Prudential Regulation Authority Rulebook

1.1

This Part applies to a BRRD undertaking which is:

1. (1) a CRR firm;
2. (2) a financial holding company whose registered office or, if the financial holding company does not have a registered office, whose head office is in the United Kingdom; or
3. (3) a mixed financial holding company whose registered office or, if the mixed financial holding company does not have a registered office, whose head office is in the United Kingdom.

1.2

A BRRD undertaking that is a parent undertaking must ensure that a subsidiary which meets the condition in 1.3 complies with the requirements of this Part as if it were a BRRD undertaking subject to those requirements.

1.3

The condition in 1.2 is that the subsidiary is:

1. (1) a credit institution;
2. (2) an investment firm or an undertaking which would be an investment firm if it had its head office in an EEA State; or
3. (3) a financial institution; and

is not a BRRD undertaking which falls within 1.1.

1.4

In this Part, the following definitions shall apply:

crisis management measure

has the meaning given in section 48Z(1) of the Banking Act 2009.

crisis prevention measure

has the meaning given in section 48Z(1) of the Banking Act 2009.

excluded person

means:

1. (a) a person who has been declared to be, or who is an operator of, a designated system under regulation 4 of the Financial Markets and Insolvency (Settlement Finality) Regulations 1999,
2. (b) a person who has been designated by an EEA State as a system under Article 2(a) of the Directive 98/26/EC of the European Parliament and of the Council on settlement finality in payment and securities settlement systems or an operator of such a system,
3. (c) an exchange, other trading facility, payment system, settlement system or other financial market utility or infrastructure established in a third country not within (a) or (b),
4. (d) a central counterparty,
5. (e) a central bank, or
6. (f) a central government (including any agency or branch of a central government).

financial arrangement

means the following contracts and agreements:

1. (a) financial contracts as defined in point 100 (a) to (d) of Article 2(1) of the BRRD;
2. (b) a derivative as defined in Article 2(5) of Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4th July 2012 on OTC derivatives, central counterparties and trade repositories; and
3. (c) a master agreement in so far as it relates to:
1. (i) any of the contracts or agreements referred to in points (a) and (b); or
2. (ii) a contract for the sale, purchase or delivery of the currency of the UK or any other country, territory or monetary union.

group

has the meaning given in section 48Z(1) of the Banking Act 2009.

recognised third-country resolution action

has the meaning given in section 48Z(1) of the Banking Act 2009.

security interest

has the meaning given in section 70B(7) of the Banking Act 2009.

Special Resolution Regime

means the provisions of Part I of the Banking Act 2009 and any measure taken under that Part.

termination right

means the following rights and provisions:

1. (a) a ‘termination right’ as defined in section 70C(10) of the Banking Act 2009; and
2. (b) a ‘default event provision’ as defined in Section 48Z(1) of the Banking Act 2009 that would apply as a consequence of:
1. (i) a crisis prevention measure, crisis management measure or recognised third-country resolution action or
2. (ii) the occurrence of any event directly linked to the application of such a measure or action.

third-country law financial arrangement

means a financial arrangement which:

1. (a) is governed by the law of a third country, and
2. (b) contains a termination right or a security interest, the exercise or enforcement of which could be suspended or prevented or the application of which would be disregarded under the Special Resolution Regime if the financial arrangement were governed by the laws of any part of the United Kingdom.

transferable securities

has the meaning given in point (44) of Article 41(1) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments.

1.5

For the purposes of this Part, any reference to securities in point 100 (a) to (d) of Article 2(1) of the BRRD has the same meaning as transferable securities.

1.6

Unless otherwise defined, any italicised expression used in this Part and in the CRR has the same meaning as in the CRR.

2.1

Subject to 2.2, a BRRD undertaking must not create a new obligation or materially amend an existing obligation under a third-country law financial arrangement unless the third-country law financial arrangement is solely with an excluded person.

2.2

A BRRD undertaking may create a new obligation or materially amend an existing obligation under a third-country law financial arrangement where each counterparty to the third-country law financial arrangement, other than a counterparty which is an excluded person, agrees in an enforceable manner that if:

1. (1) a crisis prevention measure;
2. (2) crisis management measure; or
3. (3) recognised third-country resolution action

is taken in relation to the BRRD undertaking or any member of the same group as the BRRD undertaking, it shall be entitled to exercise termination rights under, or rights to enforce a security interest in connection with, the third-country law financial arrangement to the extent that it would be entitled to do so under the Special Resolution Regime if the third-country law financial arrangement were governed by the laws of any part of the United Kingdom.

2.3

For the purpose of 2.2, section 48Z of the Banking Act 2009 is to be disregarded to the extent that it relates to a crisis prevention measure other than the making of a mandatory reduction instrument by the Bank of England under section 6B of the Banking Act 2009.

3.1

From 1 June 2016 this Part applies in relation to a third-country law financial arrangement under 2.1 where a direct or indirect counterparty is:

1. (1) a credit institution;
2. (2) an investment firm; or
3. (3) an undertaking which would be an investment firm if it had its head office in an EEA State.

3.2

From 1 January 2017 this Part applies in relation to all third-country law financial arrangements under 2.1 other than those to which the sole counterparty is an excluded person.