On June 29, 2016, the PRA published final amendments to its rules on the contractual recognition of bail-in. The BRRD requires EU banks and certain investment firms to include clauses in certain contracts governed by non-EU law by which the creditor agrees to recognize that the liability may be bailed in by the national resolution authority. In November 2015, the PRA issued a Modification by Consent which disapplied the requirement for unsecured liabilities that are not debt securities (known as "phase 2 liabilities") where compliance would be impracticable until June 30, 2016. The PRA published its final rules and extended the Modification by Consent until July 31, 2016. The amended rules applied from August 1, 2016. The PRA also published a Supervisory Statement which provides guidance on the meaning of the term "impracticable" by providing a list of non-exhaustive examples of impracticability such as it is illegal in the third country to include contractual recognition language in agreements or instruments creating liabilities governed by the laws of that third country and the creation of liabilities is governed by international protocols which the firm has no power to amend. The onus will be on firms to demonstrate that compliance with the contractual recognition requirement would be impracticable.
The amended rules, final Policy Statement and Supervisory Statement are available at: http://www.bankofengland.co.uk/pra/Pages/publications/ps/2016/ps1716.aspx.