Overseas Resolution Actions

Article 89 of the Resolution Law requires the JRDCA, once notified of a third-country resolution action related to a third-country bank, to make an instrument that recognises the action, refuses to recognise the action, or recognises part of the action and refuses to recognise the remainder.

Recognition by the JRDCA, provides certainty as to whether such a third-country resolution action has effect under Jersey law.

The JRDCA might have to make a recognition decision in relation to the single point of entry resolution, by bail-in, of a bank with a hosted subsidiary or branch in Jersey.

Alternatively, a third-country resolution authority might write down liabilities governed by Jersey law.

The JRDCA may also have to recognise the transfer of property located in Jersey.

In addition to recognition, the JRDCA also has the ability to support a resolution carried out by a third-country resolution authority (for example, by ordering a transfer of property in Jersey to a bridge institution established by the third-country resolution authority).

This is not an exhaustive list of all possible circumstances when the JRDCA might have to make a recognition decision.

A recognition decision must be made where the JRDCA is notified of a third-country resolution action, related to a third-country bank. Broadly, this is an action to manage failure or likely failure of such institutions under the law of another country or territory outside of Jersey, which is broadly comparable in terms of objectives and anticipated results to a resolution carried out under the Jersey resolution regime.

A “third-country bank” is an institution established in a country or territory other than Jersey that would, if it were established within Jersey, be regarded as a bank under the Resolution Law. This includes deposit-takers and their parents and subsidiaries.

In order to make a recognition decision, the JRDCA must decide whether the third-country resolution action is broadly comparable in terms of objectives and anticipated results to a resolution carried out under the Jersey resolution regime (meaning the exercise of a stabilisation option in relation to a corresponding entity in Jersey). Where the third-country action is not of this nature, other options for cross-border assistance may be available through the Jersey courts.

The JRDCA may only make a recognition decision subject to the approval of the Minister for External Relations (the Minister) and to Article 89(2) of the Resolution Law.

The JRDCA may refuse to recognise a third-country resolution action (or any part of it) if it is satisfied that one or more of the following conditions are met:

• Such recognition would have an adverse effect on financial stability in Jersey;
• The taking of a resolution action by the JRDCA in relation to a branch located in Jersey of a third-country bank is necessary to achieve one or more of the resolution objectives;
• Under the third-country resolution action, creditors (including, in particular, depositors) located or payable in Jersey would not, by reason of being located in Jersey, receive the same treatment, and have similar legal rights, as creditors (including depositors) who are located or payable in the third-country jurisdiction concerned;
• Recognition of, and taking action in support of, the third-country resolution action (or the relevant part of the third-country resolution action) would have material fiscal implications for Jersey; or
• Such recognition would be unlawful under Article 7(1) of the Human Rights (Jersey) Law 2000.

Effective prior engagement between the third-country resolution authority and the JRDCA will help support the transparent and expedited process envisaged in the Key Attributes. Therefore, the JRDCA encourages third-country resolution authorities to engage the JRDCA ahead of taking any resolution action that may require action from the JRDCA, including recognition. This gives the JRDCA time and flexibility to work with the third-country resolution authority when assessing the recognition request and supporting materials, and aids swift decision-making.

Third-country resolution authorities could also consider recognition as part of business-as-usual resolution planning and engagement. This would allow third-country resolution authorities, host and any other relevant authorities to consider the information and decision making that may be required in advance. In the event that the third-country resolution authority is unable to engage ahead of taking a resolution action, the JRDCA encourages the home authority to engage as soon as possible after taking the measures.

The information provided to the JRDCA may be shared with the Minister given their role in deciding whether to approve the JRDCA's recognition decision.