Financial Markets Law Committee responds to Liikanen Report

On 13 November 2012, the Financial Markets Law Committee (“FMLC”) published a response to the Liikanen Report on structural reform of the EU banking sector (see blogpost dated 4 October 2012 for more detail on the report itself).  The response focuses on two aspects of the Liikanen Report:

  • Bail-in, and
  • Ring-fencing.

On the subject of bail-in, the FMLC supports the Liikanen group’s recommendation that the set of instruments to which the bail-in tool would apply needs to be more clearly defined.  It also reiterated its previous concern that over-reliance on exemptions from the scope of the bail-in tool risks undermining one of the key principles of insolvency law, being the pari passu distribution of assets to creditors of the same class.

On the subject of ring-fencing, the FMLC made clear its belief that any structural reforms implemented at an EU level must take account of existing and proposed Member State ring-fencing regimes, or risk a situation where certain institutions would, in effect, have to be split into three parts.

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