Bank Recovery and Resolution: Contractual Recognition of Bail-in

September 30, 2015

Under Article 55 of the European Union’s Bank Recovery and Resolution Directive (2014/59/EU) (“BRRD”), certain financial institutions subject to the BRRD must include a “bail-in” clause in a wide range of agreements that are governed by the law of a non-EU member state. This clause is intended to help ensure that losses are borne equally by creditors, regardless of the governing law of the contract, and to facilitate the cross-border resolution of EU financial institutions.

This alert memorandum provides a background to and discussion of the requirements under the BRRD and the bail-in regime, principally in the UK. It also details the requirements for contractual recognition of bail-in in non-EU law governed contracts and sets out the continuing issues that financial institutions are likely to encounter.