It is unclear whether the concept of “secured liabilities” as mentioned in Article 44(2)(b) BRRD covers liabilities benefitting from a State guarantee (including thus the so-called “GGBBs”) or whether it is limited to liabilities secured by assets (collateral)?
In Article 44(2)(b) of Directive 2014/59/EU (BRRD) (which is mirrored in Article 27(3)(b) of Regulation (EU) No 806/2014 (SRM Regulation), the concept of “secured liabilities” raises interpretation issues. This notion is not further defined in the BRRD (nor in the SRM Regulation).
Recital 70 of the BRRD seems to plead in favour of a broad definition: “It is not appropriate to apply the bail-in tool to claims in so far as they are secured, collateralised or otherwise guaranteed”. Another argument in favour of an exclusion of the GGBBs (Government Guarantees for Bank Bonds) from the scope of the bail-in tool is that the effects of the application of the bail-in tool to such instruments, i.e. the activation of the guarantee and the financial intervention of the State, would be in contradiction with the one of the objectives of the BRRD, namely “to protect public funds by minimising reliance on extraordinary public financial support” (Article 31(2)(c) BRRD).
This question goes beyond matters of consistent and effective application of the regulatory framework. A Directorate General of the Commission (Directorate General Financial Stability, Financial Services and Capital Markets Union) has prepared the answer, albeit that only the Court of Justice of the European Union can provide definitive interpretations of EU legislation. This is an unofficial opinion of that Directorate General, which the European Banking Authority publishes on its behalf. The answers are not binding on the European Commission as an institution. You should be aware that the European Commission could adopt a position different from the one expressed in such Q&As, for instance in infringement proceedings or after a detailed examination of a specific case or on the basis of any new legal or factual elements that may have been brought to its attention.
Update 26.03.2021: This Q&A has been reviewed in the light of the changes introduced to Directive 2014/59/EU (BRRD) and continues to be relevant.