Information in accordance with Article 41 (4) of Delegated Regulation 2017/565
Liability cascade in context of bank resolution
Bank shares, bonds issued by credit institutions and saving banks as well as other claims against credit institutions and saving banks are subject to special provisions throughout Europe in the event of threats to the existence of these institutions. The background for these provisions are the legal regulations on the reorganisation and resolution of banks that come into effect should these institutions fail. These regulations (e.g. the so called “bail-in”) could have a negative impact for investors and contract partners in the event of resolution of the relevant institution.
You can find further information regarding the basic liability ranking in the event of intervention measures on the part of the resolution authorities under www.bafin.de by entering the search term "liability cascade".
Relationship between the criteria security, liquidity and return on investment
Please note that the criteria security, liquidity and return on investment are in conflict with each other. On the one hand, there is conflict between security and profitability. Because to achieve the highest possible level of security, a lower yield must generally be accepted. Conversely, above-average returns are always associated with increased risks. For example, this means that the return on instruments used only at the end or not at all for loss coverage and recapitalisation within the context of bank resolution or insolvency, tends to be lower. On the other hand, there can be a trade-off between liquidity and profitability since more liquid assets, i.e. investments that can be realised relatively quickly may be associated with yield disadvantages.