EC Issues Rule on Contractual Recognition of Resolution Stay Powers
The European Commission (EC) published Regulation 2021/1340 with regard to the regulatory technical standards for determining the content of the contractual terms on recognition of resolution stay powers. This Regulation supplements the Bank Recovery and Resolution Directive (BRRD) and shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.
In accordance with Article 71a(1) of the BRRD, institutions and entities are required to include terms that recognize the stay powers of resolution authorities in their financial contracts that are governed by the third-country law. The contractual recognition terms of a relevant financial contract governed by the third-country law, which an institution or entity enters into, shall include the following:
- Acknowledgement and acceptance by the parties that the contract may be subject to the exercise of powers by a resolution authority to suspend or restrict rights and obligations arising from such a contract under Articles 33a, 69, 70, and 71 of BRRD as transposed by the applicable national law and that the conditions set out in Article 68 of that Directive as transposed by the applicable national law will apply.
- Description of or a reference to the powers of the resolution authority as set out in BRRD, as transposed by the applicable national law, and a description of or a reference to the conditions of Article 68 of Directive 2014/59/EU as transposed by the applicable national law.
- Acknowledgement and acceptance by the parties that they are bound by the effect of an application of the certain powers in accordance with BRRD as transposed by the applicable national law.
- Acknowledgement and acceptance by the parties that the contractual recognition terms are exhaustive on the matters described therein to the exclusion of any other agreements, arrangements or understandings between the counterparties relating to the subject matter of the relevant agreement.
Related Link: Regulation 2021/1340
Effective Date: September 05, 2021
Keywords: Europe, EU, Banking, BRRD, Regulatory Technical Standards, Contractual Recognition, Basel, Resolution Framework, Stay Powers, EC
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