This page will be updated as relevant information becomes available globally and will serve as the central repository for information from ISDA relating to the global recovery and resolution landscape. If you have any questions or would like additional information in relation to these matters, please email: ISDALegal@isda.org
This page is separated into 5 sections:
- Special Resolution Regimes
- ISDA Documentation
- Insurance Recovery and Resolution
Following the financial crisis of 2007/08, the Financial Stability Board (FSB) sought to address the G-20 policy goal of addressing the “too big to fail” issue by seeking to achieve the orderly resolution of systemically important financial institutions (SIFIs). The resulting FSB Key Attributes of Effective Resolution Regimes for Financial Institutions formed the cornerstone of global bank resolution and recovery. The twelve key attributes represent the international standard for resolution regimes and were supplemented by further FSB guidance on how to apply the standards across different sectors and methodologies for the assessment of implementation of the key attributes.
Stemming from the FSB Key Attributes, there have been special resolution regimes (SRRs) implemented in various jurisdictions with implications for a broad scope of financial markets participants. One of the core principles of these SRRs is the imposition of stays on the exercise of certain rights, in particular termination rights, collateral foreclosure and the right to claim for payments, arising as a result of a default by a bank under resolution (“resolution stay”). Another core principle of resolution activity is the power of a resolution authority to exercise certain write-down and conversion powers (“bail-in”) in relation to a liability.
ISDA has facilitated the global financial community in its efforts to comply with the various aspects of resolution planning and implementation. A summary and links to the relevant materials are set out below.
REPLACED BY ISDA 2015 UNIVERSAL RESOLUTION STAY PROTOCOL
In November 2013, regulatory authorities from Germany, Japan, Switzerland, the United Kingdom and the United States (the Home Authorities) requested that ISDA revise standard ISDA Master Agreement documentation so that in the event that a systemically important financial institution enters proceedings under an SRR, all of its counterparties would be subject to stays and overrides of certain termination rights under such SRR, notwithstanding the governing law of the agreements. In response to this request, ISDA developed the ISDA 2014 Resolution Stay Protocol to provide a contractual approach to cross-border recognition until comprehensive statutory regimes were adopted.
In 2015, the Home Authorities requested additional changes to the ISDA 2014 Universal Protocol to expand its scope and to more easily accommodate SRRs developed in additional jurisdictions. In response ISDA developed the ISDA 2015 Universal Resolution Stay Protocol, which replaced the ISDA 2014 Resolution Stay Protocol in its entirety for those parties that adhere to it.
The Home Authorities also requested that ISDA work alongside the International Capital Market Association, International Securities Lending Association and Securities Industry and Financial Markets Association to develop an annex that would apply the operative provisions to certain master agreements that govern securities financing transactions. In response, ISDA included the SFT Annex, which can be found at the end of the 2015 Universal Resolution Stay Protocol.
It was recognized that a broad scope was useful to market participants, therefore ISDA developed the Other Agreements Annex to expand the scope beyond ISDA and SFT documentation and various country annexes to expand the scope of SRRs covered.
It is expected that buyside market participants generally will not adhere to the ISDA 2015 Universal Resolution Stay Protocol. Instead, ISDA developed the ISDA Resolution Stay Jurisdictional Modular Protocol (the ISDA JMP) which is intended to achieve the same policy goals with respect to the orderly resolution of systemically important financial institutions.
The ISDA 2015 Universal Protocol was developed in advance of Stay Regulations, whereas the ISDA JMP was developed to facilitate compliance with Stay Regulations implemented in different jurisdictions. The ISDA JMP operates as a standalone protocol, with various jurisdiction-specific modules sitting underneath. The various modules are set out chronologically in the table below.
|Canadian Module||July 28, 2022|
|Hong Kong Module||September 24, 2021|
|BRRD II Omnibus Module||September 14, 2021|
|2020 UK (PRA Rule) Module||December 22, 2020|
|Italian Module REPLACED BY BRRD II OMNIBUS MODULE||December 18, 2018|
|French Module SUPERSEDED BY BRRD II OMNIBUS MODULE||November 19, 2018|
|Swiss Module||October 31, 2017|
|Japanese Module||January 5, 2017|
|German Module SUPERSEDED BY BRRD II OMNIBUS MODULE||June 28, 2016|
|UK (PRA Rule) Module||May 3, 2016|
The Jurisdictional Modules set out above allow market participants to opt-in to the SRR in the jurisdiction contained in the title thereof, with the exception of the BRRD II Omnibus Module which allows market participants to comply with Article 71a of the EU Bank Recovery and Resolution Directive (BRRD) as transposed in Austria, Belgium, Denmark, France, Finland, Greece, Germany, Ireland, Luxembourg, Spain and Sweden in version 1.0 and Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, Gibraltar, Hungary, Italy, Lithuania, Malta, Netherlands, Romania and Slovakia in version 2.0.
In addition to the ISDA JMP, ISDA has developed the template standard contractual recognition of resolution stay clauses set out below.
- Standard Contractual Recognition of EU Resolution Stay Clause
- Standard Contractual Recognition of Canadian Resolution Stay Clause
- Standard Contractual Recognition of Hong Kong Resolution Stay Clause
These allow market participants that do not wish to adhere to a protocol to bilaterally incorporate contractual recognition of resolution stay regimes provisions into their contracts. Market participants seeking a bilateral solution to the resolution stay requirements may also utilize ‘incorporation by reference’ language – further details of which can be found in the FAQs to the ISDA JMP.
In response to the Stay Regulations implemented in the United States, ISDA developed the ISDA 2018 U.S. Resolution Stay Protocol which enables in-scope entities to amend qualified financial contracts (QFCs) to ensure such QFCs, unless excluded or exempted, are subject to applicable limits on the exercise of default rights.
In response to Article 55 of BRRD, ISDA developed the ISDA 2016 Bail-in Art 55 BRRD Protocol (Dutch/French/German/Irish/Italian/Luxembourg/Spanish/UK entity-in-resolution version) (the 2016 Bail-in Protocol) to allow in-scope entities to include a contractual term in agreements creating any relevant liability governed by a third country law (i.e. non-EU or, if the implementation of Article 55 of the BRRD in the relevant jurisdiction extends to liabilities governed by non-EEA law, non-EEA) whereby the creditor recognises that the liability may be subject to the exercise of write-down and conversion powers (“bail-in”) under the BRRD and agrees to be bound by any such bail-in, provided that such liability is not an excluded liability.
The national laws covered by the 2016 Bail-in Protocol include those in respect of which final implementing rules were available at the time the 2016 Bail-in Protocol was drafted and that were agreed as priority jurisdictions with ISDA working groups.
ISDA subsequently developed the ISDA 2017 Bail-in Article 55 BRRD Protocol (Austrian/Belgian/Danish/Swedish entity-in-resolution version) (the 2017 Bail-in Protocol).
The 2017 Bail-in Protocol expanded ISDA’s protocol offering for compliance with the bail-in aspects of BRRD to the additional four countries (Austria, Belgium, Denmark and Sweden) in respect of which final implementing rules were available at the time of development and agreed as priorities by members of the ISDA working groups following publication of the 2016 Bail-in Protocol. Aside from the jurisdictional coverage, the scope of the 2017 Bail-in Protocol is the same as the 2016 Bail-in Protocol.
In addition to the 2016 and 2017 Bail-in Protocols, ISDA has developed the template BRRD Article 55 Bail-in Amendment Agreements set out below.
- ISDA BRRD Article 55 Bail-In Amendment Agreement (Principal version)
- ISDA BRRD Article 55 Bail-In Amendment Agreement (Agency version)
The template amendment agreements expand the jurisdictional coverage of ISDA’s Article 55 BRRD contractual recognition documentation to all European Economic Area (EEA) jurisdictions. There is a principal version as well as an agency version which caters for market participants amending contracts as agent on behalf of one or more clients as principal.
- EU Bank Recovery and Resolution Directive (BRRD)
- BRRD II (amending BRRD)
- EBA RTS on Contractual Recognition of Stay Powers under Article 71a(5)
- EBA RTS on Contractual Recognition of Bail-In Powers under Article 55(3)
- Federal Reserve Stay Regulations
- Federal Deposit Insurance Corporation Stay Regulations
- Office of the Comptroller of the Currency Stay Regulations
- Article 12 para. 2bis of the Banking Ordinance
- Chapter 5 Article 56 and 61a of the “Ordinance of the Swiss Financial Market Supervisory Authority on the Insolvency of Banks and Securities Dealers” (Supplemental)
The European Commission announced in September 2021 its plans to reform the EU insurance rules, known as Solvency II. A component of the review was a legislative proposal for a new Insurance Recovery and Resolution Directive.
ISDA has provided information to its working groups on the proposed reform package and is engaging with the various stakeholders in order to provide feedback on the substance of the legislative proposal. Further details and resources will be added to this page as this topic develops.