EBA · 2021_6104 Rejected question

Clause of substitution of investor or remarketing for capital or internal MREL

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
52 / 63 / 72b
Topic
Own funds
Submitted by
Credit institution
Submitted
2021-07-20
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Question

In the context of a bond issued by a subsidiary to the parent company recognized as Own Funds or Eligible Liability, would it be possible to insert a clause of change of control that would allow the parent company, if it is no longer the owner of the subsidiary, to automatically sell the bond to the purchaser of the subsidiary?

Background

In the past few years, we have seen an increase in the number of M&A transactions in the banking space, which is consolidating. Some banks have been for instance look at selling some subsidiaries. In this context, it would not make sense for the bank to remain the holder of internal Own Funds or Eligible Liability instruments once it is no longer the parent company. It would be therefore interesting to explore options to organize the substitution of the seller by the buyer of the subsidiary.
No answer published yet.

Original source: European Banking Authority, Q&A ID 2021_6104

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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