Opinions EN (menu position rule)

Communication on the application of the technical FAQs 5 and 34 on the moratorium


Several recent regulatory initiatives at international, European and national levels provide for or propose a framework for issuing debt instruments that are subordinated to other, preferred liabilities. Such debt instruments are intended to absorb the losses in the event of resolution and to contribute to recapitalization ahead of the preferred liabilities. With the issuing of these debt instruments the requirements of the MREL (Minimum Requirement for Own Funds and Eligible Liabilities) or the TLAC (Total Loss Absorbing Capacity) can be met.

Financial institutions are issuing, besides subordinated Additional Tier 1 or Tier 2 debt instruments, other debt instruments that are not part of their own funds but are nevertheless structurally, legally or contractually subordinated to preferred liabilities. These are what are known as 'Tier 3' or 'nonpreferred senior' debt instruments. The FSMA takes the position that such structurally, legally or contractually subordinated debt instruments are subordinated within the meaning of technical FAQs 5 and 34 on the moratorium on the distribution of particularly complex structured products. This means that under the moratorium these instruments may not be distributed to retail clients except under the terms of the opt-out.