FMLC has written two letters to Treasury regarding bank recovery and resolution:
- FMLC requests clarification as to the forms of set-off which are safeguarded by the Banking Act 2009 (Restriction of Special Bail-in Provision, etc.) Order 2014 and in the Banking Act 2009: Special Resolution Regime Code of Practice. It says the Code gives the impression that claims and cross-claims entered into between creditors and banks which are likely to benefit from insolvency or other forms of set-off are protected liabilities, which is inconsistent with the Order; and
- FMLC suggests that measures to implement the power to require the appointment of a temporary administrator under Article 29 of the Bank Recovery and Resolution Directive (BRRD) should take into account the widespread market practice of providing that the appointment of an administrator will constitute an event of default under financial contracts on market standard terms. FMLC suggests this because this outcome is contrary to the legislative intent of the BRRD and may lead to a significant degree of unintended market disruption if it were to clash with measures to prevent a crisis in respect of a systemically significant EU banking institution.