Delegated regulation 2017/867 - Classes of arrangements to be protected in a partial property transfer under Article 76 of Directive 2014/59/EU - Main contents

EN

Official Journal of the European Union

L 131/15

Directive 2014/59/EU requires Member States to ensure the protection of certain classes of arrangements during the partial transfer of assets, rights and liabilities of an institution under resolution. The same protection is required when a resolution authority forcibly modifies the terms of a contract to which the institution under resolution is party. That protection aims to prevent, when a partial transfer or a contractual modification has been effected, the splitting of assets, rights and liabilities which are linked to each other by virtue of those arrangements.

To ensure the proper application of this protection, it is necessary to identify precisely the types of arrangements that fall under the scope of each of the classes set out under Directive 2014/59/EU. The method most appropriate for this identification is to provide detailed rules and definitions, in addition to those set out under Directive 2014/59/EU. This is preferable to establishing a list of specific arrangements that may be entered into under the different national Member State laws, as such a list would be difficult to complete and would need to be continuously updated. As such this regulation should clarify and restrict, where necessary, the scope of application of the various forms of protection provided for by Directive 2014/59/EU for each class of arrangements.

The various classes of arrangements set out in Article 76(2) of Directive 2014/59/EU are detailed to varying degrees: some classes are fully specified, while others are determined in vaguer terms. In addition, some classes refer to one type of contractual relationship and liability or to a limited set of contractual relationships and liabilities, while others cover a greater number and an open range of contractual liabilities, transactions and relationships. Those latter classes could potentially encompass all of the legal and contractual relationships between an institution and one or more of its counterparties. If those classes of arrangements were to be fully protected, resolution authorities could find it difficult to effect partial transfers, if at all. It is therefore appropriate to avoid an excessive protection that could potentially extend to all of the assets, rights and liabilities between an institution and its counterparties.

Some classes of protected arrangements are defined in broader terms in Directive 2014/59/EU. In order to enhance certainty in terms of scope, namely in relation to security arrangements, set-off and netting arrangements and structured finance arrangements those classes should be further specified. This Delegated Regulation should not prevent the resolution authorities to further specify in partial transfers those types of set- off and netting arrangements to be protected in individual partial transfers, where those arrangements are recognised for risk mitigation purposes under the applicable prudential rules,...