The UK (PRA Rule) Jurisdictional Module to the ISDA Resolution Stay Jurisdictional Modular Protocol enables entities subject to the UK Prudential Regulation Authority’s (UK PRA) final rule on contractual stays in financial contracts governed by third-country law (PRA 2015/82) to amend the terms of their Covered Agreements with certain counterparties to comply with the UK PRA’s final rule, by obtaining from such counterparties a contractual recognition of the application of stays on or overrides of termination rights under the UK Banking Act, as required by the UK PRA final rule.

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

The UK (PRA Rule) 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 UK (PRA Rule) Jurisdictional Module. There is no cut-off date to the UK (PRA Rule) Jurisdictional Module. ISDA does, however, reserve the right to designate a cut-off date by giving 30 days’ notice on this site.

ISDA has prepared this list of frequently asked questions to assist in your consideration of the UK (PRA RULE) 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 UK (PRA RULE) JURISDICTIONAL MODULE. PARTIES SHOULD CONSULT WITH THEIR LEGAL ADVISERS AND ANY OTHER ADVISER THEY DEEM APPROPRIATE PRIOR TO USING OR ADHERING TO THE UK (PRA RULE) JURISDICTIONAL MODULE. 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 UK (PRA Rule) Jurisdictional Module?
  • How does adherence to the UK (PRA Rule) Jurisdictional Module and the ISDA Jurisdictional Modular Protocol work?
  • How does the UK (PRA Rule) Jurisdictional Module relate to the PRA Rule?
  • Why are certain terms in italics?
  • What agreements are Covered Agreements under the UK (PRA Rule) Jurisdictional Module?
  • What entities are Regulated Entities under the UK (PRA Rule) Jurisdictional Module?
  • When does the UK (PRA Rule) Jurisdictional Module become effective?
  • What are the compliance dates for the PRA Rule?
  • How do I sign up to the UK (PRA Rule) 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 could be published that would include operational provisions based on the text of that regulation and aimed at enabling parties to comply with those requirements. A party will be able to adhere to a particular Jurisdictional Module by submitting an Adherence Letter for such Jurisdictional Module. Each Jurisdictional Module will be 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 UK (PRA Rule) Jurisdictional Module was published as a Jurisdictional Module to the ISDA Jurisdictional Modular Protocol on 3 May 2016.

What is the purpose of the UK (PRA Rule) Jurisdictional Module?

The UK (PRA Rule) Jurisdictional Module was created to allow market participants to comply with the Prudential Regulation Authority’s final rule regarding contractual stays in financial contracts governed by third-country law (PRA Rule). Adhering Parties will be able to adhere to the UK (PRA Rule) Jurisdictional Module and identify themselves as either “Regulated Entities” that are subject to the PRA Rule or “Module Adhering Parties” that are adhering for the purpose of satisfying the regulatory requirements applicable to their counterparties under the PRA Rule.

How does adherence to the UK (PRA Rule) 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 UK (PRA Rule) 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 UK (PRA Rule) 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 UK (PRA Rule) 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 UK (PRA Rule) 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 UK (PRA Rule) Jurisdictional Module.
  2. All G-SIBs: Under this option, a Module Adhering Party identifies any current or future Regulated Entity with respect to the UK (PRA Rule) 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 UK (PRA Rule) 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 UK (PRA Rule) 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 UK (PRA Rule) Jurisdictional Module.

Note that a Module Adhering Party can elect both option 2 to identify all G-SIB Regulated Entities as its Regulated Entity Counterparties and option 3 to identify additional Regulated Entities as its Regulated Entity Counterparties.

Once I submit my Adherence Letter, is my adherence to the UK (PRA Rule) 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 UK (PRA Rule) 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 UK (PRA Rule) Jurisdictional Module relate to the PRA Rule?

The UK (PRA Rule) Jurisdictional Module is intended to facilitate compliance with the PRA Rule. The provisions of the UK (PRA Rule) Jurisdictional Module that amend Covered Agreements are based on the provisions of the PRA Rule. Note, however, that as discussed in Question 5 of the general FAQs for the ISDA Jurisdictional Modular Protocol, amendments in a Jurisdictional Module, including the UK (PRA Rule) Jurisdictional Module, are made to Covered Agreements on a “retrospective” and “prospective” basis, even if this is not required by the regulations. Parties should consult with their legal advisers and any other adviser they deem appropriate to understand the requirements of the PRA Rule.

Why are certain terms in italics?

Words and phrases that are in quotation marks and italics have the meaning given to them in or pursuant to the PRA Rule. The UK (PRA Rule) Jurisdictional Module is interpreted in accordance with the PRA Rule.

What agreements are Covered Agreements under the UK (PRA Rule) Jurisdictional Module?

Third-country law financial arrangements”, as defined under the PRA Rule, are Covered Agreements under the UK (PRA Rule) Jurisdictional Module.

What entities are Regulated Entities under the UK (PRA Rule) Jurisdictional Module?

A Regulated Entity under the UK (PRA Rule) Jurisdictional Module is, as such terms are defined in the PRA Rule:

(a) A “BRRD undertaking” which is:

(i) a “CRR firm”;

(ii) a “financial holding company” whose “registered office” or, if the “financial holding company” does not have a “registered office,” whose “head office” is in the “United Kingdom”; or

(iii) a “mixed financial holding company” whose “registered office” or, if the “mixed financial holding company” does not have a “registered office,” whose “head office” is in the “United Kingdom”; and

(b) A “subsidiary” of a “BRRD Undertaking” which is:

(i) a “credit institution”;

(ii) an “investment firm” or an “undertaking” which would be an “investment firm” if it had its head office in an “EEA State”; or

(iii) a “financial institution”; and

is not a “BRRD undertaking” which falls within clause (a) of this definition.

When does the UK (PRA Rule) Jurisdictional Module become effective?

The UK (PRA Rule) Jurisdictional Module becomes effective on the later of the applicable compliance date for a Module Adhering Party and a Regulated Entity Counterparty under the PRA Rule and the “Implementation Date” with respect to a Module Adhering Party and a Regulated Entity Counterparty.

Even if a party adheres to the UK (PRA Rule) Jurisdictional Module prior to the applicable compliance date under the PRA Rule, amendments will not be made by the UK (PRA Rule) Jurisdictional Module until required under the PRA Rule.

What are the compliance dates for the PRA Rule?

If both parties to an agreement are Regulated Entities under the PRA Rule, or if one party is a Regulated Entity and the beneficiary of such agreement is a Regulated Entity; or if one party to such agreement is a Regulated Entity and the other party, or beneficiary, is either a “credit institution,” “investment firm,” or an “undertaking” which would be an “investment firm” if it had its “head office” in an “EEA State,” the compliance date for the PRA Rule is 1 June 2016. Otherwise, the compliance date for the PRA Rule is 1 January 2017.

How do I sign up to the UK (PRA Rule) Jurisdictional Module?

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