Prudential Regulation Authority Publishes Final Rules On Contractual Stays In Financial Contracts Governed By Third-Country Law

On November 13, 2015, the PRA published its Policy Statement, including final rules, and Supervisory Statement on contractual stays in certain financial contracts governed by third-country law. The rules will apply to all UK incorporated PRA-authorized banks, building societies, PRA-designated investment firms and their qualifying parents. Those firms will need to agree with their counterparties to certain financial contracts governed by the laws of a jurisdiction outside the EEA that any action taken by the UK authorities to stay the termination rights in those contracts or to enforce a security interest would be recognized. Contractual agreement in writing is not required, as initially proposed. Instead, firms must ensure that the counterparty has agreed in an "enforceable manner" that its termination rights and rights to enforce a security interest will be limited according to the UK rules. The PRA states that...