The Spanish Bail-in tool: Restructuring of certain bank liabilities in royal decree-law 24/2012

Royal Decree-Law 24/2012, of 31 August 2012 (RD-Law 24/2012), could be considered in practice as the insolvency act for credit institutions.

Its content is based on the Proposal for a Directive of the European Parliament and of the Council establishing a framework for the recovery and resolution of credit institutions and investment firms1 and the Memorandum of Understanding signed by Spain and the Euro group (MoU)2.

The new regulation is based on the public interest in (i) the financial system continuing to work normally regardless of the crisis of a particular bank, (ii) protecting deposit-holders, and (iii) minimising public financial support: shareholders and creditors have to bear losses (bail-in mechanism) before the tax payers takes the strain (bail-out).

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