The EC is promoting a package of amendments to the CRR and the BRRD known as “BRRD II”. These include a pre-resolution moratorium power for resolution authorities, which has been controversial because of fears that it may prejudice the ability to net and, therefore, the way non-EU regulators (especially in the USA and Japan – and now, presumably the post-Brexit UK) regulate their banks. A key meeting of ECOFIN will be held in May, and then trilogues will start, so lobbying is in top gear, and this will be in the news over the coming months. Article 27 of the BRRD already gives authorities power to intervene to try to stop a failing bank going into resolution. BRRD II would add a pre-resolution moratorium (originally for 5 business days, but this has since been reduced to 2), during which payment obligations (excluding those owed to an EMSA-registered CCP) would be suspended. ISDA noted in an email this week that “recognition of netting depends on legal certainty – expressed in a legal opinion – that quick and final payment will be made of net obligations in the event that a counterparty defaults”, and that that no other major jurisdiction has a pre-resolution moratorium.
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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.