In June 2018 the ECON committee of the European Parliament published a study titled “Subordinated Debt and Self-placement: Mis-selling of Financial Products”.
After five years of very diverse interpretations and applications of so-called “burden sharing” in bank recovery and resolution, also known as bail-in of subordinated bank creditors, the European Parliament’s ECON Committee examined whether subordinated bonds were sold to the general public as a consequence of weak and ineffective regulations (MiFID). It found that, on the contrary, such selling practices were in fact in breach of MiFID rules, which therefore qualifies such practices as mis-selling and entitles the wronged retail bondholders to compensation.
BETTER FINANCE already noted that the treatment of retail subordinated bondholders was exceptionally harsh in Slovenia, where all of the subordinated debt in all banks – including all three systemic ones - was wiped out without compensation and without efficient legal recourse. This wipe-out was ruled unconstitutional by the Slovenian Constitutional Court in October 2016, although the situation remains to be rectified to this day. Following these developments, BETTER FINANCE also called upon both the EC authorities and the Slovenian government to start seeking a constructive solution, but so far nothing has happened.
Read the full press release here.
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