Article 3(2) of the EBA’s draft RTS on the contractual recognition of write-down and conversion powers under Article 55(3) of the Bank Recovery and Resolution Directive (BRRD) (the “draft RTS”) requires the introduction of bail-in clauses to all liabilities (governed by the law of a third country) that “may become unsecured in part or in full”.

Article 55(1) of Directive 2014/59/EU on the recovery and resolution of credit institutions and investment firms (BRRD) [link]
EBA Consultation Paper on draft RTS on the contractual recognition of write-down and conversion powers under Article 55(3) of the Bank Recovery and Resolution Directive (BRRD) of 5 November 2014 (EBA/CP/2014/33) [link]

The Vice Chairman

The above requirement submits all derivative that are subject to daily margining, including derivatives cleared through a central counterparty (CCP), to Article 55 (1) of Directive 2014/59/EU. Article 3(3)(b) of the draft RTS submits all liabilities that have been “amended” after the day of the implementation of the bail-in tool by the Member State, without specifying what “amended” means. Article 4 of the draft RTS specifies the content of the clause. The question was raised whether the 2014 ISDA Resolution Default Protocol (negotiated with the FSB) complies with Article 4.
Since the EBA’s consultation period ends on 5 February 2015, it will not be possible to draft an EFMLG position in time. However, potential follow-up measures will be discussed.

According to Article 194(1) of the CRR
“The technique used to provide the credit protection together with the actions and steps taken and procedures and policies implemented by the lending institution shall be such as to result in credit protection arrangements which are legally effective and enforceable in all relevant jurisdictions.
The lending institution shall provide, upon request of the competent authority, the most recent version of the independent, written and reasoned legal opinion or opinions that it used to establish whether its credit protection arrangement or arrangements meet the condition laid down in the first subparagraph.”
A Task Force chaired by Bertrand prepared a short list of questions inquiring on EFMLG bank practices regarding legal opinions covered by Article 194 CRR. The questionnaire will be discussed and finalised by the EFMLG at its meeting on 27 February. A tour de table will be conducted as regards the experience of EFMLG members to date with such legal opinions.

Regulation (EU) 575/2013 CRR [link]
Draft questionnaire [link]
Extracts of CRR/CRD IV: Articles on legal opinions/legal reviews [link]
Allen & Overy Client Briefing Paper 5 - Capital Requirements Directive IV Framework. Collateral: Funded Credit Risk Mitigation in the Banking Book [link]
Allen & Overy Client Briefing Paper 6 - Capital Requirements Directive IV Framework. Unfunded Credit Risk Mitigation in the Banking Book: Guarantees and Credit Derivatives [link]

Bertrand Brehier

Expected finalisation of the questionnaire at the meeting on 27 February 2015; answers, by mid-March 2015 (precise deadline will be decided in the course of the meeting).   

MIFID, Investor Protection and Level Playing Field across EU Member States by national authorities

Draft EFMLG letter to the European Commission on Art. 24 [link]
Questionnaire [link]

Adolfo Fraguas Bachiller

EFMLG members will be requested to report (tour de table) on the immediately relevant investor protection practices in their jurisdiction. On the basis of this reporting plus the text of the draft letter, the EFMLG will discuss/agree on the text of the letter to be sent to the European Commission.  

Dimitris Tsibanoulis

Overview ahead of his harmonization of the chapters and preparation of the General chapter.

2014-07-22 FSB paper - Reforming Major Interest Rate Benchmarks [link]
2014-11-07 EC reply to the EFMLG - Legal consequences of the introduction of a new index replacing the Euribor [link]
Presentation [link]

Fernando Conlledo

After the refusal of the Commission, EFMLG members were expected to have approached their relevant national authorities on the introduction ideas/plans of the Euribor+ and report at the meeting (tour de table). Fernando will provide novel additional information. The EFMLG will draw conclusions of the preferred course or action.

Draft EFMLG response to EC - Legal consequences of the introduction of a new index replacing the Euribor [link]

Inigo Arruga

Ooverview with the intention of EFMLG members confirming the findings. After the EFMLG discussion it will be sent to the Commission as EFMLG contribution for further consideration in the Euribor / Euribor + context.  

On 18 February 2015 Jonathan Hill, the Commissioner for Financial Stability published a green paper and launched a public consultation on Capital Markets Union (CMU). The consultation also considers harmonising the market for covered bonds, securitisation and creating a single accounting standard for smaller companies. Further, it addresses interesting aspects including the cross-border flow of collateral and the enforceability of collateral and close-out netting (question 27). The paper could also be the inspiration for the EFMLG work program 2015/2016.

Green paper – Building a capital markets union [link]
Presentation [link]

Francesca Passaponti, The Vice Chairman

Issues as stake and consider potential follow-up.

The revised Key Attributes include a new Appendix II, Annex 1 on the Resolution of Financial Market Infrastructure (FMI) like central counterparties (CCPs) and FMI Participants. The powers to allocate losses provided under 4.9 and 4.10 (page 62) include variation margin and initial margin haircuts and the termination and close-out of contracts.

FSB key attributes – effective Resolution [link]

The Vice Chairman

To present the issues as stake and consider potential follow-up.

As a follow-up of the last meetings, it may be beneficial to discuss the new Article 429a CRR which provides some relief as far as collateralized derivatives is concerned.

Commission delegated Regulation (EU) 2015/62 with regard to the leverage ratio [link]

The Vice Chairman

To present the issues as stake and consider potential follow-up.

Implications for the (i) interbank market, (ii) deposits, (iii) loans, (iv) collateral.

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Bertrand Brehier

A tour de table at the next meeting on 27 February 2015.

Update after the state of affairs presented at the last EFMLG meeting by Pedro.

Pedro Ferreira Malaquias

TBD by Pedro

Pedro Ferreira Malaquias

Follow up of the last EFMLG meeting. The Vice Chairman will prepare a short draft letter before or after the meeting reminding the European Commission of the need to pursue anew previous Commission engagements/project on ensuring a uniform and sound application of netting across the EU, which, in addition, would be consistent with EU G-20 engagements. The draft letter will be sent for comments to the whole EFMLG.

2012-09-28 EFMLG letter on the proposal for a Directive establishing a framework for the recovery and resolution of credit institutions and investment firms [link]
2014 ISDA Opinion (Hengeler Müller). See pages 48-50. [link]
Green paper – Building a capital markets union [link]

The Vice Chairman

EFMLG letter on Banking Secrecy

2014-10-30 EFMLG letter to the European Commission and European Banking Authority on Banking secrecy [link]
European Commission’s feedback on the EFMLG letter of 30 October 2014 (still outstanding)

EFMLG Secretariat

The Vice Chairman

Topics and organisation points for the Quadrilateral meeting in 2015, including agreeing on possible dates

Inigo Arruga and Adrienn Petrovics

Use of US TLAC instead of EU MREL and the subsequent necessity to establish a bank non-operating holding company at the top of the bank group in Europe

ISDA Resolution Protocol ISDA 2014 Resolution Stay Protocol [link]
FSB Consultation on Cross Border Resolution [link]
Press Release of 10 November 2014 [link]
G20 Leaders’ Communiqué [link]
FSB consults on proposal for a common international standard on Total Loss-Absorbing Capacity (TLAC) for global systemic banks [link]

Francis Dickinson, Bertrand Brehier