FCA published a statement that is relevant for firms preparing for transposition of the revised Bank Recovery and Resolution Directive (BRRD2). HM Treasury laid a statutory instrument before the UK Parliament on October 15, 2020 to transpose BRRD2, which the UK is required to do by December 28, 2020. Certain provisions of this directive will come into effect on December 28, 2020, but then will cease to be effective in the UK on December 31, 2020. Unlike PRA, that has consulted on short-lived rule changes to come into effect on December 28, 2020, FCA has not identified any conflicts between its current requirements and those in the statutory instrument that will implement BRRD2. The statement highlights that FCA will not be addressing those new requirements in BRRD2 that do not apply to FCA solo-regulated firms. Firms should consult the website of HM Treasury and PRA for further information on these changes.
FCA also highlighted the following relevant areas that apply to FCA-regulated firms:
- Article 48(7) on the priority of debts in insolvency—As transposed by HM Treasury, certain changes are made to the priority of debts in insolvency in the case of insolvency proceedings commenced during the four-day period.
- Article 55 on the Contractual Recognition of Bail-in—FCA has requirements in place for firms to include terms in their contracts recognizing that a liability may be “bailed in” (for example the debt may be written-down or converted into equity) by the resolution authority. BRRD2 adds to these with a mechanism for firms to notify the resolution authority in situations where it is “legally or otherwise impracticable” to include the required terms in contractual provisions. These additional requirements do not conflict with existing rules of FCA. Any notifications submitted that have not already been acted upon will automatically lapse on January 01, 2021.
- Other potentially relevant article—Article 44a addresses the sale of subordinated eligible liabilities to retail clients and will be introduced via Handbook rules. FCA is consulting on the introduction of the requirements in this area in its quarterly consultation paper (No. 30), which was published on December 04, 2020.
Related Link: FCA Statement
Keywords: Europe, UK, Banking, Securities, BRRD2, BRRD2 Transition, Resolution Framework, Basel, Bail-In, Brexit Transition, HM Treasury, FCA
Previous ArticleEU Endorses Rules Addressing Cessation of Financial Benchmarks
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).
The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.
The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.
The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.
The Basel Committee on Banking Supervision (BCBS) issued principles for the effective management and supervision of climate-related financial risks.