EBA · 2017_3211 Rejected question

Sequence of write down of shares and subordinated debt

Regulation
Directive 2014/59/EU (BRRD)
Article
47, 48, para. 1
Topic
MREL
Submitted by
Competent authority
Submitted
2017-03-07
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Question

When applying the bail-in tool, (but not the Point of Non-Viability write-down), is it necessary to act on all ”shares” before touching upon ”subordinated debt”?

Background

It seems as if an extra step is implied in Article 48(1) of Directive 2014/59/EU (BRRD) between (c) and (d), to capture all other classes of shares that are not Common Equity Tier 1 (CET1), Additional Tier 1 (AT1) and Tier 2 (AT2) capital. Article 48(1)(d) of Directive 2014/59/EU (BRRD) assumes that all ”shares”’ have been addressed, but they are not expressly picked up in that list. It has to be noted that Article 47(1) (a) refers to ”cancel[ing] existing shares”, which suggests all shares and not just CET1. Some shares however may not be capital instruments so we do not think they should be cancelled at the Point of Non Viability (PONV) but rather left for bail in.
No answer published yet.

Original source: European Banking Authority, Q&A ID 2017_3211

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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