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World-wide bail-in uniformity planned

30 September 2014 3:08PM
The Financial Stability Board yesterday spelled out a menu of measures to provide "legal certainty in cross-border resolution," a goal set at the St Petersburg G20 Summit in 2013 with a deadline of next month's Brisbane Summit.Measures chosen include:-- a protocol that, if adopted by both counterparties to an ISDA Master Agreement, "would support the cross-border enforcement of a temporary stay of early termination rights in relation to resolution-based defaults."-- the "broad adoption of the contractual approach to making temporary stays of early termination rights (including with respect to cross-defaults) in financial contracts effective in a cross-border context."-- "the inclusion of contractual recognition clauses in debt instruments… [that will] help support the cross-border enforceability of bail-in and other resolution actions of the home resolution authority in relation to the issuing entity."The FSB said authorities must have confidence "that the exercise of resolution powers will be legally enforceable in relation to a firm's loss absorbing resources in resolution.""Where instruments are governed by a foreign law, an acceptable level of confidence can be achieved only where there are legal frameworks in place by which the write down or conversion of the instruments under the issuer's home resolution regime can be recognised promptly and with an adequate degree of predictability and certainty in other relevant jurisdictions," it said.

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