The PRA has published:
- Policy Statement 25/15: Contractual stays in financial contracts governed by third country law (PS25/15); and
- Supervisory Statement 42/15: Contractual stays in financial contracts governed by third country law (SS42/15).
PS25/15 contains final rules to implement the PRA’s proposals made in Consultation Paper 19/15: Contractual stays in financial contracts governed by third country law that are intended to both reduce the risk of contagion from the failure of a relevant firm and support its orderly resolution by ensuring that resolution action taken in relation to a relevant firm would not immediately lead to the early termination of its financial arrangements (or those of its subsidiaries) governed by third country law while similar financial arrangements governed by the laws of the UK or another EAA jurisdiction are stayed.
PS25/15 is relevant to PRA-authorised banks, building societies, PRA designated investment firms and their qualifying parent undertakings, which for this purpose comprise UK financial holding companies and UK mixed financial holding companies. PS25/15 is also relevant to credit institutions, investment firms and financial institutions that are subsidiaries of these firms, regardless of the jurisdiction of incorporation or establishment of the subsidiary, to the extent that the subsidiary enters into a financial arrangement governed by third country law which contains termination rights or security interests, the exercise of which could be suspended or prevented or the application of which would be disregarded under the Special Resolution Regime under Part 1 of the Banking Act 2009 if the contract were governed by UK law. PS25/15 is also relevant to counterparties of UK firms and in scope subsidiaries with third country law financial arrangements.
SS42/15 sets out the PRA’s expectations in respect of the PRA rules on contractual stays in financial contracts governed by third country law. The supervisory statement should be read together with the Stay in Resolution Part of the CRR Firms and Non-Authorised Persons Sectors of the PRA Rulebook.
The new rules are effective from 1 June 2016 in respect of financial arrangements with counterparties that are credit institutions or investment firms, and from 1 January 2017 in respect of financial arrangements with all other counterparties.
View Contractual stays in financial contracts governed by third-country law, 13 November 2015
View Contractual stays in financial contracts governed by third country law – SS42/15, 13 November 2015