PRA has made a statement outlining its view on the implications of LIBOR transition for contracts in scope of the Contractual Recognition of Bail-In (CROB) and Stay in Resolution (Stays) parts of its Rulebook. PRA considers that:
- where the sole purpose of an amendment to a CROB liability or a Stays financial arrangement is to transition away from LIBOR, then the amendment should not be a material amendment for the purposes of those rules;
- firms should consider adding CROB and Stays terms into documentation for a third-country law governed liability or financial arrangement amended for LIBOR transition purposes, as it enhances firm resolvability; and
- firms should consider whether having non-CET1 own funds instruments governed by third-country law but without UK statutory or contractual recognition could cause resolution difficulties, such that the BoE may use its statutory powers to direct firms to try to renegotiate instruments.