On 12 June 2014, Directive (EU) No 59/2014 of the European Parliament and of the Council of 15 May 2014 (the "BRRD") has been published. Pursuant to the BRRD, competent local authorities will have the power to intervene and to impose measures on financial institution. Covered bonds are in principle exempted from the applicability of the write-down and conversion powers in the BRRD. In addition, on 22 September 2014, the European Banking Authority ("EBA") published draft guidelines on early intervention triggers set out in Article 27(1) of the BRRD (the "Guidelines"). The guidelines provide competent local authorities with guidance on when and whether the intervention measures could be considered and applied.

The BRRD provides competent local authorities with stronger and additional measures and is intended as a supplement to the existing legislation. On European level Article 104 of Directive (EU) 2013/36 of the European Parliament and of the Council of 26 June 2013 (the "CRD IV"), already includes the possibility for local authorities to intervene, subject to the occurrence of certain triggers. Moreover, in the Netherlands, the Dutch intervention act entered into force on 13 June 2012 with retro-active effect as of 20 January 2012 (the ''Intervention Act'').  

The measures set forth in the BRRD are available in cases where an institution infringes or is likely to infringe the requirements in the CRD IV. The BRRD gives regulators powers to write down debt or to convert such debt into equity and to allow institutions to continue as a going concern subject to appropriate restructuring. Directions on when and whether the intervention measures in the BRRD could be considered and applied are set forth in the Guidelines. The EBA has requested interested parties to provide comments on the Guidelines by 22 December 2014. 

Pursuant to article 44, paragraph 2 of BRRD, covered bonds are in principle exempted from the applicability of the write-down and conversion powers laid down in the BRRD. This means that, in principle, covered bonds cannot be written down following a bail-in intervention of the national authorities. However, it is unclear how the BRRD will be implemented in the Netherlands. In addition, it remains to be seen if and to what extent the implementation of the BRRD in the Netherlands will set aside the Intervention Act.  

The BRRD needs to be implemented in the member states on the European Union before 1 January 2015, except for the bail-in provisions which will come into force no later than 1 January 2016. In the Netherlands, the BRRD will be implemented by means of an implementation act, the draft version of which is expected to be published beginning/mid October 2014. In Belgium, the Act of 25 April 2014 on the status and supervision of credit institutions (the "Banking Act"), which entered into force on 7 May 2014, already anticipates the implementation of the principles included in the BRRD.

Click here for the FAQ of the European Commission on the BRRD.

Click here for the BRRD