Bail-in without borders
an update on contractual recognition of bail-in language
The Bank Recovery and Resolution Directive provides a framework for the recovery and resolution of European banks and most investment firms. It enables national resolution authorities – including the Bank of England in the UK – to restore the balance sheet of financial institutions through use of a “bail-in” tool.
Bail-in involves the recapitalisation of failing institutions through the write-down or cancellation of liabilities, or their conversion into equity, and is aimed at avoiding tax payer “bail-outs”. The Directive imposes rules on European institutions to insert contractual recognition of bail-in language into their non-EEA law governed contracts. Article 55 of the Directive is aimed at closing the gap between the automatic effectiveness of EU bail-in action within the EEA and its uncertain effect elsewhere – to achieve bail-in without borders.
Yet, the Directive is widely criticised for being too wide and inflexible and has caused confusion for those institutions required to insert relevant wording and counterparties unsure of what it means for them. Recently, in the UK, the PRA published a consultation on its rules implementing Article 55. Among other issues, the consultation proposes to put on a permanent footing the existing temporary waiver to the Article 55 requirement where compliance is “impracticable”.
The intention is that the revised rules will apply from 1 July 2016.
In this seminar we’ll look at:
- Article 55: its purpose, scope and difficulties
- What do you need to include in your contracts?
- Industry-wide forms of bail-in language – are they being used?
- The “impracticable” exemption – what does it really mean?
- Expected developments – Commission to amend Article 55?
Who should attend this seminar?
This seminar will be of interest to legal and deal teams in financial institutions.