.S. dollar amount includible in income as OID for each accrual period by (a) calculating the amount of OID allocable to each accrual period in the relevant foreign currency using the constant-yield method described above, and (b) translating the amount of the foreign currency so derived at the average exchange rate in effect during that accrual period (or portion thereof within a U.S. holder's taxable year) or, at the U.S. holder's election (as described above under "Payments of interest"), at the spot rate of exchange on the last day of the accrual period (or the last day of the taxable year within such accrual period if the accrual period spans more than one taxable year), or at the spot rate of exchange on the date of receipt, if such date is within five business days of the last day of the accrual period. Because exchange rates may fluctuate, a U.S. holder of an Original Issue Discount Note that is also a Foreign Currency Note may recognize a different amount of OID income in each accrual period than would the holder of an otherwise similar Original Issue Discount Note denominated in U.S. dollars. All payments on an Original Issue Discount Note (other than payments of qualified stated interest) will generally be viewed first as payments of previously accrued OID (to the extent thereof), with payments attributed first to the earliest-accrued OID, and then as payments of principal. Upon the receipt of an amount attributable to OID (whether in connection with a payment of an amount that is not qualified stated interest or the sale or retirement of the Original Issue Discount Note), a U.S. holder will recognize ordinary income or loss measured by the difference between the amount received (translated into U.S. dollars at the exchange rate in effect on the date of receipt or on the date of disposition of the Original Issue Discount Note, as
the case may be) and the amount accrued (using the exchange rate applicable to such previous accrual).
A subsequent U.S. holder of an Original Issue Discount Note that purchases the Note at a cost less than its remaining redemption amount (as defined below), or an initial U.S. holder that purchases an Original Issue Discount Note at a price other than the Note's issue price, also generally will be required to include in gross income the daily portions of OID, calculated as described above. However, if the U.S. holder acquires the Original Issue Discount Note at a price greater than its adjusted issue price, such U.S. holder is required to reduce its periodic inclusions of OID income to reflect the premium paid over the adjusted issue price. The "remaining redemption amount" for a Note is the total of all future payments to be made on the Note other than payments of qualified stated interest.
Floating Rate Notes generally will be treated as "variable rate debt instruments" under the OID Regulations. Accordingly, the stated interest on a Floating Rate Note generally will be treated as qualified stated interest and such a Note will not have OID solely as a result of the fact that it provides for interest at a variable rate. If a Floating Rate Note does not qualify as a "variable rate debt instrument", such Note will be subject to special rules (the "Contingent Payment Regulations") that govern the tax treatment of debt obligations that provide for contingent payments. See "Notes providing for contingent payments" and "Foreign Currency CPDI Notes" below.
The book/tax conformity rule, discussed above under "U.S. Taxation", applies to OID in some cases, and therefore an accrual method holder may be required to include OID on Original Issue Notes in a more accelerated manner than described above if the holder does so for financial accounting purposes. It is uncertain what adjustments, if any, should be made in later accrual periods when taxable income exceeds income reflected on the accrual method holder's financial statements to reflect the accelerated accrual of income in earlier periods. In addition, it is possible, although less likely, that an accrual method holder may be required to include OID that would otherwise fall under the de minimis threshold in gross income as such OID accrues on the holder's financial statements. The application of the book-tax conformity rule to OID, including OID that would otherwise fall under the de minimis threshold, is uncertain, and accrual method taxpayers should consult with their tax advisors on how the rule may apply to their investment in the Notes.
The relevant Issuer will indicate in the applicable Final Terms or Pricing Supplement whether any Notes are issued with OID.
A U.S. holder of a Note that purchases the Note at a cost greater than its remaining redemption amount will be considered to have purchased the Note at a premium, and may elect to amortize such premium (as an offset to interest income), using a constant-yield method, over the remaining term of the Note. Such election, once made, generally applies to all bonds held or subsequently acquired by the U.S. holder on or after the first day of the first taxable year to which the election applies and may not be revoked without the consent of the IRS. A U.S. holder that elects to amortize such premium must reduce its tax basis in a Note by the amount of the premium amortized during its holding period. Original Issue Discount Notes purchased at a premium will not be subject to the OID rules described above. In the case of premium in
respect of a Foreign Currency Note, a U.S. holder should calculate the amortization of such premium in the specified currency. Amortization deductions attributable to a period reduce interest payments in respect of that period and therefore are translated into U.S. dollars at the exchange rate used by the U.S. holder for such interest payments. Exchange gain or loss will be realized with respect to amortized bond premium on such a Note based on the difference between the exchange rate on the date or dates such premium is recovered through interest payments on the Note and the exchange rate on the date on which the U.S. holder acquired the Note. With respect to a U.S. holder that does not elect to amortize bond premium, the amount of bond premium will be included in the U.S. holder's tax basis when the Note matures or is disposed of by the U.S. holder. Therefore, a U.S. holder that does not elect to amortize such premium and that holds the Note to maturity generally will be required to treat the premium as capital loss when the Note matures.
If a U.S. holder of a Note purchases the Note at a price that is lower than its remaining redemption amount, or in the case of an Original Issue Discount Note, its adjusted issue price, by at least 0.25% of its remaining redemption amount multiplied by the number of remaining whole years to maturity, the Note will be considered to have "market discount" in the hands of such U.S. holder. In such case, gain realized by the U.S. holder on the disposition of the Note generally will be treated as ordinary income to the extent of the market discount that accrued on the Note while held by such U.S. holder. In addition, the U.S. holder could be required to defer the deduction of a portion of the interest paid on any indebtedness incurred or maintained to purchase or carry the Note. In general terms, market discount on a Note will be treated as accruing ratably over the term of such Note, or, at the election of the holder, under a constantyield method. Market discount on a Foreign Currency Note will be accrued by a U.S. holder in the relevant foreign currency. The amount includible in income by a U.S. holder in respect of such accrued market discount will be the U.S. dollar value of the amount accrued, generally calculated at the exchange rate in effect on the date that the Note is disposed of by the U.S. holder.
A U.S. holder may elect to include market discount in income on a current basis as it accrues (on either a ratable or constant-yield basis), in lieu of treating a portion of any gain realized on a sale of a Note as ordinary income. If a U.S. holder elects to include market discount on a current basis, the interest deduction deferral rule described above will not apply. Any accrued market discount on a Foreign Currency Note that is currently includible in income will be translated into U.S. dollars at the average exchange rate for the accrual period (or portion thereof within the U.S. holder's taxable year). Any such election, if made, applies to all market discount bonds acquired by the taxpayer on or after the first day of the first taxable year to which such election applies and is revocable only with the consent of the IRS.
Under the book/tax conformity rule, discussed above under "U.S. Taxation", an accrual method holder that makes the election described in the paragraph above may be required to accrue market discount in a more accelerated manner than described therein if the holder does so for financial accounting purposes. It is also possible, although less likely, that an accrual method holder that has not made the election and accrues market discount on a current basis on its financial statements, may be required to accrue market discount—including de minimis market discount—currently for U.S. federal income tax purposes. The application of the book/tax conformity rule to debt instruments with market discount is uncertain, and accrual method taxpayers should consult with their tax advisors on how the rule may apply to their investment in the Notes.
The rules set forth above will also generally apply to Notes having maturities of not more than one year ("Short-Term Notes"), but with certain modifications.
First, the OID Regulations treat none of the interest on a Short-Term Note as qualified stated interest. Thus, all Short-Term Notes will be Original Issue Discount Notes. OID will be treated as accruing on a Short-Term Note ratably, or at the election of a U.S. holder, under a constant yield method.
Second, a U.S. holder of a Short-Term Note that uses the cash method of tax accounting and is not a bank, securities dealer, regulated investment company or common trust fund, and does not identify the Short-Term Note as part of a hedging transaction, will generally not be required to include OID in income on a current basis. Such a U.S. holder may not be allowed to deduct all of the interest paid or accrued on any indebtedness incurred or maintained to purchase or carry such Note until the maturity of the Note or its earlier disposition in a taxable transaction. In addition, such a U.S. holder will be required to treat any gain realized on a sale, exchange or retirement of the Note as ordinary income to the extent such gain does not exceed the OID accrued with respect to the Note during the period the U.S. holder held the Note. Notwithstanding the foregoing, a cash-basis U.S. holder of a Short-Term Note may elect to accrue OID into income on a current basis or to accrue the "acquisition discount" on the Note under the rules described below. If the U.S. holder elects to accrue OID or acquisition discount, the limitation on the deductibility of interest described above will not apply.
A U.S. holder using the accrual method of tax accounting and certain cash-basis U.S. holders (including banks, securities dealers, regulated investment companies and common trust funds) generally will be required to include original issue discount on a Short-Term Note in income on a current basis. Alternatively, a U.S. holder of a Short-Term Note can elect to accrue the "acquisition discount", if any, with respect to the Note on a current basis. If such an election is made, the OID rules will not apply to the Note. Acquisition discount is the excess of the Short-Term Note's stated redemption price at maturity (that is, all amounts payable on the Short-Term Note) over the purchase price. Acquisition discount will be treated as accruing ratably or, at the election of the U.S. holder, under a constant-yield method based on daily compounding.
Finally, the market discount rules will not apply to a Short-Term Note.
Fixed Rate Reset Notes, Convertible Interest Basis Notes, Floating Rate Notes that do not qualify as "variable rate debt instruments", and any other Notes that provide for contingent payments (including pursuant to an Issuer Call option) may (depending on their terms) be treated as contingent payment debt instruments for U.S. federal income tax purposes (any Notes that are contingent payment debt instruments, "CPDI Notes"). CPDI Notes will be subject to the OID Regulations and a U.S. holder will be required to accrue income on the CPDI Notes as set forth below, provided that the Note has a term of more than one year and does not provide for payments in a foreign currency or determined by reference to a foreign currency or any debt obligation denominated in a foreign currency. For CPDI Notes denominated in a foreign currency, see below under "Foreign Currency CPDI Notes".
At the time the CPDI Notes are issued, the relevant Issuer will be required to determine a "comparable yield" for the CPDI Notes that takes into account the yield at which the relevant Issuer could issue a fixed rate debt instrument with terms similar to those of the CPDI Notes (including the level of subordination, term, timing of payments and general market conditions, but excluding any adjustments for liquidity or the riskiness of the contingencies with respect to the CPDI Notes). The comparable yield may be greater than or less than the stated interest rate, if any, with respect to the CPDI Notes.
Solely for purposes of determining the amount of interest income that a U.S. holder will be required to accrue, the relevant Issuer will be required to construct a "projected payment schedule" in respect of the CPDI Notes representing a series of payments the amount and timing of which would produce a yield to maturity on the CPDI Notes equal to the comparable yield. NEITHER THE COMPARABLE YIELD NOR THE PROJECTED PAYMENT SCHEDULE CONSTITUTES A REPRESENTATION BY THE RELEVANT ISSUER REGARDING THE ACTUAL AMOUNT THAT THE CPDI NOTES WILL PAY. For U.S. federal income tax purposes, a U.S. holder is required to use the comparable yield and the projected payment schedule established by the relevant Issuer in determining interest accruals and adjustments in respect of a CPDI Note, unless such U.S. holder timely discloses and justifies the use of other accruals and adjustments to the IRS.
Based on the comparable yield and the issue price of the CPDI Notes, a U.S. holder of a CPDI Note (regardless of accounting method) will be required to accrue as OID the sum of the daily portions of interest on the CPDI Note for each day in the taxable year on which the holder held the CPDI Note, adjusted upward or downward to reflect the difference, if any, between the actual and the projected amount of any contingent payments on the CPDI Note (as set forth below). The daily portions of interest in respect of a CPDI Note are determined by allocating to each day in an accrual period the taxable portion of interest on the CPDI Note that accrues in the accrual period. The amount of interest on a CPDI Note that accrues in an accrual period is the product of the comparable yield on the CPDI Note (adjusted to reflect the length of the accrual period) and the adjusted issue price of a CPDI Note. The adjusted issue price of a CPDI Note at the beginning of the first accrual period will equal its issue price and for any accrual period thereafter will be (x) the sum of the issue price of such CPDI Note and any interest previously accrued thereon by a holder (disregarding any positive or negative adjustments) minus (y) the amount of any projected payments on the CPDI Note for previous accrual periods.
A U.S. holder will be required to recognize interest income equal to the amount of any positive adjustment (i.e., the excess of actual payments over projected payments) in respect of a CPDI Note for a taxable year. A negative adjustment (i.e., the excess of projected payments over actual payments) in respect of a CPDI Note for a taxable year (i) will first reduce the amount of interest in respect of the CPDI Note that a U.S. holder would otherwise be required to include in income in the taxable year and (ii) to the extent that the negative adjustment exceeds the amount described in (i), will give rise to an ordinary loss, up to the amount by which the holder's total interest inclusions on the debt instrument in prior taxable years exceed the total amount of the holder's net negative adjustments treated as ordinary loss on the debt instrument in prior taxable years. Deductions in respect of a net negative adjustment may be subject to limitations under the Code. Any negative adjustment in excess of the amounts described above in (i) and (ii) will be carried forward to offset future interest income in respect of the CPDI Note or to reduce the amount realized on a sale, exchange or retirement of the CPDI Note.
If a U.S. holder purchases a CPDI Note for an amount that differs from its adjusted issue price, the general rules discussed above under "Premium and market discount" will not apply. Instead, the U.S. holder must reasonably determine the extent to which the difference between the price the holder paid for the CPDI Note and its adjusted issue price is attributable to a change in expectations as to the projected contingent payments, a change in interest rates, or both, and make certain adjustments. U.S. holders should consult their tax advisors regarding these adjustments.
Upon a sale, exchange or retirement of a CPDI Note (including a repurchase or redemption of the CPDI Note at the option of the relevant Issuer or the holder), a U.S. holder generally will recognize taxable gain or loss equal to the difference between the amount realized on the sale, exchange or retirement and such holder's tax basis in the CPDI Note. A U.S. holder's tax basis in a CPDI Note will equal the cost thereof, increased by the amount of interest income previously accrued by the holder in respect of the CPDI Note (disregarding any positive or negative adjustment) and decreased by the amount of all prior projected payments in respect of the CPDI Note. A U.S. holder generally will treat any gain as interest income, and any loss as ordinary loss to the extent of the excess of previous interest inclusions over the total negative adjustments previously taken into account as ordinary losses, and the balance as capital loss. If there are no remaining contingent payments under the projected payment schedule at the time of the sale, exchange or retirement of the CPDI Note, any gain or loss recognized by the holder generally will be capital gain or loss.
The tax consequences to a U.S. holder of a Short–Term Note that provides for contingent payments are not clear. Under the special rules applicable to Short-Term Notes, a U.S. holder using an accrual method of accounting generally is required to accrue OID with respect to a Note, as described above. However, the rules applicable to Short-Term Notes do not address how to accrue income with respect to a future contingent payment. Moreover, the Contingent Payment Regulations that require U.S. holders to accrue interest income regardless of their method of accounting do not apply to Short-Term Notes. Taxpayers using an accrual method of accounting generally are not required to include amounts in income until all the events have occurred that fix the right to receive the income and the amount of the income can be determined with reasonable accuracy. Accordingly, although no assurances can be provided in this regard, it appears that in the case of contingent payment Short-Term Notes, a U.S. holder using the accrual method of accounting should not be required to include amounts in income prior to the date on which the amount of such payment becomes fixed, while a U.S. holder using the cash method of accounting generally should include such amounts in income at the time that such payment is received.
The book/tax conformity rule, discussed above under "U.S. Taxation", applies to CPDI Notes in some cases, and therefore an accrual method holder may be required to include OID on CPDI in a more accelerated manner than described above if the holder does so for financial accounting purposes. It is uncertain what adjustments, if any, should be made in later accrual periods when taxable income exceeds income reflected on the accrual method holder's financial statements to reflect the accelerated accrual of income in earlier periods. The application of the book-tax conformity rule to OID on CPDI Notes is uncertain, and accrual method taxpayers should consult with their tax advisors on how the rule may apply to their investment in the Notes.
The relevant Issuer will indicate in the applicable Final Terms or Pricing Supplement whether any Fixed Rate Reset Notes, Convertible Interest Basis Notes, Floating Rate Notes or any other Notes that provide for contingent payments are CPDI Notes. If the Final Terms or Pricing Supplement indicate that any Notes are CPDI Notes, please contact Nigel Smith (Senior Functional Specialist) at Santander UK Plc, 2 Triton Square, Regent's Place, London NW1 3AN (Direct Tel: +44 (0) 800 389 7000) to obtain the comparable yield and projected payment schedule for the Notes.
Special rules apply to debt instruments held by U.S. persons that would be subject to the CPDI rules but for the fact that payments are denominated in, or determined by reference to, a currency other than the U.S. dollar (such notes, "Foreign Currency CPDI Notes"). The general method applicable under the Contingent Payment Regulations is applied, with the calculations (including the determination of the comparable yield) performed in the currency in which the instrument is denominated. The amount of interest accrued for each period then generally is translated into U.S. dollars at the average exchange rate for the period. Positive adjustments generally are translated at the spot rate on the last day of the relevant period. Negative adjustments are translated either at the rate used to translate the interest income that the adjustment offsets or the spot rate on the date that the instrument was issued or acquired.
Foreign currency gain or loss (that is, gain or loss attributable to fluctuations in the value of the foreign currency) will not be recognized with respect to a net positive or negative adjustment. Foreign currency gain or loss with respect to accrued interest will be (a) the amount of interest paid, translated into U.S. dollars at the spot rate on the date of payment, minus (2) the amount of interest paid, translated into U.S. dollars at the spot rate on the date the interest was accrued. Foreign currency gain or loss with respect to payments of principal will equal (1) the amount of principal paid, translated into U.S. dollars at the spot rate on the date of payment, minus (2) the amount of principal paid, translated into U.S. dollars at the spot rate on the date the Note was issued (or, if later, acquired). Complex ordering rules apply to determine whether a particular payment with respect to a Foreign Currency CPDI Note represents interest or principal, U.S. holders should consult their tax advisors regarding the application of these rules.
As a result of Sections 1471 through 1474 of the Code and related Treasury regulations (collectively, "FATCA") and related intergovernmental agreements, investors in the Notes may be required to provide information and tax documentation regarding their tax identities as well as that of their direct and indirect owners. It is also possible that payments on Notes issued or materially modified on or after 1 January 2019 may be subject to a withholding tax of 30%. The relevant Issuer will not pay additional amounts on account of any withholding tax imposed by FATCA.
The United States and the UK have entered into an agreement for the implementation of FATCA (the "U.S.-UK IGA").Pursuant to the U.S.-UK IGA (as defined above) and applicable UK regulations implementing the U.S.-UK IGA, the relevant Issuer may be required to comply with certain reporting requirements. Investors in the Notes may therefore be required to provide information and tax documentation regarding their identities as well as that of their direct and indirect owners and this information may be reported to the Commissioners for Her Majesty's Revenue & Customs, any relevant taxing authorities, and ultimately to the IRS.
FATCA is particularly complex. Each prospective investor should consult its own tax adviser to obtain a more detailed explanation of FATCA and to learn how this legislation might affect such investor in its particular circumstances.
Information returns may need to be filed with the IRS with respect to payments made to, and the proceeds of disposition of Notes effected by, certain U.S. holders of Notes. In addition, certain U.S. holders may be subject to backup withholding tax in respect of such amounts if they do not provide their taxpayer identification numbers and certify that they are not subject to backup withholding or otherwise establish an exception from backup withholding to the person from whom they receive payments. Persons holding Notes who are not U.S. holders may be required to comply with applicable certification procedures to establish that they are not U.S. holders in order to avoid the application of such information reporting requirements and backup withholding tax. Any amounts withheld under the backup withholding rules will be allowed as a credit against a U.S. holder's U.S. federal income tax liability, if any, and may entitle the holder to a refund, provided the required information is timely furnished to the IRS.
Certain U.S. holders that own "specified foreign financial assets" with an aggregate value in excess of U.S.\$50,000 are generally required to file an information statement along with their tax returns, currently on Form 8938, with respect to such assets. "Specified foreign financial assets" include any financial accounts held at a non-U.S. financial institution, as well as securities issued by a non-U.S. issuer (which would include the Notes) that are not held in accounts maintained by financial institutions. Higher reporting thresholds apply to certain individuals living abroad and to certain married individuals. Regulations extend this reporting requirement to certain entities that are treated as formed or availed of to hold direct or indirect interests in specified foreign financial assets based on certain objective criteria. U.S. holders who fail to report the required information could be subject to substantial penalties. In addition, the statute of limitations for assessment of tax would be suspended, in whole or part. Persons considering the purchase of Notes are encouraged to consult with their own tax advisors regarding the possible application of these rules to their investment in the Notes, including the application of the rules to their particular circumstances.
A U.S. taxpayer that participates in a "reportable transaction" is required to disclose its participation to the IRS. The scope and application of these rules is not entirely clear. Under the relevant rules, a U.S. holder may be required to treat a foreign currency exchange loss from Foreign Currency Notes as a reportable transaction if this loss exceeds the relevant threshold in the regulations (U.S.\$50,000 in a single taxable year, if the U.S. holder is an individual or trust, or higher amounts for other non-individual U.S. holders), and to disclose its investment by filing Form 8886 with the IRS. A penalty in the amount of U.S.\$10,000 in the case of a natural person and U.S.\$50,000 in all other cases is generally imposed on any taxpayer that fails to timely file an information return with the IRS with respect to a transaction resulting in a loss that is treated as a reportable transaction. Prospective purchasers are urged to consult their tax advisors regarding the application of these rules.
PROSPECTIVE NOTEHOLDERS WHO ARE IN ANY DOUBT AS TO THEIR TAX POSITION OR WHO MAY BE SUBJECT TO TAX IN A JURISDICTION OTHER THAN THE UNITED KINGDOM OR THE UNITED STATES SHOULD SEEK INDEPENDENT PROFESSIONAL ADVICE.
The Dealers have in a programme agreement (such programme agreement as modified and/or supplemented and/or restated from time to time, the "Programme Agreement") dated 29 August 2018 agreed with the relevant Issuer a basis upon which the relevant Issuer may from time to time agree to issue Notes. Any such agreement will extend to those matters stated under "Form of the Notes" and "Terms and Conditions of the Notes". In the Programme Agreement, the relevant Issuer has agreed to reimburse the Dealers for certain of their expenses in connection with the issue of Notes under the Programme and to indemnify the Dealers against certain liabilities incurred by them in connection therewith.
In connection with the issue of any Tranche of Notes, one or more relevant Dealers acting as Stabilisation Manager(s) (or persons acting on behalf of any Stabilisation Manager(s)) may overallot Notes or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail. However, stabilisation may not necessarily occur. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the offer of the relevant Tranche of Notes is made and, if begun, may cease at any time, but it must end no later than the earlier of 30 days after the issue date of the relevant Tranche of Notes and 60 days after the date of the allotment of the relevant Tranche of Notes. Any stabilisation action or over-allotment must be conducted by the relevant Stabilisation Manager(s) (or person(s) acting on behalf of any Stabilisation Manager(s)) in accordance with all applicable laws and rules.
Each Dealer has acknowledged, and each further Dealer appointed under the Programme Agreement will be required to acknowledge, that the Notes have not been and will not be registered under the Securities Act or the securities laws of any state of the United States or other relevant jurisdiction within the United States, and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S under the Securities Act or pursuant to an exemption from or in a transaction not subject to, the registration requirements of the Securities Act. Terms used in the preceding sentence have the meanings given to them by Regulation S under the Securities Act.
Notes in bearer form are subject to U.S. tax law requirements and may not be offered, sold or delivered within the United States or its possessions or to U.S. persons, except in certain transactions permitted by U.S. tax regulations. Terms used in the preceding sentence have the meanings given to them by the United States Internal Revenue Code of 1986 and regulations thereunder. The applicable Final Terms (or, in the case of Exempt Notes, the applicable Pricing Supplement) will identify whether TEFRA C rules or TEFRA D rules apply or whether TEFRA is not applicable.
Each Dealer has agreed, and each further Dealer appointed under the Programme Agreement will be required to agree, that except as permitted by the Programme Agreement, it has not offered, sold or delivered Notes and it will not offer, sell or deliver Notes (i) as part of their distribution at any time or (ii) otherwise until 40 days after the completion of the distribution of all Notes of the relevant Tranche, within the United States or to, or for the account or benefit of U.S.
persons and only in accordance with Rule 903 of Regulation S or, if applicable, Rule 144A under the Securities Act and it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Notes from it or through it during the distribution compliance period a confirmation or notice setting forth the restrictions on offers and sales of the Notes within the United States or to or for the account or benefit of U.S. persons.
The Notes are being offered and sold only (a) outside the United States to persons other than U.S. persons ("foreign purchasers", which term includes dealers or other professional fiduciaries in the United States acting on a discretionary basis for foreign beneficial owners, other than an estate or trust) in reliance upon Regulation S and (b) to a limited number of QIBs in compliance with Rule 144A.
Terms used in this section of "Selling Restrictions" have the meanings given to them by Regulation S.
In addition, until 40 days after the completion of the distribution of all Notes comprising any Tranche, any offer or sale of Notes within the United States by any dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act unless made pursuant to Rule 144A or another exemption from the registration requirements of the Securities Act.
Each purchaser of Notes will be deemed to have represented and agreed as follows:
(5) It will give to each person to whom it transfers Notes notice of any restrictions on transfer of those Notes.
(6) It acknowledges that transfers by the holder of, or of a beneficial interest in, a Rule 144A Note to a transferee taking delivery of such interest through a Regulation S Note; or, prior to the expiry of the Distribution Compliance Period, transfers by the holder of, or of a beneficial interest in, a Regulation S Note to a transferee taking delivery of such interest through a Rule 144A Note are conditioned on the requirement that the transferor provide the Registrar and the Transfer Agent with a written certification (the form of which certification can be obtained from the Trustee) as to compliance with the transfer restrictions referred to above.
Each Rule 144A Note will bear a legend to the following effect:
"THE NOTES REPRESENTED BY THIS [GLOBAL][DEFINITIVE] NOTE HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES, AND, MAY BE TRANSFERRED ONLY PURSUANT TO THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AS SET FORTH BELOW.
[THE HOLDER HEREOF - include for Rule 144A Global Notes][THE REGISTERED OWNER HEREOF - include for definitive notes], BY PURCHASING OR OTHERWISE ACQUIRING THE NOTES IN RESPECT OF WHICH THIS [GLOBAL][DEFINITIVE] NOTE IS ISSUED [(OR ANY BENEFICIAL INTEREST OR PARTICIPATION HEREIN) ON ITS OWN BEHALF AND ON BEHALF OF ANY ACCOUNT FOR WHICH IT IS PURCHASING THIS GLOBAL NOTE OR ANY BENEFICIAL INTEREST OR PARTICIPATION HEREIN - include for Rule 144A Global Notes], (1) REPRESENTS FOR THE BENEFIT OF THE ISSUER AND FOR ANY AGENT OR SELLER WITH RESPECT TO SUCH NOTES THAT IT IS THE SOLE BENEFICIAL OWNER OF THE NOTES REPRESENTED HEREBY OR IS PURCHASING SUCH NOTES FOR ONE OR MORE ACCOUNTS MAINTAINED BY IT OR OVER WHICH IT EXERCISES SOLE INVESTMENT DISCRETION AND THAT EITHER (A) IT AND ANY SUCH ACCOUNT ARE NOT U.S. PERSONS (AS DEFINED IN REGULATION S OF THE SECURITIES ACT) AND ARE NOT PURCHASING SUCH NOTES FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON, OR (B) IT AND ANY SUCH ACCOUNT ARE (OR ARE HOLDING SUCH NOTES FOR THE BENEFIT OF) QUALIFIED INSTITUTIONAL BUYERS ("QIBS") AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), (2) ACKNOWLEDGES THAT SUCH NOTES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE SECURITIES ACT AND MAY NOT BE OFFERED, SOLD, RESOLD OR DELIVERED IN THE UNITED STATES EXCEPT PURSUANT TO AN EXEMPTION FROM THE SECURITIES ACT IN ACCORDANCE WITH THE TERMS HEREOF, (3) AGREES TO NOTIFY ANY SUBSEQUENT TRANSFEREE OF THE TRANSFER
RESTRICTIONS SET OUT HEREIN AND THAT IT WILL BE A CONDITION TO SUCH TRANSFER THAT THE TRANSFEREE WILL BE DEEMED TO MAKE THE REPRESENTATIONS SET OUT HEREIN, AND (4) AGREES, FOR THE BENEFIT OF THE ISSUER, THAT SUCH NOTES MAY ONLY BE OFFERED, SOLD, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED OR DELIVERED (A) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE SECURITIES ACT, OR (B) TO A PERSON WHO THE SELLER REASONABLY BELIEVES TO BE A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A OR ANOTHER EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT; PROVIDED THAT, IN THE CASE OF A TRANSFER PURSUANT TO CLAUSE (A), A TRANSFEROR OF THE NOTES WILL BE REQUIRED [(1)] TO EXECUTE AND DELIVER TO THE ISSUER AND THE REGISTRAR AND THE TRANSFER AGENT A TRANSFER CERTIFICATE (THE FORM OF WHICH IS ATTACHED TO THE AGENCY AGREEMENT AND CAN BE OBTAINED FROM THE REGISTRAR AND THE TRANSFER AGENT), [AND (2) TO EXCHANGE THE PORTION OF THIS GLOBAL NOTE TO BE SO TRANSFERRED FOR AN INTEREST IN A REGULATION S GLOBAL NOTE OR A DEFINITIVE NOTE TO BE REGISTERED IN THE NAME OF THE TRANSFEREE - include for Rule 144A Global Notes].
PROSPECTIVE PURCHASERS ARE HEREBY NOTIFIED THAT THE SELLERS OF THE NOTES MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A.
EACH HOLDER OF THIS [GLOBAL][DEFINITIVE] NOTE [OR AN INTEREST HEREIN - include for Rule 144A Global Notes] AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE [OR AN INTEREST HEREIN - include for Rule 144A Global Notes] IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
FOR THE PURPOSES HEREOF, "OFFSHORE TRANSACTION" AND "U.S. PERSON" SHALL HAVE THE MEANINGS GIVEN TO THEM IN RULE 902 OF REGULATION S UNDER THE SECURITIES ACT."
Each Regulation S Note will bear a legend to the following effect:
"THE NOTES REPRESENTED BY THIS [GLOBAL][DEFINITIVE] NOTE HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES. [THE OFFER, SALE, PLEDGE OR TRANSFER OF THE NOTES REPRESENTED BY THIS GLOBAL NOTE IS SUBJECT TO CERTAIN CONDITIONS AND RESTRICTIONS. - include for Regulation S Global Notes] [BY PURCHASING OR OTHERWISE ACQUIRING THE NOTES REPRESENTED BY THIS GLOBAL NOTE, THE HOLDER - include for Regulation S Global Notes][THE OWNER HEREOF, BY PURCHASING THE NOTES IN RESPECT OFWHICH THIS DEFINITIVE NOTE IS ISSUED, - include for definitive notes] AGREES FOR THE BENEFIT OF THE ISSUER THAT, IF IT SHOULD DECIDE TO DISPOSE OF THE NOTES REPRESENTED BY THIS NOTE PRIOR TO THE DATE WHICH IS 40 DAYS AFTER THE COMPLETION OF THE DISTRIBUTION OF THE NOTES REPRESENTED BY THIS [GLOBAL][DEFINITIVE] NOTE, THE NOTES REPRESENTED BY THIS [GLOBAL][DEFINITIVE] NOTE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED OR DELIVERED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND ONLY (A) TO PERSONS WHOM THE SELLER REASONABLY BELIEVES TO BE QUALIFIED INSTITUTIONAL BUYERS ("QIBS"), AS DEFINED IN RULE 144A ("RULE 144A") UNDER THE SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A OR ANOTHER EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, OR (B) OTHERWISE TO NON-U.S. PERSONS IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT; PROVIDED THAT, IN THE CASE OF A TRANSFER PURSUANT TO CLAUSE (A), A TRANSFEROR OF THE NOTES WILL BE REQUIRED [(1)] TO EXECUTE AND DELIVER TO THE ISSUER AND THE REGISTRAR AND THE TRANSFER AGENT A TRANSFER CERTIFICATE (THE FORM OF WHICH IS ATTACHED TO THE AGENCY AGREEMENT AND CAN BE OBTAINED FROM THE REGISTRAR AND THE TRANSFER AGENT), [AND (2) TO EXCHANGE THE PORTION OF THIS GLOBAL NOTE TO BE SO TRANSFERRED FOR AN INTEREST IN A RULE 144A GLOBAL NOTE OR A DEFINITIVE NOTE TO BE REGISTERED IN THE NAME OF THE TRANSFEREE - include for Regulation S Global Notes].
EACH HOLDER OF THIS NOTE OR AN INTEREST HEREIN AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
FOR THE PURPOSES HEREOF, "OFFSHORE TRANSACTION" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT."
In the case of a Registered Global Note registered in the name of Cede & Co. as nominee (or another nominee) of The Depository Trust Company, the following paragraph shall also appear in the legend:
"UNLESS THIS GLOBAL NOTE IS PRESENTED BY AN AUTHORISED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY REGISTERED NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUIRED BY AN AUTHORISED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUIRED BY ANY AUTHORISED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN."
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme Agreement will be required to represent and agree, that it has not offered, sold or otherwise made available and will not offer, sell or otherwise make available any Notes which are the subject of the offering contemplated by this Prospectus as completed by the Final Terms (or, in the case of Exempt Notes, the Pricing Supplement) in relation thereto to any retail investor in the European Economic Area. For the purposes of this provision:
(a) the expression "retail investor" means a person who is one (or more) of the following:
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that:
No prospectus or other disclosure document (as defined in the Corporations Act 2001 of the Commonwealth of Australia (the "Corporations Act")) in relation to the Programme or the Notes has been, or will be, lodged with the Australian Securities and Investments Commission ("ASIC"). Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that (unless the applicable Final Terms (or, in the case of Exempt Notes, the applicable Pricing Supplement) or another supplement to this Prospectus otherwise provides) it:
(a) has not (directly or indirectly) offered, and will not offer for issue or sale and has not made or invited, and will not make or invite, applications for issue, or offers to purchase, the Notes in or to the Commonwealth of Australia (including an offer or invitation which is received by a person in the Commonwealth of Australia); and
(b) has not distributed or published, and will not distribute or publish, this Prospectus or any other offering material or advertisement relating to any Notes in the Commonwealth of Australia,
unless:
The Notes have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended; the "FIEA") and each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that it will not offer or sell any Notes, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (as defined under Item 5, Paragraph 1, Article 6 of the Foreign Exchange and Foreign Trade Act (Act No. 228 of 1949, as amended)), or to others for re- offering or resale, directly or indirectly, in Japan or to, or for the benefit of, a resident of Japan except pursuant to an exemption from the registration requirements of and otherwise in compliance with the FIEA and any other applicable laws, regulations and ministerial guidelines of Japan.
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that:
any advertisement, invitation or document relating to the Notes, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to Notes which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors" as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.
This Prospectus has not been registered as a prospectus with the Monetary Authority of Singapore and Notes will be offered pursuant to exemptions under the Securities and Futures Act, Chapter 289 of Singapore (the "Securities and Futures Act"). Accordingly, the Notes may not be offered or sold, or be made the subject of an invitation for subscription or purchase nor may this Prospectus or any other document or material in connection with the offer or sale or invitation for subscription or purchase of any Notes be circulated or distributed, whether directly or indirectly, to any person in Singapore other than (i) to an institutional investor pursuant to Section 274 of the Securities and Futures Act, (ii) to a relevant person or any person pursuant to Section 275(1), and in accordance with the conditions specified in Section 275, of the Securities and Futures Act or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the Securities and Futures Act.
Each of the following persons specified in Section 275 of the Securities and Futures Act which has subscribed or purchased Notes, namely a person who is:
should note that shares, debentures and units of shares and debentures of that corporation or the beneficiaries' rights and interest in that trust shall not be transferred for six months after that corporation or trust has acquired the Notes under Section 275 of the Securities and Futures Act except:
Unless otherwise stated in the applicable Final Terms (or Pricing Supplement, in the case of Exempt Notes), all Notes shall be prescribed capital markets products (as defined in the Securities and Futures (Capital Markets Products) Regulations 2018 of Singapore) and Excluded Investment Products (as defined in the MAS Notice SFA 04- N12: Notice on the Sale of Investment Products and the MAS Notice FAA-N16: Notice on Recommendations on Investment Products).
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that:
required by the applicable Canadian Securities Laws to permit each resale by it of Notes to a Canadian Purchaser;
purchased by such Canadian Purchaser; (ii) that the Notes will be freely tradeable by the Canadian Purchaser without any restrictions or hold periods; (iii) that any person will refund the purchase price of the Notes; or (iv) as to the future price or value of the Notes; and
(i) it will inform each Canadian Purchaser purchasing from it (i) that the relevant Issuer is not a "reporting issuer" (as defined under applicable Canadian Securities Laws) and is not, and may never be, a reporting issuer in any province or territory of Canada and there currently is no public market in Canada for any of the Notes, and one may never develop; (ii) that the Notes will be subject to resale restrictions under applicable Canadian Securities Laws; and (iii) such Canadian Purchaser's name and other specified information will be disclosed to the relevant Canadian securities regulators or regulatory authorities and may become available to the public in accordance with applicable laws, provided that a statement to such effect in any Canadian Offering Memorandum delivered to such Canadian Purchaser by the Dealer shall constitute such disclosure.
No permit has been obtained from the Polish Financial Supervisory Authority ("Polish FSA") in relation to the issue of the Notes nor has the issue of the Notes been notified to the Polish FSA in accordance with applicable procedures. Accordingly, the Notes may not be offered in the Republic of Poland ("Poland") as defined in the Polish Act on Public Offerings, the Conditions Governing the Introduction of Financial Instruments to Organised Trading System and Public Companies dated 29 July 2005 (as amended) as a communication made in any form and by any mean, directed at 150 or more people or at an unnamed addressee containing information on the securities and the terms of their acquisition sufficient to enable an investor to decide on the securities acquisition ("Public Offering"). Each Dealer has confirmed, and each further Dealer appointed under the Programme will be required to confirm, that it is aware that no such permit has been obtained nor such notification made and has represented that it has not offered, sold or delivered and will not offer, sell or deliver the Notes in Poland in the manner defined as Public Offering as part of their initial distribution or otherwise to residents of Poland or on the territory of Poland. Each Dealer has acknowledged, and each further Dealer appointed under the Programme will be required to acknowledge, that the acquisition and holding of the Notes by residents of Poland may be subject to restrictions imposed by Polish law (including foreign exchange regulations) and that the offers and sales of the Notes to Polish residents or within Poland in secondary trading may also be subject to restrictions.
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that the Notes to be issued under the Programme have not been and will not be offered, sold or publicly promoted or advertised by it in the United Arab Emirates other than in compliance with any laws applicable in the United Arab Emirates governing the issue, offering and sale of securities.
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that it has not offered and will not offer the Notes to be issued under the Programme to any person in the Dubai International Financial Centre unless such offer is:
The Notes have not been offered or sold and will not be offered or sold in Indonesia or to Indonesian nationals, corporations or to Indonesian citizens, wherever they are domiciled or to Indonesian residents, including by way of invitation, offering or advertisement, and neither the Prospectus nor any other offering materials relating to the Notes have been distributed, or will be distributed, in Indonesia or to Indonesian nationals, corporations or residents in a manner which constitutes a public offering of the Notes under the laws or regulations of the Republic of Indonesia.
The Notes may not be offered, sold, transferred or otherwise disposed directly or indirectly, nor may any document or other material in connection therewith be distributed, other than to a person to whom an offer or invitation to subscribe or purchase the Notes and to whom the Notes are issued would fall within:
as may be amended and/or varied from time to time and subject to any amendments to the applicable laws from time to time.
Other than in respect of Notes for which "Prohibition of Sales to Belgian Consumers" is specified as "Not Applicable" in the applicable Final Terms (or in the case of Exempt Notes, the Pricing Supplement), each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that an offering of Notes may not be advertised to any individual in Belgium qualifying as a consumer within the meaning of Article I.1 of the Belgian Code of Economic Law, as amended from time to time (a "Belgian Consumer") and that it has not offered, sold or resold, transferred or delivered, and will not offer, sell, resell, transfer or deliver, the Notes, and that it has not distributed, and will not distribute, any prospectus, memorandum, information circular, brochure or any similar documents in relation to the Notes, directly or indirectly, to any Belgian Consumer.
Each Dealer has severally agreed, and each further Dealer appointed under the Programme will be required to agree, with the relevant Issuer that it will observe all applicable laws and regulations in any jurisdiction in which it may offer, sell or deliver Notes and that it will not, directly or indirectly, offer, sell or deliver Notes or distribute or publish this document, any prospectus, circular, advertisement or other offering material (including, without limitation, any supplement to this document) in relation to the Notes in or from any country of jurisdiction except under circumstances that will to be the best of its knowledge and belief result in compliance with any applicable laws and regulations, and all offers, sales and deliveries of Notes by it will be made on the foregoing terms.
The restrictions on offerings may be modified by the agreement of the relevant Issuer and the Dealers following a change in a relevant law, regulation or directive.
Santander UK plc was incorporated in England and Wales on 12 September, 1988 with registered number 2294747. Santander UK Group Holdings plc was incorporated in England and Wales on 23 September 2013 with registered number 08700698.
The commencement of the Programme and the issue of Notes (with maturities not exceeding 30 years) was duly confirmed and authorised by (i) resolutions of the Board of Directors of Santander UK plc dated 24 July 2017 and by resolutions a committee of the Board of Directors approved on 4 August 2017 and (ii) resolutions of the Board of Directors of Santander UK Group Holdings plc dated 24 July 2017 and by resolutions a committee of the Board of Directors approved on 4 August 2017. Pursuant to such resolutions, authority was delegated to the relevant CEO, the relevant CFO, a committee formed of any two directors of the relevant Issuer or a committee formed of two persons authorised by the relevant Board of Directors. Pursuant to such delegated authorities, a committee formed of two persons authorised by the Board of Directors of (i) Santander UK plc and (ii) Santander UK Group Holdings plc duly confirmed and authorised the continuation of the Programme pursuant to resolutions each dated 14 August 2018.
The listing of Notes on the Official List will be expressed as a percentage of their nominal amount (excluding accrued interest). It is expected that each Tranche of Notes which is to be admitted to listing on the Official List and to trading on the London Stock Exchange's Regulated Market will be admitted separately as and when issued, subject only to the issue of a Global Note or Notes initially representing the Notes of such Tranche. The acceptance of the Programme on the Official List in respect of Notes is expected to be granted on or around 4 September 2018.
So long as Notes are capable of being issued under the Programme, copies of the following documents will, when published, be available for inspection during usual business hours on any weekday (Saturdays and public holidays excepted) at the registered office of the Issuers and at the specified office of the Principal Paying Agent (and items (i), (iv) and (v) will be available for collection free of charge):
(ii) the consolidated and non-consolidated audited financial statements of the Issuers in respect of the financial years ended 31 December 2016 and 31 December 2017 and the Half Yearly Financial Reports of the Issuers as at and for the six months ended 30 June 2018;
(iii) the Programme Agreement, the Agency Agreement and the Trust Deed (which contains the forms of Global Notes, Notes in definitive form, Coupons and Talons);
The Notes in bearer and registered form have been accepted for clearance through Euroclear and Clearstream, Luxembourg. The appropriate Common Code and ISIN for each Tranche of Bearer Notes allocated by Euroclear and Clearstream, Luxembourg will be specified in the applicable Final Terms (or, in the case of Exempt Notes, the applicable Pricing Supplement). In addition, the relevant Issuer may make an application for any Notes in registered form to be accepted for trading in book-entry form by DTC. The CUSIP and/or CINS numbers for each Tranche of Registered Notes, together with the relevant ISIN and Common Code, will be specified in the applicable Final Terms (or, in the case of Exempt Notes, the applicable Pricing Supplement). If the Notes are to clear through an additional or alternative clearing system the appropriate information will be specified in the applicable Final Terms (or, in the case of Exempt Notes, the applicable Pricing Supplement).
The address of Euroclear is 3 Boulevard du Roi Albert II, B.1210 Brussels, Belgium and the address of Clearstream, Luxembourg is Avenue J. F. Kennedy, L-1855 Luxembourg.
The address of DTC is 55 Water Street, 25th Floor, New York, NY 10041-0099, United States of America.
There has been no significant change in the financial or trading position of each of the Issuers and their respective subsidiaries since 30 June 2018, being the date of each Issuer's last published consolidated half yearly financial statements.
There has been no material adverse change in the financial position or prospects of each of the Issuers and their respective subsidiaries since 31 December 2017, being the date of each Issuer's last published consolidated annual financial statements.
There are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Issuers are aware) which may have or had, in the 12 months prior to the date hereof, a significant effect on the financial position or profitability of the Santander UK Group or each of the Issuers and its subsidiaries.
The consolidated annual financial statements of the Issuers and the Group for the years ended 31 December 2017 and 31 December 2016 incorporated by reference in this Prospectus have been audited by PricewaterhouseCoopers LLP, chartered accountants and registered auditors, as stated in the report appearing therein.
The auditors of the Issuers and the Group have no material interest in the Issuers or the Group.
Bearer Notes and the relevant Coupons or Talons will bear a legend to the effect that any U.S. person holding the same will be subject to limitations under the United States income tax laws, including those under Section 165(j) and 1287(a) of the United States Internal Revenue Code of 1986, as amended.
As at the date of this Prospectus, in respect of Santander UK plc the Programme has been rated (i) (P)Aa3 (senior unsecured) and (P)P-1 (short-term) by Moody's, (ii) BBB (senior unsecured notes with a maturity of one year or more) and A-2 (senior unsecured notes with a maturity of less than one year) by S&P and (iii) A (long-term senior unsecured) and F1 (short-term senior unsecured) by Fitch.
As at the date of this Prospectus, in respect of Santander UK Group Holdings plc the Programme has been rated (i) (P)Baa1 (senior unsecured), (P)P-2 (short-term) and (P)Baa1 (subordinated) by Moody's, (ii) BBB (senior unsecured notes with a maturity of one year or more), A-2 (senior unsecured notes with a maturity of less than one year) and BB+ (subordinated notes) by S&P and (iii) A (long-term senior unsecured) and F1 (short-term senior unsecured) by Fitch.
The Contracts (Rights of Third Parties) Act 1999 (the "Act") provides, inter alia, that persons who are not parties to a contract governed by the laws of England and Wales may be given enforceable rights under such contract. This Programme expressly excludes the application of the Act to any issue of Notes under the Programme.
The Issuers do not intend to provide any post-issuance information in relation to any issue of Notes.
In relation to any Tranche of Fixed Rate Notes, an indication of the yield in respect of such Notes will be specified in the applicable Final Terms (or, in the case of Exempt Notes, the applicable Pricing Supplement). The yield is calculated at the Issue Date of the Notes on the basis of the relevant Issue Price. The yield indicated will be calculated as the yield to maturity as at the Issue Date of the Notes and will not be an indication of future yield.
REGISTERED OFFICE OF THE ISSUERS
2 Triton Square Regent's Place London NW1 3AN
13th Floor, Citigroup Centre Canada Square London E14 5LB
13th Floor, Citigroup Centre Canada Square London E14 5LB
Citibank Europe plc
1 North Wall Quay Dublin 1
Citigroup Global Markets Europe AG 5 th Floor, Reuterweg 16 60323 Frankfurt
To the Issuers as to English law
Slaughter and May One Bunhill Row London EC1Y 8YY
To the Issuers as to United States law
Cleary Gottlieb Steen & Hamilton LLP 2 London Wall Place London EC2Y 5AU
To the Dealers as to English law and United States law
Allen & Overy LLP One Bishops Square London E1 6AD
To the Trustee as to English law
Linklaters LLP One Silk Street London EC2Y 8HQ
246
PricewaterhouseCoopers LLP 1 Embankment Place, London WC2N 6RH
Ciudad Grupo Santander Avda de Cantabria s/n Edificio Encinar 28660 Boadilla del Monte Madrid, Spain
10 Harewood Avenue London NW1 6AA
One Cabot Square London E14 4QJ
Peterborough Court 133 Fleet Street London EC4A 2BB
25 Bank Street Canary Wharf London E14 5JP
2 King Edward Street London EC1A 1HQ
Barclays Bank PLC 5 The North Colonnade Canary Wharf London E14 4BB
Citigroup Centre Canada Square Canary Wharf London E14 5LB
Winchester House 1 Great Winchester Street London EC2N 2DB
8 Canada Square London E14 5HQ
Mizuho House 30 Old Bailey London EC4M 7AU
25 Cabot Square Canary Wharf London E14 4QA
Nomura International plc 1 Angel Lane London EC4R 3AB
UBS Limited 5 Broadgate London EC2M 2QS
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