The hierarchy was published in the Official Journal on 12 December 2017. The purpose of the amended hierarchy is to introduce a new EU-wide class of non-preferred senior debt (the fourth category in the amended hierarchy set out below) that is deemed to comply with the subordination requirement for inclusion in TLAC and MREL (but not in own funds). This should help banks to meet their MREL requirements once these are specified by the Single Resolution Board and by national resolution authorities.
The amended hierarchy is specified as (from highest to lowest ranking):
- Covered deposits and deposit guarantee schemes.
- Eligible deposits from natural persons and SMEs that exceed the coverage level provided for in the Deposit Guarantee Scheme Directive, and deposits that would be eligible deposits from natural persons and SMEs were they not made through the non-EU branches of EU institutions.
- Ordinary unsecured deposits (not covered under the first two categories above).
- Unsecured claims resulting from debt instruments with an original contractual maturity of at least one year, containing no embedded derivatives and not being derivatives themselves, and where the relevant contractual documentation and any prospectus refer explicitly to this lower ranking.
This amending Directive is due to be implemented by 1 January 2019.