EBA · 2016_2728 Rejected question

General principles governing resolution

Regulation
Directive 2014/59/EU (BRRD)
Article
34, para. 1
Topic
Resolution tools and powers
Submitted by
Investment firm
Submitted
2016-05-09

Question

BRRD Article 34.1.b. states that "creditors of the institution under resolution bear losses after the shareholders in accordance with the order of priority of their claims under normal insolvency proceedings, save as expressly provided otherwise in this Directive". I have two questions : Does the fact that "creditors of the institution under resolution bear losses [...] accordance with the order of priority of their claims under normal insolvency proceedings save as expressly provided otherwise in this Directive" means that creditors with the same ranking under insolvency be treated the same way under the bail-in, bridge bank or sale of business tools except if the BRRD explicitely excludes one specific liability from the application of the considered resolution tool or does the provision "save as expressly provided otherwise in this Directive" means that if the BRRD allows for a transfer / bail-in of "all or any liabilities" then similar liabilities can be treated differently ? Does the principle according to which "creditors of the institution under resolution bear losses after the shareholders" also applies to a bridge bank created under BRRD rules and to which further resolution tools, including possibly bail-in, are applied or does that apply only to the "initial" institution or until the bridge bank is not a bridge bank anymore ?

Background

Clarification on the "ranking" of the shareholders of a bridge bank would be helpful, especially as article 40.2. ("The application of the bail-in tool for the purpose referred to in point (b) of Article 43(2) shall not interfere with the ability of the resolution authority to control the bridge institution.") would seem to suggest that a resolution authority / fund cannot loose its shareholding in a bridge bank. Clarification on the possibility to treat differently two similar liabilities would also be helpful as, while remaining under the safeguard of the no creditor worse off principle, very different outcomes can be obtained for such similar liabilities if one is transfered (bridge bank or sale of business) and the other is not.
No answer published yet.

Original source: European Banking Authority, Q&A ID 2016_2728

This Q&A is published by European Banking Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

Similar Q&As

More Q&As on this topic

📋 Track EU financial regulation continuously

Forseti monitors EU financial regulation and delivers personalised alerts anchored to verified official sources.

14-day free trial. No credit card required.