16 December 2020
The European Banking Authority (EBA) published today its final draft Regulatory Technical Standards (RTS) on the contractual recognition of stay powers. The technical standards provide further specification of essential elements to ensure the effectiveness of the resolution regime established by the Bank Recovery and Resolution Directive (BRRD). These standards are part of the EBA's major programme of work to implement the BRRD and address the problem of too-big-to-fail banks.
These technical standards aims to ensure the effective application of stay power. Where financial contracts are governed by the law of a third country, the BRRD requires these contracts to include a contractual recognition term by which the parties acknowledge that the contract may be subject to these stay powers and agrees to be bound by their effect.
The final draft RTS further determine the contents of the contractual recognition term for stay powers. The EBA's approach is designed to strike a balance between the need for harmonisation and the need for flexibility to take account of any issues arising in relation to a specific third country law, type of financial contract.
The final draft RTS on contractual recognition of stay powers have been developed according to Article 71a(5) of the BRRD, which requires the EBA to further determine the contents of the term required in paragraph 1 of article 71a of the BRRD, taking into account institutions' and entities' different business models.