Elke König, Chair of the EU’s Single Resolution Board, was reported to have said on 5th April that post-Brexit EU27 banks’ bonds governed by English law might not count as “eligible liabilities” for MREL purposes. What König actually said was that these “will become third country issues and might no longer be eligible for MREL going forward”. MREL is imposed under Article 45 of the BRRD, and Article 45(5) states that where a liability is governed by a non-EU country’s law, “resolution authorities may require the institution to demonstrate that any decision of a resolution authority to write down or convert that liability would be effective under the law of that third country, having regard to the terms of the contract governing the liability, international agreements on the recognition of resolution proceedings and other relevant matters”. Standard bail-in wording (which Article 55 requires anyway) should satisfy this for new issues. For legacy issues, EU27 banks should anyway be able to give this demonstration if asked (because it is unlikely that the post-Brexit UK will not agree to give legal effect to EU27 bail-ins). So, a throw-away line in a speech that was ill-advised, but nothing to suggest English bond issue lawyers will be short of new issue work post-Brexit.
Head of Knowledge Management (Finance and Projects)
Mark Daley joined DLA Piper in 2015 after over thirty years’ experience as a debt finance lawyer in private practice in London and Hong Kong.