The Prudential Authority ("PA") has introduced a new effective date for banks designated as systemically important financial institutions ("SIFIs") and their holding companies to comply with Prudential Standard RA03 – Flac Instruments for Designated Institutions (the "Standard"), which was previously published as a draft for consultation. According to Prudential Communication 19 of 2024 published by the PA on 11 December 2024, the extension from the previously proposed implementation date of 1 January 2025 to 1 January 2026 is due to "operationalisation challenges". The 6-year phase-in period which was initially included in the draft version of the Standard remains unchanged and will commence on the new implementation date of 1 January 2026.
SIFIs and their holding companies will therefore be required from the beginning of next year to ensure they can maintain a sufficient level of Flac instruments or Flac instruments and other qualifying instruments that will be available during resolution for bail-in, in line with the 6-year phase-in period set out in the Standard.
In summary, Flac instruments are unsecured debt instruments issued by a designated institution or its holding company that meets the requirements as set out in the Standard. For a recap and for further information on Flac instruments, "designated institutions", "resolution" and "bail-in", please refer to our previous articles below:
- ENS - News - New resolution regime for designated institutions comes into effect
- ENS - News - South African SIFI banks and holding companies are required to issue Flac (unsecured debt) instruments for resolution readiness
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