12.6.3.4 Coupon ban

Many beneficiary banks were subject to a coupon ban. This constitutes burden- sharing by hybrid and subordinated debt holders. Usually, a coupon ban is imposed in combination with another form of burden-sharing.

In some cases, there is no coupon ban, but this can be explained by the fact that because of the LME there is no subordinated debt left. For instance, in its decision on National Bank of Greece (NBG), the Commission observed that as a consequence of the conversion, NBG had no outstanding hybrid capital and subordinated debt instruments held by private investors. The Commission therefore accepted the termination of the commitment not to pay coupon and not to repurchase such instruments. The Commission considered that those commitments were no longer necessary to ensure burden-sharing by historical subordinated debt instruments, since such instruments no longer existed.1

In some cases, there appears to be full burden-sharing by subordinated debt holders. However, at the same time, a coupon ban is imposed. How can this be explained? The case of SNS REAAL can serve as an illustration. On 1 February 2013, SNS REAAL was nationalised and all subordinated debt holders were expropriated. Only the subordinated bonds issued by SRLEV (a subsidiary of SNS REAAL) were not expropriated. As a result, these subordinated securities still existed and were affected by the coupon ban.2

It should be noted that in several cases, the coupon ban was the only form of burden-sharing by hybrid and subordinated debt holders.3 Since the coupon ban is less burdensome than a LME or full write-down, the fact that there are some cases in which the Commission accepted the coupon ban as the only burden-sharing measure raises the question whether the Commission has consistently applied the burden-sharing principle. This question will be addressed in the next subsection.