PrivatBank Bail-in: Bank of England Recognises Bail-in by National Bank of Ukraine

The Bank of England has received a request for recognition from the National Bank of Ukraine (NBU) to recognise the bail-in of four loans made by “UK SPV Credit Finance plc” (UK SPV) to PrivatBank.
Published on 14 May 2021

News release

As set out in the Financial Stability Board’s Key Attributes of Effective Resolution Regimes for Financial Institutions, third-country recognition is central to effective cross-border resolutions because it enables resolution actions taken in one jurisdiction to have effect in other jurisdictions. Under UK law, the Bank of England is required, where a request for recognition has been made, to make a decision on whether or not to recognise such a resolution action.

The Bank of England has received a request for recognition from the National Bank of Ukraine (NBU) to recognise the bail-in of four loans made by “UK SPV Credit Finance plc” (UK SPV) to PrivatBank. PrivatBank is a bank incorporated in Ukraine. It does not perform banking activities or have banking customers in the UK. The request for recognition arises solely because of the existence of the four English law loans to PrivatBank. In 2016, PrivatBank was subject to bail-infootnote [1] by the NBU. Following this, the NBU submitted a request for recognition to the Bank of England in relation to the bail-in of the four loans, totalling $595m, which were funded by notes issued by UK SPV and are governed by English law.

Under section 89H of the Banking Act 2009, in order to decide whether to recognise this bail-in, the Bank of England is required to undertake an analysis to determine whether the third-country bail-in is broadly comparable in its objectives and anticipated results to those of the UK resolution regime. The Bank of England must then also consider whether any of the statutory grounds apply for refusing to recognise the bail-in.

In line with section 89H, the Bank of England decided to recognise the bail-in of PrivatBank and HM Treasury provided its approval of this decision.

The Bank of England’s recognition gives effect to the bail-in of the four loans in question as a matter of English law. The Bank of England’s decision does not affect deposits held in UK banks.

Whilst considering its decision, the Bank of England has kept relevant stakeholders, including the NBU and representatives of creditors, informed about the recognition process throughout.

Notes for editors

1. The PrivatBank (Recognition of Third-Country Resolution Action) Instrument 2021

2. PrivatBank is the trading name of Joint Stock Company Commercial Bank PrivatBank, a joint stock company and commercial bank incorporated in Ukraine and registered in the Ukrainian Register of Banks under No. 92, formerly known as Public Joint Stock Company Commercial Bank PrivatBank. PrivatBank has no direct presence or operations in the UK.

3. UK SPV Credit Finance plc is a funding conduit of PrivatBank, incorporated in the UK.

4. Where the Bank of England is notified of resolution action taken by a foreign resolution authority concerning English law governed assets or liabilities, such as the four loans in question, the Bank is required to determine whether or not to recognise such resolution action in accordance with section 89H of the Banking Act 2009. The Bank of England may only make a recognition decision with the approval of HM Treasury.

5. The Bank of England considers recognition requests on a case-by-case basis by reference to the framework in section 89H of the Banking Act 2009. Recognition does not amount to an endorsement of the underlying action and is not intended to affect any legal challenge in respect of that action brought in the home jurisdiction under Ukrainian law. For the avoidance of doubt, the version of section 89H applied in the decision making process in the present case was the version as amended by the Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018/1394.

  1. Bail-in is a resolution tool that enables shares, debt and other liabilities of a bank to be written down or converted to absorb losses and recapitalise the bank. This enables any losses to be imposed on shareholders and unsecured creditors by cancelling or reducing the value of their claims. The bail-in tool ensures investors bear losses and reduces the likelihood public funds will be needed to bail out a bank. Further information on bail-in in the UK can be found in “The Bank of England’s Approach to Resolution

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