Prudential Regulation Authority Rulebook

3.1

In this Chapter, the following definitions shall apply:

debt instruments

means any form of transferable debt security or instrument, whether registered or bearer, including commercial paper, bills of exchange, banker’s acceptances, certificates of deposit and bonds, with the exception of debt securities or instruments which are Additional Tier 1 instruments or Tier 2 instruments.

unsecured liability

means a liability where the right of the creditor to payment or other form of performance is not secured by a charge, pledge, lien or mortgage, or collateral arrangements including liabilities arising from repurchase transactions and other title transfer collateral arrangements.

3.2

A BRRD undertaking must include in the contract governing a liability a term by which the creditor or party to the agreement creating the liability recognises that the liability may be subject to the exercise of power by the Bank of England to make a special bail-in provision or mandatory reduction provision and agrees to be bound by any reduction of the principal or outstanding amount due or by any conversion or cancellation effected by the exercise of that power, provided that such liability is:

1. (1) not an excluded liability;
2. (2) not an excluded deposit;
3. (3) governed by the law of a third country;
4. (4) issued, entered into or arising after 19 February 2015; and
5. (5) either a debt instrument which is an unsecured liability, or an additional Tier 1 instrument or a tier 2 instrument.

[Note: Art. 55(1) (part) of the BRRD]

3.3

In respect of a liability that is:

1. (1) an additional tier 1 instrument; or
2. (2) a tier 2 instrument,

a BRRD undertaking that is a CRR firm must provide to the PRA a properly reasoned independent legal opinion from an individual appropriately qualified in the relevant third country on the enforceability and effectiveness of the term referred to in 2.1.