The Council has published the text of the general approach it agreed last week on the Recovery and Resolution Directive (RRD). Some of the elements of this general approach, as summarised in a note by the Council, include:

  • claims of the deposit guarantee scheme ranking higher in a bail-in than deposits of natural persons and small and medium-sized enterprises (SMEs) that are not covered by the guarantee scheme. These uncovered deposits would have preference over ordinary unsecured creditors;
  • interbank liabilities with an original maturity of less than seven days would be excluded from bail-in;
  • national authorities can exclude liabilities from the bail-in on the basis of practicality, continuity of critical functions and avoidance of contagion or value destruction;
  • there would be an exemption to setting up ex-ante separate resolution funds where national arrangements allow financing to be raised and made available immediately upon the resolution authority's request. Member States would also decide whether to merge funds for resolution and deposit guarantee schemes;
  • flexibility to exclude liabilities and use the fund to recapitalise an institution would only be available after losses equal to 8% of total liabilities have been imposed on shareholders and creditors; and
  • a review in 2016 will enable the introduction of harmonised minimum requirements for own funds and eligible liabilities.

The EP plenary vote has been pushed back to 19 November, probably in expectation of lengthy trilogue negotiations. (Source: Council Agrees Position on Bank Resolution, Council General Approach and OEIL File on RRD)