The European Banking Authority (EBA) has published a consultation paper on its draft regulatory technical standards (RTS) under article 55(3) of the Bank Recovery and Resolution Directive (BRRD).
Article 55(1) of the BRRD requires Member States to require institutions and relevant entities to include in relevant agreements a contractual term by which the creditor or party to the agreement creating the liability recognises that liabilities may be subject to the write-down and conversion powers and agrees to be bound by any reduction of the principal or outstanding amount due, conversion or cancellation that is effected by the exercise of those powers by a Member State resolution authority.
Article 55(1) BRRD sets out a list of liabilities which are excluded from the requirement to include the contractual term. Furthermore article 55(3) BRRD requires the EBA to develop draft RTS in order to further determine the list of liabilities to which the exclusion applies.
The consultation published by the EBA contains the draft RTS and explains the approach that the EBA has taken. The draft RTS also specifies the contents of the contractual term required to be included in relevant liabilities where no alternative mechanism exists to secure recognition.
The deadline for comments on the consultation paper is 5 February 2015.
View EBA consults on contractual recognition of bail-in, 5 November 2014