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Association for Financial Markets in Europe Publishes Model Clauses for Contractual Recognition of Bail-In Under the EU Bank Recovery and Resolution Directive

On August 1, the Association for Financial Markets in Europe (AFME) published model clauses (Model Clauses) in relation to contractual “bail-in” requirements contained in the EU Bank Recovery and Resolution Directive (BRRD). The BRRD requires certain parties to include “bail-in” clauses in contracts that create eligible liabilities and are governed by laws outside of the European Union.

The bail-in clauses effectively require creditors to: (1) recognize that the liability under the contract may be subject to write-down and conversion powers; and (2) agree to be bound by any reduction of the principal or outstanding amount due, or any conversion or cancellation instigated by an EU resolution authority, which is designated under the BRRD by each EU member state and may be a national central bank, competent ministry or other public administrative authority.

In response to the BRRD, AFME developed the Model Clauses to assist industry compliance. The Model Clauses cover entities organized in the United Kingdom, France, Italy, Belgium and Germany, respectively.

AFME’s Model Clauses can be found here and the accompanying press release can be found here.

©2021 Katten Muchin Rosenman LLPNational Law Review, Volume VI, Number 218
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About this Author

Neil Robson, private equity fund managers counselor, Katten Law Firm, London
Partner

Neil Robson, a regulatory and compliance partner with Katten Muchin Rosenman LLP, focuses his practice on counseling hedge and private equity fund managers and other investment advisers on operational, regulatory and compliance issues. He regularly addresses Financial Conduct Authority (FCA) and EU authorization and compliance under both the EU Alternative Investment Fund Managers Directive (AIFM Directive) and MiFID, cross-border issues in the financial services sector, market abuse, anti-money laundering and regulatory capital requirements, formations and buyouts of...

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