12.6.4 Impact BRRD

Art. 34(1)(b) BRRD requires that creditors of the bank under resolution should bear losses after the shareholders in accordance with the order of priority of their claims under normal insolvency proceedings. In other words: it requires full burden-sharing by subordinated debt holders. As regards burden-sharing by subordinated debt holders, the State aid control framework and the recovery and resolution-framework are consistent with each other.

Point 46 of the 2013 Banking Communication stipulates that the ‘no creditor worse off-principle’ should be adhered to. This means that subordinated creditors should not receive less in economic terms than what their instrument would have been worth if no State aid were to be granted. The ‘no creditor worse off-principle’ is also enshrined in Art. 34(1)(g) BRRD and Art. 15(1)(g) SRM- Regulation. Thus, also with respect to the safeguards for creditors, the State aid control framework and the recovery and resolution-framework are consistent with each other.