On 3 December 2020, there was published on legislation.gov.uk The Bank Recovery and Resolution (Amendment) (EU Exit) Regulations 2020 together with an explanatory memorandum, de minimis assessment and transposition note.

The purpose of the statutory instrument is to implement into UK law those elements of the Bank Recovery and Resolution Directive II (BRRD II) that come into effect before the end of the transition period. HM Treasury is not transposing the requirements of the BRRD II that do not need to be complied with by firms until after the end of the transition period, in particular Article 1(17) which revises the framework for the minimum requirement for own funds and eligible liabilities (MREL) requirements across the EU on the basis that the UK already has in place an MREL framework in line with international standards (the Financial Stability Board’s total loss absorbing capacity standards).

In its transposition of BRDD II HM Treasury has also considered which provisions would not be suitable for the UK resolution regime after leaving the EU whilst still maintaining prudential soundness and other important regulatory outcomes such as consumer protection and proportionality. As a result, the statutory instrument is sun setting the following at the end of the transition period:

  • Article 1(6) of BRRD II which inserts a new Article 16a in BRRD and provides the resolution authority with the power to prohibit an entity from distributing more than the ‘Maximum Distributable Amount’ relating to the minimum requirement for own funds and eligible liabilities (M-MDA), where the entity fails to meet the combined buffer requirement, subject to certain conditions.
  • Article 1(12), which inserts a new Article 33a in BRRD to introduce a pre-resolution moratorium power.
  • Article 1(20) of BRRDII which introduces Article 48(7) of BRRD, making changes to priority of debts in insolvency.
  • Article 1(21) of BRRDII, which updates Article 55 of BRRD on the contractual recognition of bail-in.
  • Article 1(30) which amends the existing in-resolution moratorium power under Article 69 of BRRD.