Status: Please note you should read all Brexit changes to the FCA Handbook and BTS alongside the main FCA transitional directions. Where these directions apply the 'standstill', firms have the choice between complying with the pre-IP completion day rules, or the post-IP completion day rules. To see a full list of Handbook modules affected, please see Annex B to the main FCA transitional directions.


Status: This chapter was amended on 31 December 2020 as a result of Brexit. However, it is subject to the FCA Prudential Transitional Direction, which means that firms should not comply with these provisions yet. Instead, firms must follow this link and continue to comply with pre-IP completion day requirements https://www.handbook.fca.org.uk/handbook?date=31-12-2020&timeline=True (unless specified otherwise in the Direction). To see a full list of Handbook modules affected, please see Section B of the Annex to the Direction.

IFPRU 11.6 1Contractual recognition of bail-in

Application

IFPRU 11.6.1 R RP

This section applies to:

  1. (1)

    an IFPRU 730k firm that is not subject to supervision on a consolidated basis;

  2. (2)

    a firm that is an RRD group member;

  3. (3)

    a qualifying parent undertaking that is an RRD group member; and

  4. (4)

    a qualifying parent undertaking that is:

    1. (a)

      a mixed activity holding company of an IFPRU 730k firm; and

    2. (b)

      does not hold an RRD institution using an intermediate financial holding company or mixed financial holding company.

IFPRU 11.6.2 G RP

This section is limited to the types of mixed activity holding company in IFPRU 11.6.1R (4) because, in accordance with article 33(3) of RRD, it is only these types of mixed activity holding company that can be subject to the bail-in provisions of RRD.

Contractual recognition of bail-in

IFPRU 11.6.3 R RP
  1. (1)

    If a liability meets the conditions in (2), a firm or qualifying parent undertaking must include a term in the contract governing the liability which states that the creditor or party to the agreement creating the liability:

    1. (a)

      recognises that the liability may be subject to write-down and conversion powers; and

    2. (b)

      agrees to be bound by any of the following actions of the Bank of England3 in relation to that liability:

      1. (i)

        reduction of principal or outstanding amount due; or

      2. (ii)

        conversion; or

      3. (iii)

        cancellation.

  2. (2)

    The contractual recognition of a bail-in requirement in (1) applies to a liability that is:

    1. (a)

      governed by the law of a third country that is not an EEA State3;

    2. (b)

      issued or entered into after 1 January 2016;

    3. (ba)

      2issued or entered into before 1 January 2016 but materially amended after 9 December 2016;

    4. (c)

      of a type that is not excluded under article 44(2) of RRD;

    5. (d)

      not a deposit of a type referred to in point (a) of article 108 of RRD; and

    6. (e)

      not a liability which the Bank of England3 has determined can be subject to write-down and conversion powers by the Bank of England3 under:

      1. (i)

        the law of a third country; or

      2. (ii)

        a binding agreement concluded with that third country.

  3. (3)

    3The contractual recognition of bail-in requirement in (1) also applies to a liability that is:

    1. (a)

      governed by the law of an EEA State;

    2. (b)

      issued or entered into after IP completion day4;

    3. (c)

      issued or entered into before IP completion day4 but materially amended after IP completion day4;

    4. (d)

      of a type that is not excluded under article 44(2) of RRD;

    5. (e)

      not a deposit of a type referred to in point (a) of article 108 of RRD; and

    6. (f)

      not a liability which the Bank of England has determined can be subject to write-down and conversion powers by the Bank of England under:

      1. (i)

        the law of an EEA State; or

      2. (ii)

        a binding agreement concluded with that EEA State.

[Note: article 55(1) of RRD]

IFPRU 11.6.4 G RP

2A firm or qualifying parent undertaking proposing to provide contractual recognition of bail-in should also refer to articles 42 to 44 of the RRD Regulation3.