PRA Finalizes Policy to Support Transposition of BRRD2
PRA published the policy statement PS28/20 that sets out the amended Contractual Recognition of Bail-in Part of the PRA Rulebook and Stay in Resolution Part of the PRA Rulebook. PS28/20 also provides feedback to responses to the consultation paper CP18/20, which sets out proposals to reflect transposition of the revised Bank Recovery and Resolution Directive (BRRD2) into UK legislation.
HM Treasure developed a Statutory Instrument for BRRD2, on December 02, 2020, to deliver the transposition of BRRD2. The instrument affects changes to primary legislation that will impact the existing PRA regime for Contractual Recognition of Bail-in and Stay in Resolution. Most elements of the Statutory Instrument that are relevant to the Contractual Recognition of Bail-in and Stay in Resolution Rules will come into force on December 28, 2020, but will subsequently cease to have effect on December 31, 2020, the day the Brexit transition period ends. In CP18/20, PRA referred to this process as "sunsetting." To reflect these changes, PRA had proposed to:
- Temporarily suspend part of the Contractual Recognition of Bail-in Part of the PRA Rulebook from December 28, 2020
- Reinstate the existing Contractual Recognition of Bail-in Part, with minor amendments, to come into force on implementation period completion day
- Amend the Stay in Resolution Part of the PRA Rulebook from December 28, 2020 until implementation period completion day
- Reintroduce the existing Stay in Resolution Part on implementation period completion day
PRA had received one response to its consultation, with the respondent requesting clarification about proposal to amend the definition of “crisis management measure” in the Stay in Resolution Part of the PRA Rulebook. PRA has considered that request and decided to publish the final policy as consulted on. PS28/20 has been designed in the context of the withdrawal of UK from the European Union and entry into the transition period. During the transition period, UK remains subject to European law and must transpose Directives that become applicable before implementation period completion day. The RA policy that is applicable only during the end of the transition period and will cease to have effect on the implementation completion day will not need to be amended under the EU (Withdrawal) Act 2018 (EUWA). Therefore, no such EUWA changes will be made to the Stay in Resolution Part, which will be in place for four days. PS28/20 will come into effect at the end of the transition period (on implementation period completion day) and will need to be amended under the EUWA. These changes will be made separately through the PRA Rulebook (EU Exit) Instrument 2020.
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Keywords: Europe, UK, Banking, BRRD2, BRRD2 Transposition, Resolution Framework, Basel, Brexit, Bail-In, PRA Rulebook, PS28/20, CP18/20, HM Treasury, PRA
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