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EU Retreats from Minimum Bail-In Debt Requirement

Below is a link to an interesting article which appeared in the Financial Times last week.  The suggestion is that the latest version of the EU Directive on establishing a framework for the recovery and resolution of credit institutions and investment firms (the “RRP Directive”) will not set a minimum level of “bail-in” debt to be maintained by all banks within the EU.  Rather, national authorities will have discretion to set requirements in this area.  If this is the case the EU seems to have pre-empted the results of the consultation exercise contained within its own recent “Discussion paper on the debt write-down tool – bail-in”.  The discussion paper invited comment on this very issue, detailed within the discussion paper as simply one possible option with respect to bail-in, noting the risk that such a system, if not correctly implemented, has the capacity to undermine the effectiveness of the RRP framework and create an uneven playing field within the Internal Market.  In addition, this development would represent a departure from earlier drafts of the RRP Directive which suggested that institutions would be required to maintain a level of bail-in debt equal to at least 10% of the total liabilities of the institution that did not qualify as own funds.

Beyond this, it seems as though the “bail-in” regime will not come into force until 2018.  Again, this is in contrast to the EU discussion paper on bail-in which concluded the EU banking system would not be prejudiced if this regime were introduced as early as 2015.

The article can be found here:

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