On Thursday 30 November, the European Parliament enshrined new rules bringing in a new category in the hierarchy of creditors to be mobilised in the event of the resolution of a failing bank, as introduced in 2016 with the 'BRRD' directive (see EUROPE 11892).
The new rules will introduce a new category of assets made up of senior, but not privileged, bank credits. This category will be eligible to acquire the international prudential standard TLAC for banks active on a global scale. Instruments in this category may not be financial derivatives or include any derivative element.
Debt instruments already issued will be able to remain in place as long as they meet the conditions set out in the legislative provision.
The rapporteur on this dossier, Gunnar Hökmark (EPP, Sweden), believes the legislative provision will help to reaffirm the general principle of the 'BRRD' directive. The message sent out to banks and investors is more than ever the following: this is how we are going to bail in a bank in the event of default, without relying on public support. “This creates discipline”, he said. (Original version in French by Mathieu Bion)