European Union: Banks Must Keep Records Of Financial Contracts Under New Recovery And Resolution Rules

On 14 October 2016, new rules supplementing the Bank Recovery and Resolution Directive will come into force aimed at helping resolution authorities to effectively and efficiently apply resolution tools and powers to a failing bank. Many, mainly larger, banks and certain investment firms will have to keep available and maintain a minimum set of information on financial contracts. In this way, information can quickly be made available to the resolution authority when it needs this to take informed resolution decisions.

In drafting the new rules, the European Banking Authority (EBA) has aimed for maximum consistency with existing recordkeeping and reporting requirements, in particular under EMIR. This can greatly facilitate compliance with the new rules. However, the new rules extend to a broader category of contracts and require the collection of additional, BRRD-specific, information. The new rules are therefore still likely to require significant changes to banks' data recording processes and IT infrastructure. In addition, the new information fields may require in-depth analysis of documentation. The new rules also leave considerable discretion to resolution authorities, in particular in determining which banks should apply the rules, in addition to those automatically subject to the rules; which additional information fields may be required; and whether banks will be allowed an adequate phase-in period for compliance.


The EU bank recovery and resolution framework

The Bank Recovery and Resolution Directive (BRRD) is part of the new EU bank recovery and resolution framework. This regime has been set up for the orderly resolution of failing banks (and investment firms) and should ensure that a failing bank's critical functions continue, that financial stability is preserved and that the burden of the failing of a bank is shifted from the taxpayer to a bank's shareholders and creditors (from bail-out to bail-in). In addition to the BRRD, the Single Resolution Mechanism Regulation (SRMR) and the Intergovernmental agreement on the Single Resolution Fund (IGA) are this regime's main pieces of legislation.

Under the BRRD, when it becomes clear that a bank is no longer viable and the conditions for resolution are met, a resolution authority can decide that the bank is to enter into resolution with the aim to resolve the bank in an orderly manner and ensure the continuity of its critical functions. A resolution authority has four resolution tools available: the sale of business tool, the bridge institution tool, the asset separation tool and the bail-in tool. In a recent In context article, we discussed the MREL requirement, which is related to the bail-in tool.

The power to temporarily suspend termination rights

To properly apply these resolution tools, the BRRD grants resolution authorities a number of resolution powers. One of these resolution powers is the right to impose temporary restrictions on termination rights ("temporary stays") of any party to a financial contract with the bank under resolution. This gives resolution authorities sufficient time to carry out the resolution tools (during the "resolution weekend") without parties that do business with the bank pulling out from their contracts.

The suspension of termination rights lasts from publication of the resolution order to midnight at the end of the following business day and is only allowed when the bank continues to perform its payment and delivery obligations, and provide collateral. The type of termination rights which can be suspended is broad and includes rights to terminate a contract, rights to accelerate, close out, set-off or net obligations, or any similar provision that modifies an obligation of a party to the contract or prevents an obligation under the contract, that would otherwise arise, from arising. As statutory powers under the BRRD cannot always be exercised with regard to contracts subject to third country (this is a non-EU country's) law, resolution authorities can require such contracts to include contractual resolution stay provisions. In close coordination with various parties, the International Swaps and Derivatives Association (ISDA) has developed the 2016 ISDA resolution stay modular protocol to aid banks in complying with such obligations.

The new rules on the minimum set of detailed information on financial contracts

For resolution authorities to effectively and efficiently exercise the power to suspend termination rights and to take informed decisions on the application of resolution tools, they need to have easy and swift access to information on financial contracts. For this reason, competent authorities and resolution authorities may require a bank to collect and maintain detailed records of financial contracts in advance, which can be made available to the authorities upon request. The minimum set of information to be maintained and the circumstances in which this requirement should be imposed has now been further specified by means of Regulatory Technical Standards (RTS) in Delegated Regulation (EU) 2016/1712, published in the Official Journal of the EU on 24 September 2016 and entering into force on 14 October 2016.

Banks in scope of the requirement

Under the new rules, the resolution authority must impose the requirement to maintain detailed records on all banks that have a group resolution plan which foresees the taking of resolution actions. This group will include most larger banks. In order to ensure proportionality and avoid unnecessary additional burdens, the new rules do not automatically apply to the, generally smaller, banks whose resolution plan foresees that upon failure, they would be put into regular bankruptcy instead of resolution. However, this does not mean that smaller banks are off the hook. Competent authorities and resolution authorities may, at their discretion, decide to impose the same rules to any bank when considered necessary to ensure comprehensive and effective planning.

Contracts in scope of the requirement

The new requirement applies to all of a bank's financial contracts as defined in the BRRD. The scope of this definition is particularly broad and includes the following contracts:

  • securities contracts, including for sale, purchase, loan, options and repos;
  • commodities contracts, including for sale, purchase, loan, options and repos;
  • futures and forward contracts;
  • swap agreements, including relating to interest rates, foreign exchange, an equity or debt index and debt or equity and including total return, credit spread or credit swaps;
  • inter-bank borrowing agreements with a term of up to three months; and
  • master agreements for any of the abovementioned agreements.

Required minimum set of information

The minimum set of information required under the new rules consists of 43 information fields. This includes, first of all, general information on the identity of the counterparties, the value of the contract, its collateralisation and whether it is cleared by a central counterparty (CCP). Second, the new rules unsurprisingly also require certain BRRD-specific information, information which is specifically important for resolution purposes, to be maintained. This includes information on:

  • contractual recognition: whether, in case of contracts governed by the law of a third country, contractual recognition has been included for (i) write down and conversion powers (bail-in), (ii) suspension of termination rights, (iii) other resolution powers;
  • core business lines: identification of the core business line or core business lines to which the financial contract relates;
  • termination rights: whether the other counterparty's termination rights under the financial contract are based on the insolvency or financial condition of the institution under resolution; and
  • type of liability/claim: whether or not liabilities arising from the financial contract are (partially) excluded from bail-in pursuant to relevant rules under the BRRD.

The new rules, however, merely specify the minimum set of information to be maintained. Competent authorities and resolution authorities may require additional information to be recorded where they consider this necessary to ensure that resolution powers can be applied effectively. Conversely, where an information field is not applicable to a certain type of financial contract and the bank can demonstrate this, this information field is excluded from the requirement for that type of contract. As the information fields have been largely written with derivatives in mind and do not distinguish between the various types of financial contracts, this is particularly relevant for financial contracts for the outright sale and purchase of securities or for interbank borrowing, for which a large number of information fields are not relevant.

Consistency and overlap with existing recordkeeping and reporting obligations

Recordkeeping and reporting obligations already exist for a variety of financial contracts. EBA, which has prepared the new rules, has indicated that in view of the availability of data under the existing rules on recordkeeping and reporting, the additional burden on banks should be limited. EBA has taken great care to minimise the additional burden on banks by ensuring consistency of the information requirements with other obligations, in particular those under EMIR. This consistency helps to mitigate the additional compliance burden. However, a number of the information fields, especially those related to the necessity and possibility of the application of resolution powers, are new and are expected to require significant compliance costs and efforts from banks.


Under Regulation No 648/2012 on OTC derivative transactions, central counterparties and trade repositories (EMIR), counterparties to derivatives contracts are required to keep records and report information on derivatives transactions to trade repositories on derivatives contracts. The reporting obligation is further specified in Delegated Regulation (EU) No 148/2013 supplementing EMIR with regard to RTS on the minimum details of the data to be reported to trade repositories and Implementing Regulation (EU) No 1247/2012 laying down ITS with regard to the format and frequency of trade reports to trade repositories. These RTS and ITS are currently being revised (see ESMA's final report on review of the EMIR reporting RTS and ITS).

In principle, all derivative contracts in the scope of EMIR also fall within the scope of the new rules. As mentioned above, EBA has taken care in drafting the RTS to ensure consistency with the information required under the EMIR RTS (including its proposed amendments) so as to reduce the compliance burden for banks. As a result, the new rules largely use the same language and structure and the obligation to maintain most of the data already exists. However, the new BRRD rules extend to additional BRRD-specific information which will need to be collected.


Under Regulation (EU) 2015/2365 on transparency of securities financing transactions and of reuse (SFTR), counterparties to securities financing transactions (SFTs) are required to keep records and report information on SFT transactions to trade repositories. The reporting obligation has yet to enter into force and the European Securities and Markets Authority (ESMA) is currently developing RTS further specifying the reporting obligation. After receiving feedback on its discussion paper on these RTS published in March 2016, the ESMA published its consultation document on the RTS on 30 September 2016. The RTS are expected to become applicable from 2018.

SFTRs, which includes repos, securities lending and margin lending transactions, are in principle all covered by the new rules. In developing the new rules, EBA was not able to take into account the SFTR as at the time, negotiations of its level 1 text were taking place. The SFTR reporting obligation itself is modelled on EMIR, as a result of which to the extent possible the required information will correspond to the information to be maintained under the new BRRD rules. Again, however, the records must now include the additional BRRD-specific information.


As of 3 January 2018 the Markets in Financial Instruments Directive (MiFID II) and the Regulation on markets in financial instruments and amending EMIR (EU) (No 600/2014) (MiFIR), will become applicable. MiFIR contains the obligation to maintain records and to report most transactions in financial instruments to competent authorities. This replaces the current reporting obligations under MiFID I which are narrower in scope. On 28 July 2016, the European Commission adopted the RTS under Article 26 of the MiFIR relating to the obligation to report transactions together with its draft Annexes.

The MiFIR reporting obligation will apply to nearly all transactions in financial instruments, including the sale and purchase of securities and the conclusion of derivatives contracts. However, SFTs under the scope of the SFTR are excluded and transactions already reported under EMIR need not also be reported under MiFIR. The information fields proposed under MiFIR, focused as it is on trading data, differ substantially from those under the new rules. That said, apart from the BRRD-specific information fields, for financial contracts under its scope, most information should be available from MiFIR reports.


Under Regulation No 1333/2014 of the European Central Bank (ECB) concerning statistics on the money markets (MMSR) a number of banks need to report statistical data on money market transactions to the ECB or the relevant national central bank, in order for statistics to be produced by the ECB and the national central banks on the money markets.

Under the MMSR banks need to report on transactions in money market instruments (repos, lending and borrowing and foreign exchange and overnight index swaps, all with maturity of up to a year) with financial counterparties and certain non-financial wholesale counterparties. Again, there is substantial overlap with the scope of the new rules. The information to be reported under the MMSR also to a large extent corresponds to the information to be maintained under the new BRRD rules.


As of 14 October 2016 new rules will become applicable under the BRRD requiring many banks (and certain investment firms) to keep detailed records of financial contracts. This should ensure the quick availability of this information to resolution authorities when necessary for making informed resolution decision. Our key takeaways on the burden of compliance with these new rules are as follows:

  • In drafting the rules, EBA has aimed to strike a proportionate balance by only automatically applying the rules to larger banks, those whose resolution plan foresees the taking of resolution actions in case of failure. As other banks are less likely to be resolved, and would instead be expected to enter regular bankruptcy upon failure, extending the requirement to those banks was considered disproportionate.
  • EBA has striven to further mitigate the burden of compliance by ensuring consistency, to the extent possible, with already existing recordkeeping and reporting obligations, in particular those under EMIR. As derivatives and SFTs form a substantial part of the financial contracts category to which the new rules apply, information already collected under EMIR and soon the SFTR will significantly aid in limiting compliance costs. There is also overlap with reporting obligations under MiFIR and the MMSR. As the new rules do not specify the format in which the information is to be recorded, banks can also continue to do so in accordance with their existing practices.
  • Despite the above, the new rules have a different objective from existing transaction reporting requirements. They therefore are not merely a duplication of existing rules but require additional BRRD-specific information to be collected. It is expected that these new information requirements will still require significant changes to banks' data recording processes and IT infrastructure. Furthermore, these information fields require the mining and monitoring of a number of sources, including master agreements, protocols, individual trades or agreements, and counterparties and in particular the "termination rights" and "type of liability/claim" information fields may require in-depth analysis of documentation.
  • Finally, the new rules leave a lot to the discretion of resolution authorities, in particular which additional banks should apply the rules and which additional information fields may be required. The authorities also have the discretion as relates to the phase-in period. Although the new rules do not foresee a generally applicable phase-in period, resolution authorities are expected to take into account, when imposing the requirement set out in the rules on individual banks, the period considered necessary for compliance. However, this cannot be guaranteed and banks expected to fall within the scope of the rules are advised to start planning for their own compliance and not wait for actions by resolution authorities.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions