On November 13, 2015, the PRA published its Policy Statement, including final rules, and Supervisory Statement on contractual stays in certain financial contracts governed by third-country law. The rules will apply to all UK incorporated PRA-authorized banks, building societies, PRA-designated investment firms and their qualifying parents. Those firms will need to agree with their counterparties to certain financial contracts governed by the laws of a jurisdiction outside the EEA that any action taken by the UK authorities to stay the termination rights in those contracts or to enforce a security interest would be recognized. Contractual agreement in writing is not required, as initially proposed. Instead, firms must ensure that the counterparty has agreed in an “enforceable manner” that its termination rights and rights to enforce a security interest will be limited according to the UK rules. The PRA states that legal opinions are not required as a matter of course but firms will need to ensure and demonstrate that they are in compliance. The rules will apply to contracts with counterparties that are credit institutions or investment firms from June 1, 2016 and to contracts with all other counterparties from January 1, 2017.
The Policy Statement is available at: http://www.bankofengland.co.uk/pra/Documents/publications/ps/2015/ps2515.pdf and the Supervisory Statement is available at: http://www.bankofengland.co.uk/pra/Documents/publications/ss/2015/ss4215.pdf.