EBA is consulting on the regulatory technical standards for contractual recognition of stay powers laid down in the Bank Recovery and Resolution Directive (BRRD). The regulatory technical standards support effective application of temporary restrictions on early termination rights (resolution stays) in relation to financial contracts governed by the law of a third country. These standards constitute the first EBA mandate stemming from the revised BRRD and aim to promote the effective application of recovery and resolution powers to banks and banking groups. The consultation period for the regulatory technical standards ends on August 15, 2020.
BRRD requires member states to ensure that their resolution authorities can effectively make use of the stay powers on contracts that an institution or entity has entered into, in case resolution powers or crisis prevention measures are applied. The draft regulatory technical standards being consulted on specify the contents of the contractual terms required to be included in relevant financial contracts where no alternative mechanism (that is, statutory) exists to secure recognition by the counterparty of the resolution authority’s powers to suspend or restrict rights and obligations. These include provisions specifying the acknowledgement, description of the powers, and recognition of the parties that they are bound by the powers to suspend certain obligations and restrictions of some rights and that they are bound by the requirements of Article 68 of BRRD. In addition, the parties acknowledge that no other contractual term impairs the effective and enforceability of this clause.
This approach is intended to strike a balance between the need to achieve an appropriate level of convergence while ensuring that differences in legal systems of third countries as well as other differences arising from different forms of financial contracts can be taken into account by resolution authorities, institutions, and relevant entities through the addition of further elements, if necessary; the aim is to achieve the policy goal of ensuring that the powers to suspend or restrict rights and obligations can be applied effectively in relation to financial contracts governed by the law of a third country.
Comment Due Date: August 15, 2020
Keywords: Europe, EU, Banking, BRRD, Resolution Framework, Regulatory Technical Standards, Financial Contract, Basel, EBA
Next ArticleEBA Single Rulebook Q&A: Second Update for May 2020
HM Treasury announced that the new Financial Services Bill has been introduced in the Parliament.
PRA published the consultation paper CP17/20 to propose changes to certain rules, supervisory statements, and statements of policy to implement elements of the Capital Requirements Directive (CRD5).
US Agencies adopted a final rule that applies to advanced approaches banking organizations and aims to reduce interconnectedness in the financial system as well as to reduce contagion risks associated with the failure of a global systemically important bank (G-SIB).
US Agencies (FDIC, FED, and OCC) adopted a final rule that implements the net stable funding ratio (NSFR) for certain large banking organizations.
FSB finalized the toolkit of effective practices to assist financial institutions in their cyber incident response and recovery activities.
ECB published eleventh issue of the Macroprudential Bulletin, which provides insight into the ongoing work of ECB in the field of macro-prudential policy.
HM Treasury issued a call for evidence seeking views to reform the prudential regulatory regime—also known as Solvency II—of the insurance sector in UK.
ESRB responded to the EC consultation on review of Solvency II regime.
HM Treasury launched a consultation on Phase II of the Future Regulatory Framework Review, with the comment period ending on January 19, 2021.
EC adopted the work program for 2021.