EU Requirements For Contractual Bail-In Clauses

"Bail-in" clauses, which have become a standard feature of contracts between European financial institutions and non-European parties, stipulate that European financial regulators have the power to write down, cancel or convert to equity the obligations of the financial institution.

The bail-in rules form part of a comprehensive package of measures under EU law designed to permit orderly rescue or wind-down of distressed banks. The power of European regulators to invoke the bail-in option is recognized by the law of all EU member states and should be respected by any court in those countries, whether or not the relevant contract includes bail-in language. However, courts in other countries ("third countries") might rule differently.