Question ID:
Legal Act:
Directive 2014/59/EU (BRRD)
Write-down and conversion of capital instruments
e, h
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:
Not applicable
Not applicable
Disclose name of institution / entity:
Type of submitter:
Consultancy firm
Subject Matter:
Exemption from bail-in of liabilities to institutions in order to avoid of systemic contagion

Are cash deposits of other institutions protected from bail-in? The question refers to simple deposits that are not under any pledge or collateral linked to any derivatives trade.

Background on the question:

It is not clear in the sub-paragraph (e) if bank deposits of other institutions can be treated as liabilities with an original maturity of less than seven days.

Date of submission:
Published as Final Q&A:
Final Answer:

Pursuant to Article 44(2)(e) of Directive 2014/59/EU (BRRD) resolution authorities shall not exercise the write down and conversion powers in relation to liabilities to institutions, excluding entities that are part of the same group, with an original maturity of less than seven days from the scope of the bail-in. Recital 70 indicates that these liabilities have been excluded to reduce the risk of systemic contagion. In as much as an exception to the general rule that all liabilities are in principle "bail-inable", this provision must be interpreted restrictively. The exception captures inter-bank unsecured liabilities with an original maturity of less than seven days.

Interbank deposits are included in "liabilities to institutions" in the meaning of Article 44(2)(e) of the BRRD. They are therefore excluded from bail-in to the extent that they are not owed to entities that are part of the same group and have an original maturity of less than seven days. By definition, an interbank sight deposit whereby funds may be withdrawn at any time, or within a time period less than 7 days, meets the maturity criterion and must be exempted from bail-in if the deposit holder is not another group entity.

In addition, Directive 2014/59/EU as amended by Directive (EU) 2019/879  (BRRD) newly introduced definition of "resolution group" as well as a new Article 44(2)(h), which suggests that not all intra group liabilities to institutions below 7 days are bail-inable, including some exemptions. These elements should also be considered.

According to Article 44(2)(h) BRRD, liabilities to institutions or entities referred to in point (b), (c) or (d) of Article 1(1) that are part of the same resolution group without being themselves resolution entities, regardless of their maturities, except where those liabilities rank below ordinary unsecured liabilities under the relevant national law governing normal insolvency proceedings applicable on the date of transposition of this Directive; in cases where that exception applies, the resolution authority of the relevant subsidiary that is not a resolution entity shall assess whether the amount of items complying with Article 45f(2) is sufficient to support the implementation of the preferred resolution strategy.

Final Q&A
Answer prepared by:
Answer prepared by the EBA.
Note to Q&A:

Update 26.03.2021: This Q&A has been updated in the light of the changes introduced to Directive 2014/59/EU (BRRD).