Published on 21 December 2020
Bank Recovery and Resolution Directive II – PS28/20
This Prudential Regulation Authority (PRA) Policy Statement (PS) provides feedback to responses to Consultation Paper (CP) 18/20 ‘Bank Recovery and Resolution Directive II’. It also contains the PRA’s final policy, as follows:
- amended Contractual Recognition of Bail-in (CROB) Part of the PRA Rulebook (Appendix 1); and
- amended Stay in Resolution (Stays) Part of the PRA Rulebook (Appendix 2).
This PS is relevant to Bank Recovery and Resolution Directive (BRRD) undertakings to which the CROB Part and Stays Part apply (firms).
Summary of responses
The PRA received one response to the CP. The respondent requested clarification regarding the PRA’s proposal to amend the definition of ‘crisis management measure’ in the Stays Part. Details of the response and the PRA’s feedback are set out in Chapter 2 of the PS. The PRA has considered that request and decided to publish final policy as consulted on.
The policy set out in this PS has been designed in the context of the UK’s withdrawal from the European Union and entry into the transition period. During the transition period, the UK remains subject to European law and must transpose Directives that become applicable before IP completion day. The PRA policy applicable only during the end of the transition period and ceasing to have effect on IP completion day will not need to be amended under the EU (Withdrawal) Act 2018 (EUWA). Therefore, no such EUWA changes will be made to the Stays Part, which will be in place for four days.
The policy set out in this PS that will come into effect at the end of the transition period (on IP completion day) will need to be amended under the EU (Withdrawal) Act 2018 (EUWA). These changes will be made separately by the PRA Rulebook (EU Exit) Instrument 2020.
Published on 28 October 2020
Bank Recovery and Resolution Directive II – CP18/20
In this Consultation Paper (CP), the Prudential Regulation Authority (PRA) sets out proposals relating to its Contractual Recognition of Bail-in (CROB) and Stay in Resolution (Stays) Rules. The purpose of the proposals is to support the UK’s transposition of the Bank Recovery and Resolution Directive II (BRRD II), which amends the BRRD. The UK is required to transpose the BRRD II amendments by Monday 28 December 2020.
HM Treasury’s statutory instrument for BRRD II (‘the SI’) was laid in Parliament on Thursday 15 October 2020 in order to deliver the transposition of BRRD II. The SI will result in changes to primary legislation that will affect the existing PRA regime for CROB and Stays.
In order to ensure a faithful transposition of BRRD II most of the elements of the SI which are relevant to CROB and Stays will come into force on Monday 28 December 2020 but will subsequently cease to have effect from 11pm on Thursday 31 December 2020 (Implementation Period (IP) completion day). In this CP, the PRA refers to this process as ‘sunsetting’.
This CP is relevant to BRRD undertakings to which the CROB and Stays Parts apply.
The proposals included in this CP would:
- temporarily suspend part of the CROB Part of the PRA Rulebook with effect from Monday 28 December 2020 until IP completion day.
- reinstate the existing CROB Part, with minor amendments, to come into force immediately after IP completion day. The new Rules post IP completion day would be otherwise unchanged from the existing Rules. The amendment proposed in this CP, is a minor change to reflect the statutory reference to the Banking Act definition of ‘excluded liability’ in the Contractual Recognition Part of the PRA Rulebook. The reinstated CROB Rules would therefore be updated to account for the SI amendments.
- amend the Stay in Resolution Part of the PRA Rulebook to reflect the temporary SI change to the definition of ‘crisis management measure’ in the Banking Act 2009, to come into force from Monday 28 December 2020 until IP completion day; and
- reintroduce the existing ‘Stay in Resolution’ Part, as it was before Monday 28 December 2020, to come into force immediately after IP completion day.
Responses and next steps
This consultation closes on Monday 30 November 2020. The PRA invites feedback on the proposals set out in this consultation. Please address any comments or enquiries to CP18_20@bankofengland.co.uk.