Featured Product

    SRB on Notifying on Impracticability of Bail-in Clauses in Contracts

    June 21, 2021

    SRB published the policy on how banks can notify authorities when bail-in recognition clauses cannot be added to contracts under third-country law. SRB has outlined the procedural expectations on such notifications, the conditions and categories for impracticability, and the process by which resolution authorities may require banks to include such clauses following the receipt of the notification. The policy explains how the SRB will apply the rules set out in Article 55(2) Bank recovery and resolution (BRRD) and further detailed in the forthcoming delegated and implementing regulations based on the applicable regulatory and implementing technical standards, which EBA had published in December 2020. SRB has also published notification templates and XBRL filing rules for the 2021 notification of impracticability of bail-in.

    In line with Article 55(2) of the BRRD, banks may reach the determination that it is legally or otherwise impracticable to include bail-in recognition clauses in the contractual provisions governing a relevant liability, in which case they need to notify the resolution authority. A bank that includes a bail-in recognition clause in the third-country law governed contracts to which it is party and which are within the scope of the obligation under Article 55(1) BRRD does not need to make any notification under this process. The obligation to include the bail-in recognition clause is suspended from the date of notification. SRB, in cooperation with the national resolution authorities, will assess the notification and may seek additional information from the bank for this assessment. Following a complete notification, including additional information that may have been requested from the bank, the internal resolution team will perform the assessment within a timeframe.

    Banks should ensure that their notifications are in line with the conditions defined in the regulatory technical standards and provide adequate reasoning why those conditions are met. SRB will assess the complete notification, and, if necessary, require the inclusion based on the conditions above within three months of the date of receipt. This period may be extended by three months in complex cases and, if so, the bank will be informed of the extension and rationale. If SRB does not require the inclusion of a bail-in recognition clause within that timeframe, the obligation to include the clause (in the contracts notified) will not be imposed.  SRB has identified—based on Article 55(7) BRRD—the following four preliminary categories of liabilities, for which the impracticability notification and assessment are simplified:

    • Liabilities resulting from trade finance operations, under internationally agreed frameworks and protocols
    • Liabilities resulting from project finance activities, under official standardized terms
    • Liabilities to financial market infrastructure service providers, where the services are provided on standard terms not susceptible to bilateral negotiation
    • Minor operating liabilities, arising from (non-critical) business operations, where the terms of the contract are set by the provider and not bilaterally negotiated

    In the first phase, until September 30, 2021, a bank is expected to notify its national resolution authority through the Excel-based notification templates. The national resolution authority will then forward these filled templates to SRB which, in cooperation with such national authorities, will assess the notifications. In the second phase, starting October 01, 2021 and considering the EBA taxonomy in the Data Point Model 3.07, banks will be asked to submit notifications in XBRL format. Banks are invited to liaise with their host national resolution authority to prepare the introduction of XBRL reports. Where relevant, banks are encouraged to send notifications per liability (based on template N.01.01), if any, on a quarterly basis, and per category (based on template N.01.02) on a semi-annual basis. In both cases, banks are encouraged to send notifications within the last 10 working days of the first month of the period (that is, January, April, July, and October), except where indicated otherwise by the national resolution authority. Banks are expected to report categories of liabilities under template N.01.02 on a forward-looking basis and include liabilities to be entered into within six months. In all cases, the burden of proof of impracticability is on the bank making the notification.

     

    Related Links

    Keywords: Europe, EU, Banking, Bail In, Resolution Planning, Basel, Bail-In Recognition, XBRL, BRRD, Templates, Reporting, Resolution Framework, SRB

    Featured Experts
    Related Articles
    News

    BIS Bulletin Examines Cognitive Limits of Large Language Models

    The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.

    January 25, 2024 WebPage Regulatory News
    News

    ECB is Conducting First Cyber Risk Stress Test for Banks

    As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.

    January 24, 2024 WebPage Regulatory News
    News

    EBA Continues Momentum Toward Strengthening Prudential Rules for Banks

    A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.

    January 24, 2024 WebPage Regulatory News
    News

    EU and UK Agencies Issue Updates on Final Basel III Rules

    The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards

    December 19, 2023 WebPage Regulatory News
    News

    Industry Agency Expects Considerable Uptake for Swiss Climate Scores

    The Swiss Federal Council recently decided to further develop the Swiss Climate Scores, which it had first launched in June 2022.

    December 18, 2023 WebPage Regulatory News
    News

    BCBS Consults on Disclosure of Climate Risks, Issues Other Updates

    The Basel Committee on Banking Supervision (BCBS) launched consultation on a Pillar 3 disclosure framework for climate-related financial risks, with the comment period ending on February 29, 2024.

    December 18, 2023 WebPage Regulatory News
    News

    US Government Moves to Regulate Development and Use of AI Models

    The U.S. President Joe Biden signed an Executive Order, dated October 30, 2023, to ensure safe, secure, and trustworthy development and use of artificial intelligence (AI).

    December 18, 2023 WebPage Regulatory News
    News

    MAS Launches Gprnt Digital Platform for ESG Reporting for SMEs

    The Monetary Authority of Singapore (MAS) launched an integrated digital platform, Gprnt, also known as “Greenprint.”

    November 29, 2023 WebPage Regulatory News
    News

    EBA Finalizes Templates for One-Off Climate Risk Scenario Analysis

    The European Banking Authority (EBA) has published the final templates, and the associated guidance, for collecting climate-related data for the one-off Fit-for-55 climate risk scenario analysis.

    November 28, 2023 WebPage Regulatory News
    News

    NGFS Publishes Phase IV Long-term Climate Scenarios for Banks

    The Network for Greening the Financial System (NGFS) published its latest set of long-term climate macro-financial scenarios (Phase IV) for assessing forward-looking climate risks.

    November 28, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8947