4.3.4.3 Hierarchy of claims

Art. 48 BRRD provides the sequence of write down and conversion (sometimes referred to as “waterfall” or “pecking order”). The hierarchy also follows from the general resolution principles listed in Art. 34 BRRD and Art. 15 SRM-Regulation. The shareholders will bear the first losses. After the shareholders,the creditors of the bank will bear losses in accordance with the order of priority claims under normal insolvency proceedings. The treatment of shareholders and creditors under normal insolvency proceedings is thus used as a “bench-mark”.1 Another resolution principle is the ‘no creditor worse off-principle’. This principle means that no creditor shall incur greater losses than would have been incurred if the bank had been wound up under normal insolvency pro-ceedings.2 While the ‘no creditor worse off-principle’ may sound simple, there are two complicating factors. Firstly, this principle requires a comparison with a hypothetical situation: it is not completely certain what creditors would have received in insolvency.3 Secondly, the ranking of creditors in insolvency is not harmonised at the EU level.4