New Category Of Debt Securities: Senior Non-Preferred Notes, European Capital Markets Update


On 20 July 2017, Belgium adopted legislation establishing senior non-preferred notes, a new category of debt securities available to banking institutions. The law provides for a new Article 389/1 into the Law of 25 April 2014 on the status and supervision of credit institutions ("Belgian Banking Law"). In particular, Article 389/1 aims to increase the effectiveness of the bail-in tool and introduces a new category of claims in the hierarchy of creditors in the case of a liquidation procedure (procédure de liquidation/ liquidatieprocedure) of a banking institution.

Article 389/1, para. 2 of the Belgian Banking Law now divides senior notes into: (i) senior preferred notes, retaining the same ranking as the previous senior notes; and (ii) senior non-preferred notes. In the case of liquidation, senior non-preferred notes will rank senior to subordinated notes but junior both to senior preferred notes and to claims benefiting from legal or statutory preferences.

Senior non-preferred notes may be issued in the form of either bonds in accordance with the Belgian Companies Code or deposit certificates in accordance with the Law of 22 July 1991 on dematerialized treasury notes and deposit certificates. They may be governed by Belgian or foreign law.


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