Final EU Guidelines on the Interrelationship between the Sequence of Write Down under BRRD and CRD IV Published

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The European Banking Authority has published final Guidelines on the interrelationship between the provisions of the Bank Recovery and Resolution Directive setting out the sequence of write down and conversion and the provisions of the Capital Requirements Regulation and the Capital Requirements Directive. The BRRD establishes the sequence for a resolution authority to apply bail-in to an entity under resolution. That sequence is: Common Equity Tier 1, Additional Tier 1 instruments, Tier 2 instruments, other subordinated debt in accordance with the normal insolvency hierarchy and other eligible liabilities in accordance with the normal insolvency hierarchy.

The Guidelines aim to assist resolution authorities, banks and investors in determining the appropriate treatment of obligations where there may be ambiguity as to where an instrument sits in the BRRD waterfall. The Guidelines set out guiding rules to be applied and discuss their application to a number of particular types of instruments.

Relevant resolution authorities should implement the Guidelines into national resolution practices within six months of publication of the official translations, or notify the EBA of their reasons for non-compliance.

View the Guidelines on the interrelationship between the sequence of write down under BRRD and CRD IV.

View the Guidelines on the treatment of shareholders in bail-in.

View the Guidelines on the rate of conversion of debt to equity in bail-in.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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