rec_26

(26) The requirement to include contractual recognition of the effects of the bail-in tool in agreements or instruments creating liabilities governed by the laws of third countries should facilitate and improve the process for bailing in those liabilities in the event of resolution. Contractual arrangements, when properly drafted and widely adopted, can offer a workable solution in cases of cross-border resolution until a statutory approach under Union law is developed or incentives to choose the law of a Member State for contracts are developed or statutory recognition frameworks to enable effective cross-border resolution are adopted in all third-country jurisdictions. Even with statutory recognition frameworks in place, contractual recognition arrangements should help to reinforce the awareness of creditors under contractual arrangements that are not governed by the law of a Member State of possible resolution action with regard to institutions or entities that are governed by Union law. There might be instances, however, where it is impracticable for institutions or entities to include those contractual terms in agreements or instruments creating certain liabilities, in particular liabilities that are not excluded from the bail-in tool under Directive 2014/59/EU, covered deposits or own funds instruments. For example, under certain circumstances, it could be considered impracticable to include contractual recognition clauses in liability contracts in cases where it is illegal under the law of the third country for an institution or entity to include such clauses in agreements or instruments creating liabilities that are governed by the laws of that third country, where an institution or entity has no power at the individual level to amend the contractual terms as they are imposed by international protocols or are based on internationally agreed standard terms, or where the liability which would be subject to the contractual recognition requirement is contingent on a breach of contract or arises from guarantees, counter-guarantees or other instruments used in the context of trade finance operations. However, a refusal by the counterparty to agree to be bound by a contractual bail-in recognition clause should not as such be considered as a cause of impracticability. EBA should develop draft regulatory technical standards to be adopted by the Commission in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010 to more precisely identify cases of impracticability. When applying those regulatory technical standards and taking into account the specificities of the market concerned, the resolution authority should specify, where it deems it necessary, categories of liabilities where there might be grounds for impracticability. In that framework, it should be for an institution or an entity to determine whether the insertion of a bail-in recognition clause in a contract or class of contracts is impracticable. Institutions and entities should provide regular updates to resolution authorities, to keep them informed of progress towards implementing contractual recognition terms. In this context, institutions and entities should indicate the contracts or classes of contracts for which the insertion of a bail-in recognition clause is impracticable and indicate a reason for this assessment. Resolution authorities should, within a reasonable timeframe, assess an institution's or an entity's determination that it is impracticable to include contractual recognition clauses in liability contracts and act to address any erroneous assessments and impediments to resolvability as a result of contractual recognition clauses not being included. Institutions and entities should be prepared to justify their determination if requested by the resolution authority to do so. In addition, in order to ensure that the resolvability of institutions and entities is not affected, liabilities for which the relevant contractual provisions are not included should not be eligible for the MREL.

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Source: EUR-Lex (Cellar) · retrieved 2026-10-14 · Text as adopted (Official Journal); later amendments are not incorporated in this text.