Dr. Mario Nava
Director, Dir E — Financial system surveillance and crisis management
DG FISMA
European Commission
Rue de Spa 2 / Spastraat 2
1000 Bruxelles / Brussel
Belgique

Ms Kadri Marlin
Permanent Representative of Estonia to the EU
Rue Guinard 11/13
1040, Bruxelles

Gunnar Hökmark
Parlement européen
Bât. Altiero Spinelli
07FISS
60, rue Wiertz
B1047 Bruxelles

29 June, 2017

Dear Sirs

RE: Proposed Moratorium Powers under Bank Recovery and Resolution Directive
(BRRD)

The Asset Management Group of the Securities Industry and Financial Markets Association (“SIFMA AMG” or “AMG”)1 and ICI Global2 (together, the “Associations”) welcome the opportunity to comment on the European Commission’s (the “Commission”) proposal amending Directive 2014/59/EU (the “BRRD”) on loss-absorbing and recapitalisation capacity of credit institutions and investment firms, published on 23 November 2016 (the “Proposal”).3 The Associations have significant concerns regarding the Commission’s Proposal to expand the powers of resolution authorities to suspend payment and delivery obligations of an institution subject to resolution powers under BRRD (an “Affected Institution”) in the pre-resolution and resolution phases (“Additional Moratorium Powers”) for up to five working days each time either such power is used. 4

These Additional Moratorium Powers disproportionately and unnecessarily shift risks to pension funds, regulated investment funds (e.g., US mutual funds and UCITS), private funds and other investors for whom asset managers serve as fiduciaries by undermining important contractual rights in financial contracts and bank account relationships. The Associations’ members seek to meet their clients’ investment objectives and, relatedly, liquidity needs and risk constraints by entering into financial contracts with Affected Institutions, including derivatives contracts, repurchase agreements and securities lending agreements, on behalf of their clients or the fund. They also establish bank account, time deposits, custodial and brokerage arrangements pursuant to which large cash and securities positions are held with Affected Institutions. The Additional Moratorium Powers undermine protections that are part of these agreements and arrangements by lengthy suspension of payment and delivery obligations, which are subject to very limited exceptions.5 This ability to suspend drastically alters credit risk profiles of Affected Institutions, an important factor assessed when entering into such arrangements. It likewise undermines important rights, including contractual termination and the ability to access collateral and bank accounts that protect clients against the deteriorating credit of an Affected Institution.

As discussed below, the Associations believe that this proposed expansion is inconsistent with FSB principles and relevant laws applicable to buy-side market participants, and market participants generally, in the EU and US. Consequently, the risk of becoming subject to the Additional Moratorium Powers is likely to curtail the ability of regulated investment funds and investment managers regulated in the US and Europe to deal with banks in the European Union and with their affiliated companies.

We believe that no Additional Moratorium Powers should be introduced for the following three core reasons.

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1 SIFMA AMG brings the asset management community together to provide views on policy matters and to create industry best practices. SIFMA AMG’s members represent U.S. and multinational asset management firms whose combined global assets under management exceed $39 trillion. The clients of SIFMA AMG member firms include, among others, tens of millions of individual investors, registered investment companies, endowments, public and private pension funds, UCITS and private funds such as hedge funds and private equity funds.

2 ICI Global carries out the international work of the Investment Company Institute, serving a fund membership that includes regulated funds publicly offered to investors in jurisdictions worldwide, with combined assets of US $25.2 trillion. ICI Global seeks to advance the common interests and promote public understanding of regulated investment funds, their managers, and investors. Its policy agenda focuses on issues of significance to funds in the areas of financial stability, cross-border regulation, market structure, and pension provision. ICI Global has offices in London, Hong Kong, and Washington, DC.

3 Proposal for a Directive of the European Parliament and of the Council amending Directive 2014/59/EU on lossabsorbing and recapitalisation capacity of credit institutions and  investment firms and amending Directive 98/26/EC, Directive 2002/47/EC, Directive 2012/30/EU, Directive 2011/35/EU, Directive 2005/56/EC, Directive 2004/25/EC and Directive 2007/36/EC (November 23, 2016) (COM/2016/0852 final), available at: http://eur-lex.europa.eu/legalcontent/EN/TXT/?uri=COM:2016:0852:FIN.

4 See Articles 27, 29 and 63 of the Proposal.

5 The Additional Moratorium Powers would be subject to very limited exemptions such that the Affected Institution would only be required to continue to make payments in respect of covered deposits, eligible investor compensation schemes and amounts it owes directly to payment and settlement systems, central counterparties and central banks.