The 30th May statement from EBA and ESMA on whether securities held directly by retail investors should be bailed in or not emphasises that just because there may be lots of retail holders of securities does not mean they should not be bailed in if the issuer goes into resolution, but continues that if a resolution authority considers that they could not “credibly and feasibly” (whatever this means!) be bailed in, the authority could consider whether Article 44(3) BRRD applied. Certain liabilities are per se exempt by Article 44 from bail in, such as covered deposits, and of course covered bonds, but article 44(3) contains a discretion to exempt liabilities in “exceptional circumstances” based on a narrow set of criteria. Readers will remember the Italian Government’s controversial “precautionary recapitalisation” of Monte dei Paschi in June 2017, which managed to circumvent the BRRD restrictions, and direct retail holding of bank bonds is indeed concentrated in Italy (and to a lesser extent France and Germany).
Head of Knowledge Management (Finance and Projects)
Mark Daley joined DLA Piper in 2015 after over thirty years’ experience as a debt finance lawyer in private practice in London and Hong Kong.