EBA · 2017_3119 Final Q&A

Concept of “secured liabilities”

Regulation
Directive 2014/59/EU (BRRD)
Article
44, para. 2
Topic
Resolution tools and powers
Submitted by
Competent authority
Submitted
2017-01-20
Answered
2017-02-03
Answer provided by
ESAs (EBA, ESMA, EIOPA)
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Question

It is unclear whether the concept of “secured liabilities” as mentioned in Article 44(2)(b) BRRD covers liabilities benefitting from a State guarantee (including thus the so-called “GGBBs”) or whether it is limited to liabilities secured by assets (collateral)?

Background

In Article 44(2)(b) of Directive 2014/59/EU (BRRD) (which is mirrored in Article 27(3)(b) of Regulation (EU) No 806/2014 (SRM Regulation), the concept of “secured liabilities” raises interpretation issues. This notion is not further defined in the BRRD (nor in the SRM Regulation). Recital 70 of the BRRD seems to plead in favour of a broad definition: “ It is not appropriate to apply the bail-in tool to claims in so far as they are secured, collateralised or otherwise guaranteed ”. Another argument in favour of an exclusion of the GGBBs (Government Guarantees for Bank Bonds) from the scope of the bail-in tool is that the effects of the application of the bail-in tool to such instruments, i.e. the activation of the guarantee and the financial intervention of the State, would be in contradiction with the one of the objectives of the BRRD, namely “ to protect public funds by minimising reliance on extraordinary public financial support ” (Article 31(2)(c) BRRD).

Answer

The question is clarified in Q&A 1779 and Q&A 2951 . Disclaimer : This question goes beyond matters of consistent and effective application of the regulatory framework. A Directorate General of the Commission (Directorate General Financial Stability, Financial Services and Capital Markets Union) has prepared the answer, albeit that only the Court of Justice of the European Union can provide definitive interpretations of EU legislation. This is an unofficial opinion of that Directorate General, which the European Banking Authority publishes on its behalf. The answers are not binding on the European Commission as an institution. You should be aware that the European Commission could adopt a position different from the one expressed in such Q&As, for instance in infringement proceedings or after a detailed examination of a specific case or on the basis of any new legal or factual elements that may have been brought to its attention.

Original source: European Banking Authority, Q&A ID 2017_3119

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.

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