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May 30, 2018

EBA and ESMA published a joint statement encouraging institutions, market, and resolution authorities to properly consider retail holders of debt financial instruments subject to the Bank Recovery and Resolution Directive (BRRD) when carrying out their respective tasks. The statement highlights the significance of retail investors as holders of debt issued by EU institutions and analyzes the treatment of retail debt holdings from a consumer protection and resolution perspective.

The statement notes that BRRD does not provide for different treatment of eligible liabilities based on the nature of the holder. Therefore, where there is a material presence of retail debt investors, resolution authorities are encouraged to factor this element into their resolution planning and assessment of possible impediments to resolution. The statement specifies that, in relation to the outstanding legacy stock of issuance of retail debt liabilities, institutions must provide existing clients with complete and updated information on the potential treatment of such investments in resolution or insolvency. Additionally, in relation to new debt instruments being issued under the framework of Markets in Financial Instruments Directive (MiFID) II, institutions must properly implement the new requirements, which include a number of provisions aiming to strengthen investor protection.

The statement is complemented by two annexes. Annex 1 summarizes the results of a qualitative survey of measures taken at EU member state level to address investor protection issues of retail debt liabilities. Annex 2 summarizes the relevant legal provisions in the BRRD framework. The present statement reflects the current legislative framework on resolution. In addition, the positions expressed in this statement are in line with the proposal made by EC in the context of the November 2016 Banking Package.

 

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Keywords: Europe, EU, Banking, Securities, BRRD, MiFID II, Debt Instruments, Bail-In, Investor Protection, EBA, ESMA

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