Shearman & Sterling LLP | FinReg | HM Treasury Consults on UK Transposition of Revised EU Bank Recovery & Resolution Directive
Financial Regulatory Developments Focus
This links to the home page
Financial Regulatory Developments Focus
  • HM Treasury Consults on UK Transposition of Revised EU Bank Recovery & Resolution Directive

    HM Treasury has launched a consultation on the U.K.'s intended transposition of the revised EU Bank Recovery and Resolution Directive (known as BRRD 2). BRRD 2 came into force in June 2019 and introduced a series of amendments to BRRD. EU Member States are required to transpose BRRD 2 into their national laws and apply the provisions by no later than December 28, 2020, except for provisions relating to Minimum Requirements for Own Funds and Eligible Liabilities, which apply from January 1, 2024. Under the terms of the Brexit Withdrawal Agreement, the U.K. government has committed to implementing all EU legislation due to be transposed before the end of 2020. HM Treasury has confirmed that, as the implementation of MREL provisions is not required until 2024, the U.K. intends to exercise its discretion to transpose those requirements. The U.K. already has a MREL framework which is based on the Financial Stability Board's Total Loss Absorbing Capacity standards.
    HM Treasury's consultation seeks input on the transposition of the following BRRD 2 provisions:
    • the introduction of "resolution entities" and "resolution groups";
    • the power for resolution authorities to impose a "maximum distributable amount", restricting the amount of distributions firms are able to make where they have insufficient resources to meet combined buffer requirements (taking into account MREL requirements);
    • the power for resolution authorities to suspend contractual payments once a firm has been deemed failing or likely to fail;
    • restrictions on the sale of subordinated eligible liabilities to retail clients;
    • amendments to the requirement for contractual recognition of bail-in where it would be legally or otherwise impracticable to include a contractual term; and
    • a requirement to include a term in financial contracts governed by third-country law that the contract may be subject to the exercise of powers by the resolution authority to temporarily suspend termination or security enforcement rights or restrict payment or delivery obligations.
    Responses to the consultation should be submitted by August 11, 2020.
    View HM Treasury's consultation on the transposition of BRRD 2.

    View details of BRRD 2.

    Return to main website