EBA consults on technical standards on impracticability of contractual recognition of bail-in

The European Banking Authority (EBA) launched today a public consultation on draft Regulatory Technical Standards (RTS) and draft Implementing Technical Standards (ITS) on the impracticability of contractual recognition of write-down and conversion powers and related notifications as laid down in the Bank Recovery and Resolution Directive (BRRD). These standards aim at promoting the effective application of resolution powers to banks and banking groups and to foster convergence of practices between relevant authorities and institutions across the EU. The consultation runs until 24 October 2020.

To facilitate and improve the bail-in process in the event of resolution, the BRRD requires the inclusion of a contractual recognition of the effects of the bail-in tool in contracts or agreements governed by third country law. However, there might be instances where it is impracticable for institutions or entities to include those contractual terms.

The draft RTS define (i) the conditions under which it would be legally or otherwise impracticable for an institution or entity to include the contractual term for the recognition of the bail-in; (ii) the conditions and (iii) the reasonable timeframe for the resolution authority to require the inclusion of the contractual term for the bail-in recognition.

The draft ITS specify uniform formats and templates for the notification to resolution authorities of contracts meeting the conditions of impracticability defined in the draft RTS.

Consultation process

Comments to this consultation can be sent to the EBA by clicking on the "send your comments" button on the consultation page. Please note that the deadline for the submission of comments is 24 October 2020.

The EBA will hold a public hearing on the draft RTS and draft ITS, which will take place via conference call on Wednesday 30 September 2020 from 10:00 a.m. CET. The dial in details will be communicated in due course.

All contributions received will be published following the closure of the consultation, unless specifically requested otherwise.

Legal basis and next steps

The proposed draft RTS are based on Article 55(6) of the BRRD, which requires the EBA to develop draft RTS to further specify:

• The conditions under which it would be legally or otherwise impracticable for an institution or entity to include the contractual term referred to in paragraph 1 of Article 55 BRRD in certain categories of liabilities;
• 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;
• 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.

The proposed draft ITS are based on Article 55(8) of the BRRD which requires the EBA to develop draft ITS to specify uniform formats and templates for the notification to resolution authorities for the purposes of paragraph 2 of article 55 of the BRRD.