The Italian Jurisdictional Module was created to allow market participants to comply with the Regulatory Measures Concerning the Temporary Suspension of Termination Rights by the Resolution Authority in Relation to Financial Contracts Governed by the Law of a Third Country (Italian Regulation).

The Italian Jurisdictional Module to the ISDA Resolution Stay Jurisdictional Modular Protocol enables entities subject to the Italian Regulation to amend the terms of their Covered Agreements by obtaining from certain counterparties a contractual recognition of the application of stays on termination with respect to requirements of the Italian Regulation.

Please refer to the “Frequently Asked Questions” below for more information.

The Italian Jurisdictional Module is open to ISDA members and non-members. Parties will pay a one-time fee of $500 to ISDA for each adherence to the Italian Jurisdictional Module. There is no cut-off date to the Italian Jurisdictional Module. ISDA does, however, reserve the right to designate a cut-off date by giving 30 days’ notice on this.

ISDA Resolution Stay Jurisdictional Modular Protocol

Italian Jurisdictional Module

ISDA has prepared this list of frequently asked questions to assist in your consideration of the ITALIAN JURISDICTIONAL MODULE to the ISDA RESOLUTION STAY JURISDICTIONAL MODULAR PROTOCOL (the ISDA Jurisdictional Modular Protocol).

THESE FREQUENTLY ASKED QUESTIONS DO NOT PURPORT TO BE AND SHOULD NOT BE CONSIDERED A GUIDE TO OR AN EXPLANATION OF ALL RELEVANT ISSUES OR CONSIDERATIONS IN CONNECTION WITH THE ITALIAN JURISDICTIONAL MODULE. PARTIES SHOULD CONSULT WITH THEIR LEGAL ADVISERS AND ANY OTHER ADVISER THEY DEEM APPROPRIATE PRIOR TO USING OR ADHERING TO THE ITALIAN JURISDICTIONAL MODULE.  ALL TRANSLATIONS OF ITALIAN WORDS OR PHRASES ARE UNOFFICIAL. ISDA ASSUMES NO RESPONSIBILITY FOR ANY USE TO WHICH ANY OF ITS DOCUMENTATION MAY BE PUT.

These FAQs address the following questions:

  • What is the purpose of the Italian Jurisdictional Module?
  • How does adherence to the Italian Jurisdictional Module and the ISDA Jurisdictional Modular Protocol work?
  • How does the Italian Jurisdictional Module relate to the Italian Regulation?
  • Why are certain terms in italics and others in quotation marks?
  • What agreements are Covered Agreements under the Italian Jurisdictional Module?
  • What entities are Regulated Entities under the Italian Jurisdictional Module?
  • When does the Italian Jurisdictional Module become effective?
  • What are the compliance dates for the Italian Regulation?
  • How do I sign up to the Italian Jurisdictional Module?

The ISDA Jurisdictional Modular Protocol is designed to facilitate market participants’ compliance with regulations regarding contractual stays in financial contracts governed by third-country law in different jurisdictions. As regulations are adopted in a jurisdiction, a “Jurisdictional Module” to the ISDA Jurisdictional Modular Protocol can be published that includes operational provisions based on the text of that regulation and aimed at enabling parties to comply with those requirements. A party can adhere to a particular Jurisdictional Module by submitting an Adherence Letter for such Jurisdictional Module. Each Jurisdictional Module is considered individually. For more information on the ISDA Jurisdictional Modular Protocol and adherence to the ISDA Jurisdictional Modular Protocol, please see the general FAQs for the ISDA Jurisdictional Modular Protocol.

The Italian Jurisdictional Module was published as a Jurisdictional Module to the ISDA Jurisdictional Modular Protocol on December 18, 2018.

What is the purpose of the Italian Jurisdictional Module?

The Italian Jurisdictional Module was created to allow market participants to comply with the Regulatory Measures Concerning the Temporary Suspension of Termination Rights by the Resolution Authority in Relation to Financial Contracts Governed by the Law of a Third Country (Italian Regulation) regarding contractual stays in certain financial contracts that are governed by the law of a third country. Adhering Parties will be able to adhere to the Italian Jurisdictional Module and identify themselves as either “Regulated Entities” that are subject to the Italian Regulation or “Module Adhering Parties” that are adhering for the purpose of satisfying the regulatory requirements applicable to their counterparties under the Italian Regulation.

How does adherence to the Italian Jurisdictional Module and the ISDA Jurisdictional Modular Protocol work?

Does a Module Adhering Party have to amend its Covered Agreements with all Regulated Entities?

No, a Module Adhering Party has the ability to choose the Regulated Entity or Regulated Entities it would like to amend its Covered Agreements with when it adheres to the Italian Jurisdictional Module. Once a Module Adhering Party chooses to amend its agreements with a particular Regulated Entity, that Regulated Entity is defined as a “Regulated Entity Counterparty” with respect to that particular Module Adhering Party and to the Italian Jurisdictional Module.

Module Adhering Parties have multiple options for how they can choose the Regulated Entity or Regulated Entities they would like to amend their Covered Agreements with.

How can a Module Adhering Party choose which Regulated Entities it will amend its Covered Agreements with?

A Module Adhering Party with respect to the Italian Jurisdictional Module may choose the Regulated Entity or Regulated Entities it would like to amend its Covered Agreements with by choosing between the following three options in its Adherence Letter:

  1. All Regulated Entities: Under this option, a Module Adhering Party identifies every Adhering Party that has identified itself as a “Regulated Entity” with respect to the Italian Jurisdictional Module to be a Regulated Entity Counterparty with respect to it. That means that the Module Adhering Party is agreeing to amend all of the relevant Covered Agreements with all of the Regulated Entities that have adhered or will adhere in the future to the Italian Jurisdictional Module.
  2. All G-SIBs: Under this option, a Module Adhering Party identifies any current or future Regulated Entity with respect to the Italian Jurisdictional Module that is part of a banking group that has been designated by the Financial Stability Board as a “global systemically important bank” (G-SIB), as of the date of the publication of the Italian Jurisdictional Module, as a Regulated Entity Counterparty with respect to it. This election would include Regulated Entities within such G-SIB group that subsequently adhere to such Jurisdictional Module but not Regulated Entities that are members of banking groups that are subsequently identified as G-SIBs.
  3. Entity-by-Entity: Under this option, the Module Adhering Party chooses to identify one or more Regulated Entities with respect to the Italian Jurisdictional Module as Regulated Entity Counterparties with respect to it. The Module Adhering Party can notify each Regulated Entity that it identifies as a Regulated Entity Counterparty, either through ISDA Amend or by sending a bilateral “Module Adherence Notice” directly to such Regulated Entity. Note that a Module Adhering Party that chooses to identify one or more Regulated Entities as Regulated Entity Counterparties with respect to it may choose between Regulated Entities in the same banking group within the Italian Jurisdictional Module.

Once I submit my Adherence Letter, is my adherence to the Italian Jurisdictional Module complete or are there any other steps I have to take?

Depending on the elections you make as a Module Adhering Party, you may be required to send notices to Regulated Entity Counterparties after you submit your Adherence Letter to complete your adherence to the Italian Jurisdictional Module.

Entity-by-Entity Designation

If you adhere as a Module Adhering Party and elect to identify Regulated Entity Counterparties on an “Entity-by-Entity” basis (i.e., option 3 above), you need to take steps to identify Regulated Entity Counterparties. You can do this either (1) through ISDA Amend or (2) by sending a bilateral “Module Adherence Notice” to each Regulated Entity Counterparty. Your contracts will not be amended until the date you notify a Regulated Entity that it is a Regulated Entity Counterparty with respect to you.

If you wish to use ISDA Amend to identify one or more specific Regulated Entities as Regulated Entity Counterparties with respect to you, you may do so by using the ISDA Amend website (http://www.markit.com/product/isda-amend). To use the ISDA Amend website, you will need to have an account with ISDA Amend, log in and complete the steps necessary to make Entity-by-Entity elections.

If you wish to identify one or more specific Regulated Entities as Regulated Entity Counterparties with respect to you by sending such Regulated Entity or Regulated Entities bilateral Module Adherence Notices, rather than through ISDA Amend, such notices must at a minimum (1) identify the Module Adhering Party and the Jurisdictional Module and (2) identify the Regulated Entity as a Regulated Entity Counterparty with respect to the Module Adhering Party. ISDA has published a sample Module Adherence Notice (http://assets.isda.org/media/f253b540-102/3eb0dc21.docx) that Module Adhering Parties can use to make Entity-by-Entity elections.

Adherence as an Agent on Behalf of Clients

If you are an agent adhering on behalf of “some but not all” clients, you must either identify the clients on whose behalf you are adhering in an annex to your Adherence Letter (which will be made public on the ISDA website) or send a list to each Regulated Entity Counterparty with respect to such clients identifying the clients on whose behalf you are adhering.

If you are an agent adhering on behalf of “all” clients that you represent, you may, but are not required to, identify the clients on whose behalf you are adhering, either in an annex to your Adherence Letter (which will be made public on the ISDA website) or by sending a list of the clients on whose behalf you are adhering to each Regulated Entity Counterparty with respect to such clients.

If you wish to use ISDA Amend to notify your Regulated Entity Counterparties of the clients on whose behalf you are adhering, you may do so by using the ISDA Amend website (http://www.markit.com/product/isda-amend). To use the ISDA Amend website, you will need to have an account with ISDA Amend, log in and complete the steps necessary to provide Regulated Entity Counterparties with the lists of clients on whose behalf you are adhering.

If you wish to bilaterally notify your Regulated Entity Counterparties of the clients on whose behalf you are adhering, ISDA has published a sample Underlying Funds Notice (http://assets.isda.org/media/f253b540-103/af6818e9.docx) that agents can use to notify their Regulated Entity Counterparties of the clients on whose behalf they are adhering.

How does the Italian Jurisdictional Module relate to the Italian Regulation?

The Italian Jurisdictional Module is intended to facilitate compliance with the Italian Regulation. The provisions of the Italian Jurisdictional Module that amend Covered Agreements are based on the provisions of the Italian Regulation. Note, however, that as discussed in Question 4 of the general FAQs for the ISDA Jurisdictional Modular Protocol, amendments in a Jurisdictional Module, including the Italian Jurisdictional Module, are made to Covered Agreements on a “retrospective” and “prospective” basis, even if this is not required by the Italian Regulation.

Parties should consult with their legal advisers and any other adviser they deem appropriate to understand the requirements of the Italian Regulation.

Why are certain terms in italics and others in quotation marks?

Words and phrases in quotation marks have the meaning given in the Italian Regulation to the bracketed and italicized Italian word or phrase immediately following such word or phrase. The Italian Jurisdictional Module is interpreted in accordance with the Italian Regulation.

What agreements are Covered Agreements under the Italian Jurisdictional Module?

Italian Regulated Agreements, as defined under the Italian Jurisdictional Module, are Covered Agreements under the Italian Jurisdictional Module.

An Italian Regulated Agreement is, as such terms are defined in the Italian Regulation, a “financial contract” [contratto finanziario] as referred to in Article 1, paragraph 1, letter (o), numbers 1), 2), 3), 4) and 6) of Legislative Decree 180/2015 [Articolo 1, comma 1, lettera (o), numeri 1), 2), 3), 4) e 6) del D.Lgs. 180/2015] “governed by the law of a third country” [regolati dal diritto di uno Stato Terzo].

An “Excluded Agreement” is, as such terms are defined in the Italian Regulation, a Covered Agreement:

(a) that is entered into “within the context of payment systems” [concluso nell’ambito di sistemi di pagamento] or systems for “securities settlement” [regolamento titoli]; or

(b) where the Module Adhering Party is a:

(i) “related operator” [relativi operatori] of a payment system or securities settlement system;

(ii) “central counterparty” [controparti centrali]; or

(iii) “central bank” [banche centrali].

What entities are Regulated Entities under the Italian Jurisdictional Module?

A Regulated Entity under the Italian Jurisdictional Module is a:

(a) “bank that is not part of a banking group” [banche non appartenenti a gruppi bancari], which bank has its “registered office” [sede legale] in Italy;

(b) “bank,” [banche] “financial company” [società finanziarie] or “mixed financial holding company” [società di partecipazione finanziaria mista] with a “registered office” [sede legale] in Italy that is the “parent company” [capogruppo] of a “banking group” [gruppo bancario] pursuant to Article 61 of the Consolidated Law on Banking [Articolo 61 del Testo Unico Bancario, D.Lgs. n. 385/1993] (Parent Regulated Entity);

(c) “bank” [banca] or “financial company” [società finanziaria] with a “registered office” [sede legale] in Italy that is part of a “banking group” [gruppo bancario] pursuant to Article 60 of the Consolidated Law on Banking [Articolo 60 del Testo Unico Bancario, D.Lgs. 385/1993] (Banking Group Regulated Entity) or

(d) “bank” [banca] or “financial company” [società finanziaria] with a “registered office” [sede legale] “abroad” [all’estero] that is Controlled by either a Parent Regulated Entity or a Banking Group Regulated Entity,

in each case, “within the competence of the” [rientranti nella competenza della] Single Resolution Board pursuant to paragraphs (2), (4)(b) and (5) of Article 7 of Regulation EU no 806/2014.

When do the amendments under the Italian Jurisdictional Module become effective?

The amendments under the Italian Jurisdictional Module become effective on the later of the applicable compliance date for a Module Adhering Party and a Regulated Entity Counterparty under the Italian Regulation and the “Implementation Date” with respect to a Module Adhering Party and a Regulated Entity Counterparty.

Even if a party adheres to the Italian Jurisdictional Module prior to the applicable compliance date under the Italian Regulation, amendments will not be made by the Italian Jurisdictional Module until required under the Italian Regulation.

What are the compliance dates for the Italian Regulation?

If both parties to a Covered Agreement are “G-SIBs” [banche sistemiche a livello internazionale], the compliance date for the Italian Regulation is January 31, 2018.  “G-SIBs” are Global Systemically Important Banks identified by the Financial Stability Board (FSB), in consultation with the Basel Committee on Banking Supervision and with the national competent authorities and included on the FSB’s annually published list of G-SIBs.

Otherwise, the compliance date for the Italian Regulation is January 31, 2019.

How do I sign up to the Italian Jurisdictional Module?

Please see the general ISDA Jurisdictional Modular Protocol FAQs for information on adherence to Jurisdictional Modules and the ISDA Jurisdictional Modular Protocol.