Examining the treatment of retail holders of debt financial instruments, in the context of the BRRD and MiFID II, ESMA and EBA released a joint statement on the 30th of May. The joint statement is clear in its conclusion: “institutions and authorities must consider retail holders of debt financial instruments in resolutions”.
Based on data analysis conducted by the EBA and ESMA, retail investors hold a significant portion of EU debt securities issued by institutions, but the BRRD does not provide for a different treatment of eligible liabilities based on the nature of the holder. This can result in significant consumer protection issues and loss of held debt in the case of a bail-in. The joint statement encourages resolution authorities to factor this element into resolution planning and assessment of possible impediments to resolution. The statement also calls for cooperative dialogue between resolution and market authorities, as well as the sharing of information when relevant.