On August 14, 2015, the European Banking Authority published technical advice to the European Commission under the Bank Recovery and Resolution Directive on the classes of arrangements to be protected in a partial property transfer. A partial property transfer occurs when some but not all of the assets, rights and liabilities of a failing firm are transferred to a new entity. Under the BRRD, the European Commission must adopt legislation that specifies which arrangements must be safeguarded to prevent linked liabilities, rights and contracts of a failing firm from being split in a partial property transfer. The EBA advises that a list of arrangements is not feasible because it would need to be exhaustive to capture the different legal frameworks in Member States, in particular, insolvency laws as well as any future developments. Instead, the EBA specifies the arrangements according to rules and definitions in a more specific way than the provisions of the BRRD itself. The criteria for whether an arrangement is within scope of the protection include the type, scope, economic purpose, the counterparties and the governing law of the arrangements. The EBA also recommends distinguishing between a core category of arrangements that should be protected in any event and others where the protection would depend on additional criteria and the specific circumstances. The EBA also advises that certain arrangements that would impair the feasibility of a partial property transfer resolution strategy should be excluded from protection. Finally, the EBA considers that where the BRRD text is unclear, resolution authorities should have the power to interpret the scope of the safeguards restrictively.
The EBA’s advice is available at: http://www.eba.europa.eu/documents/10180/983359/EBA-Op-2015- 15+Opinion+on+protected+arrangements.pdf.