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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.