Entire Section

  • RAR 3.2 RAR 3.2 Resolution Powers

    • RAR 3.2 Guidance

      This section covers some of the Resolution Powers set out in Article 84N of the Law. The powers can be used in any combination or in connection with a Resolution Tool and different powers may be exercised in relation to the Authorised Firm and entities in its Group. The conditions and limitations for the use of certain powers is explained below.

       

      Derived from DFSA RMI283/2020 (Made 16th December 2020). [VER1/04-21]

    • Power to Require the Provision of Services and Facilities

      • RAR 3.2.1

        Where the DFSA exercises the power to require an Authorised Firm in Resolution, or any of its Group entities, to provide any services or facilities, those services and facilities are to be provided on the following terms:

        (a) where the services and facilities were provided under an agreement to the Authorised Firm in Resolution immediately before the Resolution Action was taken and for the duration of that agreement, on the same terms; and
        (b) where there is no agreement for provision of the services and facilities or where the agreement has expired, on reasonable terms.

         

        Derived from DFSA RMI283/2020 (Made 16th December 2020). [VER1/04-21]

    • Power to Suspend Certain Obligations

      • RAR 3.2.2 RAR 3.2.2

        (1) Where the DFSA exercises the power under Article 84N(1)(p) of the Law to suspend any payment or delivery obligations the suspension will take effect from when notice under that Article is given of the suspension (as an action the DFSA intends to take) until midnight at the end of the second business day after the notice is given, except that:
        (a) where a payment or delivery obligation is due during the suspension period the payment or delivery obligation will be due immediately upon expiry of the suspension period; and
        (b) where a payment or delivery obligation has been suspended the payment and delivery obligations of the counterparty under the contract will also be suspended for the same period.
        (2) A suspension shall not apply to:
        (a) Deposits of an Eligible Depositor; or
        (b) payment and delivery obligations owed to an AMI, payment system, Central Counterparty, Securities Settlement System, Central Securities Depository or the Central Bank.

         

        Derived from DFSA RMI283/2020 (Made 16th December 2020). [VER1/04-21]

        • RAR 3.2.2 Guidance

          The DFSA will, when exercising its power under Article 84N(1)(p), have regard to the impact the exercise of the power might have on the orderly functioning of financial markets.

           

          Derived from DFSA RMI283/2020 (Made 16th December 2020). [VER1/04-21]

    • Power to Restrict Enforcement of Security Interests

      • RAR 3.2.3 RAR 3.2.3

        (1) Where the DFSA exercises its power under Article 84N(1)(q) of the Law to restrict secured creditors of an Authorised Firm in Resolution from enforcing security interests in relation to any assets of that Authorised Firm, the suspension will have effect from when notice under that Article is given, of that restriction (as an action the DFSA intends to take) until midnight at the end of the second business day after the giving of the notice.
        (2) A restriction shall not apply to restrict secured creditors in relation to any security interest of a payment system, Central Counterparty, Securities Settlement System, Central Securities Depository or the Central Bank over assets pledged or otherwise provided by way of margin or collateral by the Authorised Firm in Resolution.

         

        Derived from DFSA RMI283/2020 (Made 16th December 2020). [VER1/04-21]

        • RAR 3.2.3 Guidance

          The DFSA will, when exercising its power under Article 84N(1)(q), have regard to the impact the exercise of the power might have on the orderly functioning of financial markets.

           

          Derived from DFSA RMI283/2020 (Made 16th December 2020). [VER1/04-21]

    • Power to Temporarily Suspend Termination Rights

      • RAR 3.2.4 RAR 3.2.4

        (1) Where the DFSA exercises its power to suspend the termination rights under Article 84N(1)(k) of the Law of any party to a contract with an Authorised Firm in Resolution, the suspension will have effect from when notice under that Article is given, until midnight at the end of the second business day after the notice is given, provided that the payment and delivery obligations and the provision of collateral continue to be performed by the Authorised Firm in Resolution.
        (2) A suspension shall not apply to payment and delivery obligations owed to payment systems, Central Counterparties, Securities Settlement Systems, Central Securities Depositories or the Central Bank.
        (3) A person may exercise a termination right under a contract before the end of the period referred to in (1) if that person receives notice from the DFSA that the rights, assets or liabilities covered by the contract will not be:
        (a) transferred to another entity; or
        (b) subject to write down or conversion on the application of the Bail-In Tool.
        (4) Where the DFSA exercises the power in (1) to suspend termination rights, and where no notice has been given under (3) those rights may be exercised on the expiry of the period of suspension, if the rights, assets or liabilities covered by the contract:
        (a) remain with the Authorised Firm in Resolution and the DFSA has not applied the Bail-in Tool; or
        (b) have been transferred to another entity, only on the occurrence of any continuing or subsequent enforcement event.

         

        Derived from DFSA RMI283/2020 (Made 16th December 2020). [VER1/04-21]

        • RAR 3.2.4 Guidance

          The DFSA will, when exercising its power under Article 84N(1)(k) of the Law, have regard to the impact the exercise of the power might have on the orderly functioning of financial markets.

           

          Derived from DFSA RMI283/2020 (Made 16th December 2020). [VER1/04-21]

    • Write Down or Conversion Power

      • RAR 3.2.5

        (1) The DFSA may in writing down or converting any instrument or liability relating to an Authorised Firm:
        (a) reduce, including reducing to zero, the principal amount of, or outstanding amount due, in respect of Eligible Liabilities of the Authorised Firm;
        (b) cancel Debt Instruments issued by the Authorised Firm, except secured liabilities;
        (c) reduce, including reducing to zero, the nominal amount of Shares of the Authorised Firm and cancel the Shares;
        (d) require the Authorised Firm to issue new Shares or other capital instruments, including preference Shares and contingent convertible instruments.
        (2) A Pre-Resolution Valuation or a Provisional Valuation (as the case may be) shall form the basis of the calculation of the write down to be applied to the relevant capital instruments in order to absorb losses and the level of conversion to be applied to the relevant capital instruments in order to recapitalize the Authorised Firm.
        (3) The DFSA may exercise the Write Down or Conversion Power:
        (a) independently of any other Resolution Action; or
        (b) in combination with a Resolution Action.
        (4) The DFSA may exercise the Write Down or Conversion Power in relation to relevant capital instruments issued by an Authorised Firm in Resolution, when one or more of the following circumstances apply:
        (a) the DFSA determines that unless the Write Down or Conversion Power is exercised in relation to relevant capital instruments, the Authorised Firm will no longer be viable;
        (b) in the case of relevant capital instruments issued by an Authorised Firm that is a subsidiary or another entity in its Group, the DFSA determines that unless the Write Down or Conversion Power is exercised the Authorised Firm will no longer be viable; or
        (c) in the case of relevant capital instruments issued by an Authorised Firm that is a parent, the DFSA determines that unless the Write Down or Conversion Power is exercised the Authorised Firm’s Group will no longer be viable.
        (5) In complying with (4), the DFSA shall exercise the Write Down or Conversion Power in accordance with the priority of claims that would apply if the Authorised Firm in Resolution were to be wound up under the DIFC Insolvency Law.
        (6) Where the principal amount of a relevant capital instrument is written down:
        (a) the reduction of that principal amount will be permanent;
        (b) no liability to the holder of the relevant capital instrument will remain under or in connection with that amount of the instrument which has been written down, except for any liability al accrued; and
        (c) no compensation is paid to any holder of the relevant capital instruments other than in accordance with (7).
        (7) In order to effect a conversion of relevant capital instruments, the DFSA may require an Authorised Firm to issue instruments to the holders of the relevant capital instruments and the relevant capital instruments may only be converted where the following conditions are met:
        (a) the instruments are issued by the Authorised Firm with the agreement of the DFSA;
        (b) the instruments are awarded and transferred without delay following the exercise of the Write Down or Conversion Power; and
        (c) the Conversion Rate that determines the number of instruments that are provided in respect of each relevant capital instrument complies with these Rules.

         

        Derived from DFSA RMI283/2020 (Made 16th December 2020). [VER1/04-21]