Bank Recovery & Resolution Directive (BRRD)

The Bank Recovery and Resolution Directive (BRRD) establishes a common approach within the European Union (EU) to the recovery and resolution of banks and investment firms. The BRRD represents an important step forward in ensuring that the EU effectively addresses the risks posed by the banking system. It came into force in January 2015.

As part of a desire to eliminate close-out rights triggered by potential cross-border resolution of globally systemically important banks (G-SIBS), home authority regulators initially requested that the International Swaps and Derivatives Association (ISDA) revise their master agreements with the addition of so called ‘stay’ provisions in 2014. ISLA, the International Capital Market Association (ICMA), and the Securities Industry and Financial Markets Association (SIFMA) received similar requests in early 2015 to add stay provision contractual changes to their respective master agreements. This process was completed in November 2015.

Jurisdictional Modular Protocols, which provide mechanics for buy-side to adhere to stay provisions, have been progressively implemented since 2016.

In 2023, the European Commission published a proposal reviewing the Bank Crisis Management and Deposit Insurance (CMDI) framework, amending the Bank Recovery and Resolution Directive (BRRD), Single Resolution Mechanism Regulation (SRMR), Deposit Guarantee Schemes Directive (DGSD) and proposing adjustments to Daisy Chains. At a headline level, the review aims to bring more banks in scope of the EU resolution framework, notably introducing more flexible possibilities to use DGS funding for resolution purposes, and further restrict the use of public money to support banks in difficulty.