Final EU Guidelines on the Treatment of Shareholders in Bail-in Published

The European Banking Authority has published final Guidelines on the treatment of shareholders in bail-in under the Bank Recovery and Resolution Directive. The Guidelines are addressed to national resolution authorities and aim to clarify how valuation information should inform the determination of the terms of bail-in.

The Guidelines set out the circumstances in which it would be appropriate for a resolution authority, when implementing a bail-in or write down of capital instruments, to either: (i) cancel existing shares or other instruments of ownership or transfer of them to bailed-in creditors, and/or (ii) dilute existing shareholders and holders of other instruments of ownership as a result of the conversion of relevant capital instruments or eligible liabilities to equity.

The Guidelines should be read in conjunction with the Guidelines on the setting of conversion rates of debt to equity in bail-in, the final Guidelines on the interrelationship between the BRRD sequence of write down and conversion and the Capital Requirements Directive and Capital Requirements Regulation as well as related secondary legislation under the BRRD on valuation.

Relevant resolution authorities should implement the Guidelines into national resolution practices within six months of publication of the official translations, or notify the EBA of their reasons for non-compliance.

View the Guidelines on the treatment of shareholders in bail-in.

View the Guidelines on the rate of conversion of debt to equity in bail-in.

View the Guidelines on the interrelationship between the sequence of write down under BRRD and CRD IV.