2. November 2016
Classification of liabilities under insolvency law
BaFin, the Deutsche Bundesbank and the FMSA have drawn up a joint interpretation guide on the classification of certain liabilities of CRR institutions under insolvency law pursuant to section 46f (5) to (7) of the German Banking Act (Kreditwesengesetz) as amended.
The three authorities have issued the interpretation guide to eliminate ambiguities in the classification of structured debt securities and money market instruments.
In accordance with the Resolution Mechanism Act (Abwicklungsmechanismusgesetz), on 1 January 2017 a separate ranking category will be introduced within the insolvency claims pursuant to section 38 of the German Insolvency Code (Insolvenzordnung) for certain unsecured, non-subordinated liabilities of CRR credit institutions. This will be without prejudice to subordinated insolvency claims within the meaning of section 39 of the Insolvency Code. The new provision is laid down in section 46f (5) to (7) of the Banking Act as amended. Its purpose is to improve the resolvability of CRR institutions.
Mirroring the new ranking in creditor satisfaction pursuant to section 46f (5) of the Banking Act as amended, as of 1 January 2017 the resolution authority, when resolving a CRR institution, will first have to draw on all of the liabilities under the new ranking category specified by the new provision within the framework of a creditor bail-in, before being able to draw on the other liabilities under section 38 of the Insolvency Code. Structured debt securities which meet the criteria listed in section 46f (6) sentence 2 and (7) of the Banking Act as amended and money market instruments are not included in the new ranking category.
The interpretation guide can be downloaded using the following link.