Skip to main content
European Banking Authority logo
  • Extranet
  • Log in
  • About us
    Back

    About us

    The EBA is an independent EU Authority.  We play a key role in safeguarding the integrity and robustness of the EU banking sector to support financial stability in the EU.

    Learn more
      • Mission, values and tasks
      • Organisation and governance
        • Governance structure and decision making
        • EBA within the EU institutional framework
        • Internal organisation
        • Accountability
      • Legal and policy framework
        • EBA regulation and institutional framework
        • Compliance with EBA regulatory products
      • Sustainable EBA
      • Diversity and inclusion
      • Careers
        • Vacancies
        • Meet our team
      • Budget
      • Procurement
    Close menu panel
  • Activities
    Back

    Activities

    To contribute to the stability and effectiveness of the European financial system, the EBA develops harmonised rules for financial institutions, promotes convergence of supervisory practices, monitors, and advises on the impact of financial innovation and the transition to sustainable finance.

    Start here
      • Single Rulebook
      • Implementing Basel III in Europe
      • Supervisory convergence
        • Supervisory convergence
        • Supervisory disclosure
        • Peer Reviews
        • Mediation
        • Breach of Union Law
        • Colleges
        • Training
      • Direct supervision and oversight
        • Markets in Crypto-assets
        • Digital operational resilience Act
      • Information for consumers
        • National competent authorities for consumer protection
        • How to complain
        • Personal finance at the EU level
        • Warnings
        • Financial education
        • National registers and national authorities responsible for handling complaints related to credit servicers
        • Frauds and scams
      • Research Workshops
      • Ad hoc activities
        • Our response to Covid-19
        • Brexit
    Close menu panel
  • Risk and data analysis
    Back

    Risk and data analysis

    To ensure the orderly functioning and stability of the financial system in the European Union, we monitor and analyse risks and vulnerabilities relevant for the regulation of banks and investment firms. We also facilitate information sharing among authorities and institutions through supervisory reporting and data disclosure.

    Learn more
      • Risk analysis
        • 2024 EU wide transparency exercise
        • EU-wide stress testing
        • Risk monitoring
        • Thematic analysis
      • Remuneration and diversity analysis
      • Reporting frameworks
        • Reporting Time Traveller
        • DPM data dictionary
      • Data
        • Registers and other list of institutions
        • Guides on data
        • Aggregate statistical data
        • Secondary reporting: data from Competent Authorities to the EBA
        • Data analytics tools
    Close menu panel
  • Publications and media
    Back

    Publications and media

    Communicating to all our audiences in the most effective way and using the most appropriate channels is crucial for us. Through our publications, announcements, and participation in external events, we are committed to reaching out to all our stakeholders to report about our policies, activities, and initiatives.

    Learn more
      • Publications
        • Guidelines
        • Regulatory Technical Standards
        • Implementing Technical Standards
        • Reports
        • Consultation papers
        • Opinions
        • Decisions
        • Staff papers
        • Annual reports
      • Press releases
      • Speeches
      • Interviews
      • Events
      • Media centre
        • Media gallery
        • Media resources
    Close menu panel

Breadcrumb

  1. Home
  2. Single Rulebook Q&A
  3. 2016_2704 Governing Law of the Instruments under Article 66.4.(a) of the BRRD
Question ID
2016_2704
Legal act
Directive 2014/59/EU (BRRD)
Topic
Resolution tools and powers
Article
66
Paragraph
4
Subparagraph
a
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
Not applicable
Type of submitter
Law firm
Subject matter
Governing Law of the Instruments under Article 66.4.(a) of the BRRD
Question

What governing law is meant by the reference to the governing law of a capital instrument under Article 66.4 (a) of the BRRD? Should the governing law of the capital instrument be the law governing law of the liability (obligations) arising under such instrument or the law applicable to the proprietary (rights in rem; ownership) issues with respect to the relevant instrument or the law of the issuer of such instrument or any other law?

Background on the question

Article 66.4.(a) of the BRRD refers to the governing law of the (capital) instruments as one of the conditions for the effective exercise of the conversion and write down tools of one Member State with respect to another Member State. The term governing law of the instruments is ambiguous and unclear particularly with respect to the debt instruments in the form of debt securities that likely form the bulk of the capital instruments (governing law of liabilities generally is separately covered by the same Article 66.4.(a) of the BRRD) . There is namely no uniform governing law of the (capital) instruments in the form of securities such as debt instruments. The governing law of a debt security is normally divided with respect to contractual and proprietary (rights in rem) issues, whereas different conflicts of law rules (this means different governing laws) may govern such issues with respect to one instrument. To make it simple: in the cross border context that the BRRD aims to coordinate, there is normally no single governing law of a (financial) instrument, but different sets of governing laws that govern different issues arising from the same financial instrument. For example, whereas the law of Slovenia may govern the transfer or pledge on the bearer debt security that is located or (in case of registered securities) registered at account in Slovenia, the obligation from such debt security may be governed by the law of another country. In addition, with respect to characterization of the financial instruments (for example, whether it is a bond or some other instrument) again different sets of the conflicts of law rules may apply. In this regard, it appears that the most relevant aspect of a capital instrument in connection to the conversion and write down power should indeed be the governing law applicable to the liability (obligation) arising from the relevant capital instrument, however in such case the reference to the governing law of the instrument is already covered by the reference to the governing law of the liability under the same Article 66.4.(a) of the BRRD, which in turn makes the reference to the governing law of the instrument in the same Article redundant. The issue is important not only for the authorities but also holders of such instruments because of the legal certainty in the cross border context. Merely the reference to the governing law of an instrument may raise application of different sets of conflicts of laws rules, particularly among different Member States authorities, therefore clarification of the term is in the opinion of the contact necessary.

Submission date
13/04/2016
Rejected publishing date
11/02/2022
Rationale for rejection

Please note that as part of adjustments to the Single Rulebook Q&A process, agreed by the EBA and the European Commission, it has been decided to reject outstanding questions submitted before 1 January 2020, when the Q&A process was updated as part of the last ESAs Review. In particular, the question that you have submitted has now regrettably been rejected and will not be addressed.

If you believe your question would still benefit from clarification, you are invited to resubmit your question, adapting it to reflect any legislative, regulatory or other relevant developments that may have occurred since the initial date of submission. The EBA will aim to address resubmitted questions as a matter of priority. When considering to resubmit, you are kindly requested to observe the updated admissibility criteria agreed in the context of the adjustment of the Q&A process, available in the Additional background and guidance for asking questions. We hope for your understanding.

For further information please refer to the press release and the updated Q&A page.

Status
Rejected question

Footer

EUROPEAN BANKING AUTHORITY

Our mission is to contribute to the stability and effectiveness of the European financial system through simple, consistent, transparent, fair regulation and supervision that benefits all EU citizens.


UE logoAn agency of the EU

EU Agencies Network logoEU Agencies Network

EMAS logoSustainable EBA

Contact us

  • Contacts
  • Ask a general question
  • Send a press query
  • Ask a regulatory question
  • File a complaint
  • Whistleblower reports

Stay up to date with our work

  • Subscribe to our email alerts
  • News & press RSS feed

Follow us on Social media

  • Bluesky
  • LinkedIn
  • X
  • YouTube

Find out about us

  • The EBA at a glance
  • Vacancies
  • Privacy policy
  • Legal notice
  • Cookies policy
  • Frauds and scams

Explore related sites

  • EIOPA
  • ESMA
  • ESRB
  • CEBS archive