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Contingent Capital and bail-in-able debt: New Frontiers for European Regulated Banks

Deadline for registration: 26 September 2016


  • Background

    Contingent capital instruments are hybrid debt securities that convert into equity and/or have their face value slashed in case some pre-defined trigger is met (usually linked to the issuer’s capital or stock price). By providing additional resources when needed, they reduce the need for government intervention and bail out. The Basel Committee has included them in bank regulatory capital in 2010. Since these proposals have been launched much emphasis has been laid upon the development of a legal and regulatory framework incorporating them.

    Europe has followed its own way, by partially regulating contingent capital instruments at the level of the ordinary regulatory capital requirements for going concern banks, but separately regulating the utilization of “bailinable debt” of failing banks (which can be seen as a type of low-trigger contingent capital) in a separate resolution regime. The requirements to hold sufficient bailinable debt are new for European banks and different approaches are followed throughout Europe to implement the MREL requirements. The decisions by the Single Resolution Board on the minimum levels of bail-inable debt are long awaited and National Resolution Authorities will follow their own way in establishing MREL levels.

    Where ordinary regulatory capital requirements are the core of the Single Rule Book for banks and where the goal is to achieve convergent supervisory practices, it seems that once it concerns the implementation of requirements for contingent capital of failing banks, significant divergence of statutory arrangements and supervisory practices in Europe may be noted.

  • Why this course

    After the Basel Committee on Banking Supervision recommended to introduce an innovative element to bank regulatory capital for banks that are beyond the point of viability, the European legislator has partly adapted these proposals in the creation of the regime for Additional Tier 1 Capital but (unintentionally) did not regulate the same contingent capital principles for Tier 2 capital. Meanwhile Europe introduced the Bank Recovery and Resolution Directive which contains a complex regime for bail in of bank’s debt, that may be consequential not only for the regulatory capital providers of the banks, but also for ordinary (senior) creditors.

    The Capital Requirements Regulation provisions on contingent capital seem to be misaligned with the bail in debt provisions of BRRD and there is little evidence that the European legislator is currently looking to close the gap. Meanwhile, the market seems to consider strategies which are implementing contingent capital layers with different and less favourable triggers from the perspective of shareholders and senior creditors of banks. Unlike the CRR provisions which have direct binding effect throughout the European Union, BRRD implementation laws of the individual member states seem to adapt different approaches to regulate bail in debt. This puts the level playing field for banks in Europe under pressure.

    The training will touch upon the technical framework for contingent capital and bail in debt and the different choices made by the European legislator as compared to other regulators throughout the world. A comparison is made of different bail in regimes in Europe as well, in order to explore the common ground and the differences in the applicable regimes. In addition to the analysis from a legal perspective, an elaborate discussion will be presented about the first market developments in respect of contingent capital and bail in debt, effects on pricing and the different rationale for investors taking positions in contingent capital and bail in debt.
  • How will the course work?

    The course will introduce various topics concerning the regulatory environment by means of lectures presenting certain hypothesis and queries, each lecture ending with at least 15 minutes discussion among the participants moderated by the trainer. There will be some back ground literature made available to the course participants prior to the training.
  • Who is the training for?

    Treasurers with Banks, Senior Legal Counsel, Senior Policy Officers of Prudential Supervisors, Resolution Officers, Funding Strategists, EBA, SSM, SRB, ESBR, EU officials
  • What do you need to know to follow this course

    It is expected that the course participants have a basic understanding of the provisions of the Capital Requirements Regulation (Regulation (EU) No 575/2013) and of the bail-in provisions of the Bank Recovery and Resolution Directive (Directive 2014/59/EU).
  • What you’ll learn

    At the end of this course you will:
    • Understand the qualitative requirements imposed on banks for regulatory capital and differences between CET1, AT1 and Tier 2 capital and bail-inable debt
    • Take away practical examples of the manner in which European banks have addressed the minimum capital requirements by means of concrete capital instrument issues
    • Have learnt about the dilemmas of setting the MREL-standards in a European banking landscape with heterogeneous banking organisations and types of banks
    • Have insight in the different European statutory regimes developed or under construction for MREL requirements and bail-inable debt
    • Have created a network of researchers, regulators and practitioners working on similar topics and facing similar problems
  • Meet the course instructors

    Bart P.M. Joosen is trained as civil law lawyer at Tilburg University, the Netherlands. He obtained his (equivalent to) LL.M degree in 1987. After completion of his academic study he was appointed as lecturer in the law faculty of Tilburg University in 1987 and he lectured company law and the law of groups of companies in the period 1987-1990. Concurrently he worked on a comparative law study on the Dutch and French legislation for bankruptcy of companies and was admitted in 1988 and 1989 as a fellow researcher to the Université de Paris I (Panthéon-Sorbonne). He successfully defended his dissertation on “Transfer of undertakings in bankruptcy” at Tilburg University and was promoted to doctor in law science (PhD) in 1998. After his time at University he first worked as in-house legal counsel at Philips Electronics in Eindhoven until 1992 after which he became active in private practice in Amsterdam. He works particularly for financial market clients. His main areas of expertise are in the field of financial services supervision with a focus on micro-prudential supervision of banks and insurers (including in-depth Basel II/Basel III and Solvency II knowledge). His more recent work concerns the assessment of topics concerning systemic risk and systemically important institutions. He also works for investment firms and businesses active in payments, clearing and settlement services and infrastructures. Besides working in private practice, Bart Joosen is a full professor Prudential Supervision Law at the University of Amsterdam and associated with the Centre of Financial Law of the Faculty of Law.

    Andrea Resti is a professor of Financial Institutions and Markets at Bocconi University, Milan, where has he been served as the head of the Centre for Applied Research in Financehe teaches Financial Risk Management and . His books include “Risk Management and Shareholders’ Value in Banking” (with Andrea Sironi) and “Pillar II In the New Basel Accord”. His academic work has been published by the Journal of Business, Journal of Banking and Finance, Journal of Financial Intermediation and more. He has worked as consultant to a number of large financial institutions in Europe, as well as a member of the supervisory committee of Italy’s fifth-largest bank. He has tought courses for the Bank of Italy and the Committee of European Banking Supervisors. From 2011 to 2016 he has been a member of the Banking Stakeholder Group at the EBA, European Banking Authority, where he served as the vice-chair. Since January 2016 he acts as an adviser to the European Parliament on bank supervision issues. He has served as an expert witness for prosecutors in a number of high-profile financial scandals.

  • Course fees

    1500 € – Public Authorities (e.g. National Competent Authorities, Central Banks) and European Institutions*

    2000€ – Private Sector

    850€ – Students (with certificate of studies)

    * In case of registration of 3 participants from the same institution, a reduced fee of € 1000 is applied for each of them, under the following conditions:
    • the names of the 3 participants have to be communicated to fbf@eui.eu before registering
    • the names of other registered people from the same institution cannot be communicated. It is upon your responsibility to get in touch with your HR division
    • a single debit note will be issued for the 3 participants followed by one payment
    For more details, please contact fbf@eui.eu
  • Practical information for the registered participants


    Recommended hotels:
    Hotel Villa La Stella (20 min walking distance from EUI )
    Hotel Cellai
    Hotel Palazzo Ricasoli
    Hotel de la Pace
    Hotel Athenaeum 


    On arrival, you will be provided with temporary wi-fi access for the whole duration of the course. 

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  • Reading material

    Accessible only to registered participants

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