EEA Member States were required under the Banking Recovery and Resolution Directive (BRRD) to implement the bail-in tool and contractual recognition requirements of Article 55 BRRD into national law by 1 January 2016.
To date 27 of the 31 Member States have done so, with Poland, Iceland, Liechtenstein and Norway still to do so. EEA financial institutions must include contractual terms in any agreements governed by the laws of non-EEA Member States, which create certain payment and other liabilities specifying that they may be subject to bail-in by regulators under the BRRD. It applies to a very broad spectrum of payment and potentially other contractual and non-contractual liabilities and bail-in recognition provisions will need to be included in various loan agreements, guarantees, swap arrangements, letters of credit and other similar facilities entered into by EU financial institutions and governed by a third country law. Various bodies are considering the contents of standard contractual recognition terms. In the capital markets sphere, the Association for Financial Markets in Europe (AFME) published a model clause for use by UK-incorporated financial institutions for the issue of debt securities governed by New York Law in September 2015, and at the end of 2015 the Loan Market Association (LMA) and the Loan Syndications and Trading Association (LSTA) published suggested bail-in clauses in respect of loan documentation.
For further information on bail-in and contractual recognition provisions see our briefing note here