Regulatory Alerts2018-12-21
Contractual recognition of temporary suspension of termination rights
The German resolution authority requires financial institutions and group entities to incorporate contractual recognition clauses in third-country governed contracts, ensuring counterparties acknowledge the authority's power to temporarily suspend termination and other contractual rights during resolution. This obligation excludes pre-2016 liabilities not covered by netting agreements and contracts with designated system participants, central counterparties, or central banks, while mandating that German parent undertakings ensure compliance from foreign subsidiaries when domestic guarantees apply. The authority may enforce these requirements through administrative acts and requests detailed tabular data from non-compliant entities to assess implementation adequacy for resolution planning.