BRRD II implementation in the Netherlands
Recently, the Dutch bill for the implementation of BRRD II (i.e. Directive (EU) 2014/59 establishing a framework for the recovery and resolution of credit institutions and investment firms, as amended by Directive (EU) 2019/879) in the Netherlands was submitted to Dutch Parliament, where it is currently under debate.
Major topics of BRRD II include:
(i) Stay Powers: the attribution of powers to relevant authorities to suspend (a) payment and delivery obligations, (b) termination rights and (c) the enforcement of security under otherwise enforceable contractual arrangements (the ”Stay Powers”). When the Stay Powers are exercised, the relevant authorities have up to the next business day to make use of other powers that would benefit the recovery and/or resolution of the relevant bank or investment firm.
(ii) CROS clauses: the mandatory obligation to include clauses in certain financial contracts on the contractual recognition of such Stay Powers, where the relevant contracts are governed by non-EEA law (the contractual recognition of stay powers clauses, “CROS clauses”). The impact of the obligation to include CROS clauses is felt most in derivatives, repo’s, commodities contracts and securities purchase agreements of Dutch banks and investment firms which are often governed by English law or New York law. The obligation to include CROS clauses applies to new financial contracts only, and does not affect existing contracts, unless new obligations under existing contracts are entered into or existing obligations are materially amended. For example, Dutch banks and investment firms entering into derivatives under New York law or English law governed ISDA Master Agreements must include CROS clauses in their contractual documentation when new transactions are entered into.
(iii) ranking: the ranking of regulatory capital instruments of Dutch banks and investment firms in case of their recovery and resolution has been aligned throughout the EEA to ensure that capital instruments can be bailed-in in accordance with the BRRD II bail-in waterfall. The original implementation proposals were unclear as to (a) the ranking of regulatory capital instruments that are disqualified for regulatory capital purposes and (b) the consequences of contractual pari passu ranking provisions for regulatory capital instruments. These topics have been clarified in the bill before Parliament.
The Dutch Ministry of Finance consulted on the draft bill earlier this year. We are pleased that the suggestions of Marieke and Niek of Stibbe’s Financial Markets Group have been included in the bill submitted to Parliament. The bill is expected to enter into effect later this year.
Please see our consultation reaction by clicking here
and the Dutch bill by clicking here.
Marieke Driessen is a partner and Niek Groenendijk is a senior associate in the Financial Markets Group of Stibbe in Amsterdam. They regularly assist financial institutions and other financial market participants on financial market transactions and regulatory issues in relation thereto.
