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Notification of impracticability to include bail-in recognition clauses in contracts: SRB approach and expectations

Banks are required to include bail-in recognition clauses in relevant contracts under third country law to ensure that the liabilities under these contracts can be bailed in in the event of resolution. However, banks may determine that it is impracticable to include a bail-in recognition clause in a particular contract. In that case, they need to notify their resolution authority. The resolution authority then assesses the notification and may require the inclusion of the clause.

The SRB’s approach and expectations with regard to notifications of impracticability are based on the applicable Delegated and Implementing Regulations.[1]

The SRB expects banks to:

  • Only notify in cases where they determine that it is impracticable to include a bail-in recognition clause in the relevant contracts;
  • Submit their notifications in XBRL, taking into account the taxonomy developed by the EBA in its Data Point Model 3.0. Please refer to the filing rules below.
  • Ensure that their notifications are in line with the conditions defined in the delegated regulation and provide adequate reasoning why those conditions are met.

Furthermore, banks are encouraged to:

  • Use the categories of liabilities defined by the SRB in this document (and therefore use template N.01.02 on a forward-looking basis and include liabilities to be entered into within six months).   
  • Send notifications per liability (based on template N.01.01), if any, on a quarterly basis, and per category (based on template N.01.02) on a semi-annual basis. In both cases, banks are encouraged to send notifications within the last 10 working days of the first month of the period (i.e. preferably towards the end of January, April, July and October).

The SRB will assess only complete notifications and, if necessary, require the inclusion within three months of the date of receipt. This period may be extended by three months[2] in complex cases and, if so, the bank will be informed of the extension and rationale. If the SRB does not require the inclusion of a bail-in recognition clause within that timeframe, the obligation to include the clause (in the contracts notified) will not be imposed.

 

[1] Commission Delegated Regulation (EU) 2021/1527 of 31 May 2021 supplementing Directive 2014/59/EU of the European Parliament and of the Council with regard to regulatory technical standards for the contractual recognition of write down and conversion powers; and Commission Implementing Regulation (EU) 2021/1751 of 1 October 2021 laying down implementing technical standards for the application of Directive 2014/59/EU of the European Parliament and of the Council with regard to uniform formats and templates for notifications of determination of the impracticability of including contractual recognition of write down and conversion powers.

[2] By 6 months during a transition period of one year.

Documents

PDF | 439.16 KB | Publishing date: | Decision date:
2021-10-25 SRB Article 55 guidance.pdf

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