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Ranking of unsecured debt instruments in insolvency hierarchy [EU Legislation in Progress]

Written by Angelos Delivorias (2nd edition),

Close Businessman Arranging Small Wooden Plain Blocks to a Pyramid Figure on Black Background. An Imaginative Business Hierarchy Concept.

© Gajus / Fotolia

Following the global financial crisis, the European Union extensively reformed its regulatory framework for financial services. With legislation such as the Bank Recovery and Resolution Directive (BRRD), it ensures that, through mechanisms such as ‘bail-in’, the recovery or restructuring of distressed financial institutions is done without spreading to other institutions, or using taxpayers’ money to bail them out. To ensure that sufficient financial resources are available for bail-in, the BRRD requires resolution authorities to set financial institutions a minimum requirement for own funds and eligible liabilities (MREL). In parallel, a similar standard, the total loss-absorbing capacity (TLAC), was adopted internationally for systemically important financial institutions. The discretionary requirements in MREL and the compulsory requirement in TLAC concerning subordination of eligible liabilities have driven some countries to amend the ranking of certain bank creditors. Because national rules adopted so far diverge, unsecured debt holders and other creditors of banks can be treated differently from one Member State to another. The Commission therefore proposed to set harmonised rules. On 30 November and 8 December 2017 respectively, Parliament and Council adopted the text agreed in interinstitutional negotiations. The final act was published in the Official Journal on 27 December 2017.


Proposal for a directive on amending Directive 2014/59/EU of the European Parliament and of the Council as regards the ranking of unsecured debt instruments in insolvency hierarchy
Committee responsible: Economic and Monetary Affairs (ECON)

COM(2016) 853

procedure ref.: 2016/0363(COD)

Ordinary legislative procedure (COD) (Parliament and Council on equal footing – formerly ‘co-decision’)

Rapporteur: Gunnar Hökmark (EPP, Sweden)
Shadow rapporteurs: Pedro Silva Pereira (S&D, Portugal)

Syed Kamall (ECR, UK)

Sylvie Goulard (ALDE, France)

Fabio De Masi (GUE/NGL, Germany)

Ernest Urtasun (Greens/EFA, Spain)

Marco Valli (EFDD, Italy)

Marco Zanni (ENF, Italy)

Procedure completed. Directive (EU) 2017/2399
OJ L 345, 27.12.2017, pp. 96-101

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