On May 26, the UK Prudential Regulation Authority (PRA) published a consultation paper to require PRA-supervised firms covered by the EU Bank Resolution and Recovery Directive (BRRD) to include in their contractual agreements governed by third-country law an agreement by the relevant counterparty to subject itself to the general and temporary stay provisions of the BRRD as implemented under UK law. In particular, the BRRD provides for a general stay of a counterparty’s right to exercise any termination, suspension, modification, netting or set-off rights, or to obtain possession, exercise control or enforce any security over any property of a firm solely as a result of the exercise of a crisis prevention or crisis management measure taken pursuant to the BRRD, provided the firm continues to perform its obligations under the relevant contract. 

The BRRD also provides for national resolution authorities to impose one or more of the following temporary stays until midnight in the relevant member state on the business day following the date of entry into resolution: (1) the suspension of any payment or delivery obligation by the firm subject to resolution; (2) the prohibition of a secured creditor to enforce its security interest; and (3) the suspension of a counterparty’s termination rights. The PRA’s proposal forms part of wider cross-border recognition efforts undertaken by the Financial Stability Board to ensure the effective recognition of resolution actions across borders.