The Council of the EU has announced that it has agreed its stance on the following:

  • a draft Directive on the ranking of unsecured debt instruments in insolvency proceedings (bank creditor hierarchy). In its current form the Bank Recovery and Resolution Directive does not provide for subordination for senior unsecured debt securities verses other forms of unsecured debt claims. The specification is now deemed necessary in light of the introduction in 2019 of the total loss-absorbing capacity standard which requires the holding of subordinated instruments. The draft Directive therefore requires Member States to create a new class of ‘non-preferred’ senior debt, eligible to meet the subordination requirement; and
  • a draft Regulation on transitional arrangements to phase in the regulatory capital impact of the International Financial Reporting Standard 9 (IFRS 9). The draft Regulation is intended to mitigate the potential negative regulatory capital impact on banks of the introduction of the IFRS 9. IFRS 9 is aimed at improving the loss provisioning of financial instruments by addressing concerns that arose during the financial crisis. It responds to the G20’s call for a more forward-looking model for the recognition of expected credit losses on financial assets. The draft Regulation also contains a phase out of provisions on the large exposures treatment of public sector debt denominated in non-domestic EU currencies.

The Council’s Presidency has been asked to start talks with the European Parliament as soon as the Parliament has approved its own negotiating stance.

View Banking: Council agreement on creditor hierarchy, IFRS 9 and large exposures, 16 June 2017