On 23 July 2020, the European Banking Authority (EBA) issued a public consultation on draft Regulatory Technical Standards (RTS) and draft Implementing Technical Standards (ITS) on the impracticality of contractual recognition of write-down and conversion powers and related notifications as laid down in the Bank Recovery and Resolution Directive (BRRD).
The statutory background to the draft RTS and ITS are as follows:
- Article 55(6) of the BRRD mandates the EBA to develop draft RTS in order to 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 Article 55(1) 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.
- Article 55(8) BRRD requires that the EBA develop draft ITS to specify uniform formats and templates for the notification to resolution authorities for the purposes of paragraph 2 of Article 55 BRRD.
The mandate for the EBA does not cover exclusion from the scope of bail-in or from the scope of Article 55 BRRD. Further, the draft RTS do not specify certain instruments as “impracticable” as the mandate is to identify the underlying conditions creating the impracticality to include in the contractual provisions the term by which the counterparty recognises the effects of a possible bail-in.
The deadline for comments on the consultation is 24 October 2020.