BoE decided to recognize the bail-in of PrivatBank, with HM Treasury providing its approval of this decision. This is in response to a request from the National Bank of Ukraine to recognize the bail-in of four loans made by “UK SPV Credit Finance plc” to PrivatBank. The BoE decision does not affect deposits held in UK banks and the recognition gives effect to the bail-in of the four loans in question as a matter of English law.
As set out in the FSB Key Attributes of Effective Resolution Regimes for Financial Institutions, third-country recognition is central to effective cross-border resolutions because it enables resolution actions taken in one jurisdiction to have effect in other jurisdictions. Under the UK law, BoE is required, where a request for recognition has been made, to make a decision on whether or not to recognize such a resolution action. PrivatBank is a bank incorporated in Ukraine. It does not perform banking activities or have banking customers in the UK. The request for recognition arises solely because of the existence of the four English law loans to PrivatBank. In 2016, PrivatBank was subject to bail-in by the National Bank of Ukraine. Following this, the National Bank of Ukraine submitted a request for recognition to BoE in relation to the bail-in of the four loans, totaling $595 million, which were funded by notes issued by UK SPV and are governed by the English law. Under section 89H of the Banking Act 2009, to decide whether to recognize this bail-in, BoE is required to undertake an analysis to determine whether the third-country bail-in is broadly comparable in its objectives and anticipated results to those of the UK resolution regime. BoE must then also consider whether any of the statutory grounds apply for refusing to recognize the bail-in. While considering its decision, BoE has kept relevant stakeholders, including the National Bank of Ukraine and representatives of creditors, informed about the recognition process throughout.
Related Link: Press Release
Keywords: Europe, UK, Ukraine, Banking, PrivatBank, National Bank of Ukraine, Bain In, Credit Risk, Resolution Framework, Third-Country Recognition, BoE
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