EBA Consults on Standards on Stay Powers in Contracts Under BRRD
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.
Related Links
Comment Due Date: August 15, 2020
Keywords: Europe, EU, Banking, BRRD, Resolution Framework, Regulatory Technical Standards, Financial Contract, Basel, EBA
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Pierre-Etienne Chabanel
Brings expertise in technology and software solutions around banking regulation, whether deployed on-premises or in the cloud.
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Related Articles
HKMA on Fintech Adoption and Innovation by Banks in Hong Kong
HKMA announced the publication of a report on fintech adoption and innovation in the banking industry in Hong Kong.
BIS on Impact of Increasing Use of Cloud Technology on Cyber Risk
BIS published a working paper that examines the drivers of cyber risk, especially in context of the cloud services.
ECB Consults on Guide for Managing Climate and Environmental Risks
ECB launched consultation on a guide specifying how the Banking Supervision expects banks to consider climate-related and environmental risks in their governance and risk management frameworks and when formulating and implementing their business strategy.
ECB Issues Opinion on Revisions to CRR in Response to COVID Crisis
ECB published an opinion (CON/2020/16) on amendments to the prudential framework in EU in response to the COVID-19 pandemic.
EBA Assesses Interlinkages Between Recovery and Resolution Planning
EBA published a report that examines the interlinkages between recovery and resolution planning under the Bank Recovery and Resolution Directive (BRRD).
SRB Publishes Final MREL Policy Under the Banking Package
SRB published the final Minimum Requirements for Own Funds and Eligible Liabilities (MREL) policy under the Banking Package.
US Agencies Amend Interim Final Rule on Transition Period for CECL
US Agencies (FDIC, FED, and OCC) published a final rule that makes technical changes to the March 31, 2020 interim final rule that provides a five-year transition period for the impact of the current expected credit loss (CECL) methodology on regulatory capital.
ECB Releases Results of March Survey on Credit Terms and Conditions
ECB published results of the March 2020 survey on credit terms and conditions in euro-denominated securities financing and over-the-counter (OTC) derivatives markets.
FINMA Adjusts Deadlines for COVID-19 Relief Measures for Banks
FINMA published guidance (06/2020) on extending or discontinuing various exemptions that were granted due to the COVID-19 crisis.
SRB Consults on Standardized Data Set for Bank Valuation in Resolution
SRB launched a consultation on the minimum data needed for valuation of a bank in resolution.
