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Multi-tool for bail-in amendments now available

On 1 August 2016, the Association for Financial Markets in Europe (AFME) published a full set of model clauses for the contractual recognition of bail-in under article 55 BRRD.

The 55-page package follows the September 2015 release, which was then limited to one jurisdiction.

The expanded package now includes:

  • Generic version of model clauses for any governing law, with a regulated entity of any EU Member State. Relevant definitions can be sourced from the EU Bail-In Legislation Schedule of the Loan Market Association (LMA)
  • Liability under New York governing law, for entities organised in:
    • The United Kingdom
    • France
    • Italy
    • Belgium
    • Germany

Models are available for both:

  • Debt liabilities, such as securities and notes
  • Other liabilities, that is liabilities other than debt instruments or liabilities governed by industry-standard master agreements, such as ISDA, GMSLA, GMRA

AFME makes it clear that the model clauses should only be considered as a starting point for negotiation. Users must take separate legal advice as to compliance with local regulations and overall efficacy.

The background on national implementations and the efforts made in tailoring each set of clauses should be found useful by the market. At the very least, the package should help minimise the negotiation around the form of the amendment, but it will do little to resolve the more fundamental controversies around the bail-in tool.

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