EBA · 2021_6240 Rejected question

EBA Guidelines - critical outsourcing - references to BRRD

Regulation
Directive 2013/36/EU (CRD)
Article
Paragraph 75(o) of EBA guidelines on outsourcing
Topic
Internal governance
Submitted by
Credit institution
Submitted
2021-10-18
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Question

Pursuant to paragraph 75(o) of the EBA Guidelines on outsourcing arrangements, the outsourcing agreement for critical or important functions should set out a clear reference to Articles 68 and 71 of Directive 2014/59/EU (BRRD). On the other hand, the BRRD, as amended through the Directive (EU) 2019/879 (BRRD 2), imposes an obligation to include such articles only in financial contracts (these will essentially include derivative contracts, repurchase agreements etc.), governed by third country law. Clarification is sought as to whether contracts for critical outsourcing arrangements should incorporate references to Articles 68 and 71 of BRRD, as amended, irrespective of such contracts not being financial contracts pursuant to BRRD.

Background

EBA guidelines on outsourcing:  75. The outsourcing agreement for critical or important functions should set out at least: .... (o) for institutions, a clear reference to the national resolution authority’s powers, especially to Articles 68 and 71 of Directive 2014/59/EU (BRRD), and in particular a description of the ‘substantive obligations’ of the contract in the sense of Article 68 of that Directive.   Article 71a of BRRD, as amended - Contractual recognition of resolution stay powers 1.  Member States shall require institutions and entities referred to in points (b), (c) and (d) of Article 1(1) to include in any financial contract which they enter into and which is governed by third-country law, terms by which the parties recognise that the financial contract may be subject to the exercise of powers by the resolution authority to suspend or restrict rights and obligations under Articles 33a, 69, 70, and 71 and recognise that they are bound by the requirements of Article 68.
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Original source: European Banking Authority, Q&A ID 2021_6240

This Q&A is published by European Banking Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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