INTRODUCTION

The Directive 2014/59/EU has considerably widened the crisis prevention measures used to intervene when a bank is experiencing difficulties, to prevent them from worsening. Indeed, due to the limitation on shareholders and creditors’ rights that is entailed as a consequence of a decision adopted by a public authority, ‘resolution’ should be only adopted as a last resort measure when there are no reasonable prospects that any alternative supervisory action or private sector measure can prevent the bank's failure.

Yet, the new recovery and resolution framework provides for neither special negotiated solutions of the crisis, nor harmonised rules on financing arranged by the bank during the recovery or early intervention phase (‘funding for recovery’). In addition, the more volatile market environment linked to the new ‘bail-inable’ regime and the lack of a credible public backstop may make it more difficult to arrange early intervention measures and private sector solutions.

Crisis prevention measures and the resolution framework provided for in the Bank Recovery and Resolution Directive (BRRD) can affect the contractual relationships between banks and investors and the incentives to the latter to provide funding for recovery.

We will first recall the current provisions in the Bank Recovery and Resolution Directive on preventive, preparatory and early intervention measures that are especially relevant for the effects that they may have on contracts.