23 December 2020
The European Banking Authority (EBA) published today its final draft Regulatory Technical Standards (RTS) and final draft Implementing Technical Standards (ITS) on impracticability of contractual recognition of bail-in powers under the Bank Recovery and Resolution Directive (BRRD). These standards, which aim at ensuring the harmonised application of instances of impracticability of contractual recognition of bail-in powers, are part of the EBA's work to implement the BRRD.
Where contracts are governed by the law of a third country, the BRRD requires that these contracts include a contractual recognition term by which the parties acknowledge that the contract may be subject to bail-in powers and agree to be bound by their effect. In certain situations, it might be legally or otherwise impracticable to achieve contractual recognition of the bail-in powers.
The final draft RTS further determine the conditions of impracticability, the conditions for the resolution authority to require its inclusion and the timeframe for the resolution authority to require the inclusion of a contractual term. Finally, the draft ITS specify the uniform formats and templates for the notification to resolution authorities of determinations of impracticability to achieve contractual recognition.
These final draft RTS and ITS have been developed according to Articles 55(6) and 55(8) of the BRRD, which mandate the Authority to develop draft RTS to further specify (a) the conditions under which it would be legally or otherwise impracticable for an institution or entity referred to in point (b), (c) or (d) of Article 1(1) to include the contractual term referred to in paragraph 1 of Article 55 BRRD in certain categories of liabilities; (b) the conditions for the resolution authority to require the inclusion of the contractual term pursuant to the third subparagraph of paragraph 2 of Article 55 BRRD; (c) the reasonable timeframe for the resolution authority to require the inclusion of a contractual term pursuant to the third subparagraph of paragraph 2 of Article 55 BRRD and, respectively, to develop draft implementing technical standards to specify uniform formats and templates for the notification to resolution authorities for the purposes of paragraph 2 of Article 55 BRRD.