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European Association of Public Banks (EAPB)

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EAPB would like to raise our concern regarding agreements concluded in accordance with and governed by internationally standardized terms or protocols, where the associations responsible for publishing these standardized terms or protocols do not cover all relevant jurisdictions. For example, ISDA has published protocols with standardized terms that market participants can use to include bail-in provisions in ISDA Master Agreements. ISDA, however, often does not publish protocols that are relevant for smaller member states, which means that institutions established in these member states have to renegotiate all their ISDA Master Agreements. It is time consuming and costly to renegotiate all ISDA Master Agreements and it is challenging, particularly for smaller institutions, to convince counterparties to accept terms that differ from the standardized protocols and the terms of the standard agreements.

EAPB appreciates the EBA position that difficulties to include the contractual term required under Article 55(1) of Directive 2014/59/EU solely due to willingness of counterparties shall not be relevant for the determination of impracticability. However, if unwillingness is stemming from the fact that most market participants are able to rely on standardized terms or protocols, and that institutions are reluctant to accept bilateral terms that differ from those standardized terms or protocols, it could be very costly and time consuming for institutions established in a jurisdiction in which no standardized terms or protocols exists to include the contractual terms that are required under Article 55(1). This would place smaller institutions and institutions in smaller member states at a significant disadvantage. To preserve the level playing field, some relief should be provided for institutions in member states where standard agreements are not covered by standard Article 55 provisions.
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ISDA has published protocols in order to ease the process of including bail-in provisions in ISDA Master Agreements. However, ISDA often does not publish protocols that cover the rules implemented in smaller member states. This means that market participants established in the jurisdictions that are not covered by any ISDA protocol, have to draft and bilaterally negotiate the relevant provisions to the ISDA Master Agreements in order to comply with Article 55 (1) of Directive 2014/59/EU. These negotiations are time-consuming and pending on the willingness of the relevant counterparty to accept the provisions, could be quite a burdensome process that easily could have been avoided if ISDA had included all relevant jurisdictions in the scope of the protocols. In general, it is often also challenging for smaller institutions to convince larger counterparties to accept modifications or additional provisions in the standard documentation. The fact that the relevant agreements are often legacy agreements where the counterparty will have little imperative to renegotiate, exacerbates the problem.
Farid Aliyev
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