An Italian proposal to change the ranking of
creditors in bail-in could avoid the problems that a similar
German proposal is confronted with, but it comes with its own
problems. Certain instruments might cease to qualify for MREL,
lawyers have warned.
The Italian draft decree, published in late July,
will implement the Bank Recovery and Resolution Directive
(BRRD), which all EU member states were required to transpose
into national legislation by January 1 2015.
Changes to the creditor hierarchy are not directly
foreseen by the BRRD. But several EU member states have in
recent months proposed or implemented adjustments to the
insolvency ranking to make it easier for banks to comply with
European and global capital requirements, known as minimum
requirement for eligible liabilities (MREL) and total loss-absorbing capacity (TLAC)
The aim of MREL is to ensure that banks have in place an
adequate stock of liabilities that can...