Hong Kong Consults on New Resolution Regime


On 7 January 2013, the Hong Kong Monetary Authority (HKMA) issued a press release announcing the publication of its first stage public consultation, drafted in conjunction with the Securities and Futures Commission (SFC) and the Insurance Authority (IA), on establishing an effective resolution regime for financial institutions, including financial market infrastructures, in Hong Kong.  Continue reading


RRP: PRA Gently Turns the Screw (but to what end?)


On 19 December 2013, the Prudential Regulation Authority (PRA) issued Policy Statement PS8/13 together with two Supervisory Statements, SS18/13 on recovery planning, and SS19/13 on resolution planning.  Together, this guidance details the PRA’s final RRP rules for UK banks, building societies and UK designated investment firms. Their publication follows on from the FSA’s original consultation paper (CP11/16) and Feedback Statement (FS12/1).  The final rules are set out in the PRA Rulebook Recovery and Resolution Instrument 2013 (PRA 2013/37), which is annexed to PS8/13 and come into force 1 January 2014. Continue reading

RRD Compromise Text Published

On 22 December 2013 the Council of the EU published a note attaching the final compromise text of the proposed Recovery and Resolution Directive (RRD) agreed with the European Parliament.  Agreement in trialogue had previously been reached on 11 December 2013.

On 20 December 2013, the Permament Representatives Committee (COREPER) of the Council of the EU also published a press release confirming that it had approved (on the Council’s behalf) the compromise text agreed with the Parliament.  The text of the RRD now needs to be formally adopted by the EU Parliament and the Council.


Trilogue Agreement Reached on RRD

On 12 December 2013, the European Commission published a press release announcing that on 11 December 2013, Parliament and Council Presidency negotiators reached political agreement in trilogue on the proposed Recovery and Resolution Directive (RRD). The Directive will enter into force on 1 January 2015 and will introduce the bail-in principle which will apply from 1 January 2016. The Directive now needs official approval by the Parliament and Council of the EU at first reading. Continue reading


CS Takes the Sub Way

This is a link to an FT article explaining the changes currently being implemented by Credit Suisse to its legal structure in response to the resolution planning requirements of its main regulator. Continue reading


FMLC Provides Additional Commentary on RRD

On 25 October 2013, the Financial Markets Law Committee (FMLC) published a second discussion document on the EU Commission’s General Approach to the proposed Recovery and Resolution Directive (RRD).

The document is generally supportive of the changes made within the General Approach, but highlights a few remaining areas of concern with respect to legal uncertainty, including those set out below:

  • Bail-in: The RRD does not provide a set of principles to guide a resolution authority’s choice as to whether to convert debt to equity or whether to write-down debt.  In addition, contractual bail-in provisions may not operate in the same way as statutory bail-in provisions;
  • Valuation:  It is unclear on what basis the valuation (which must be independent) is to be carried out, notwithstanding that Article 30 of the RRD provides that the valuation should be fair and realistic.  This drafting ambiguity gives rise to legal uncertainty as to the status of a resolution action which is taken when a valuation at the proscribed standard has not been carried out, owing to practical difficulty or impossibility; and
  • General Resolution Powers:  Articles 56(1)(h) and 56(1)(l) of the RRD give a resolution authority the power to cancel or amend the terms of “debt instruments”.  However, this definition is wider than that of “capital instruments” – the term used to describe the instruments that are eligible to be ‘bailed-in’.

Non-bank RRP Update

On 25 October 2013, the Financial Stability Board (FSB) published a list of: