On December 14th
2016 IHS Markit announced the introduction of the new seniority level called “Senior Bail-in”. This additional hierarchy level will hold a new type of senior notes which are subject to write-down or conversion into a subordinated instrument on the occurrence of a resolution event. The new supplementary layer, named “Bail-in”, will differentiate the senior bonds that are protected in a resolution event from the other senior notes that can be bailed in.
In terms of ranking, the “Bail-in” bonds will sit below the protected senior notes ("Preferred") and above the subordinated lower tier 2 notes. Current structure: New structure:
The new senior rank “Bail-in” will accommodate all statutory, structurally and contractually subordinated senior unsecured notes. Currently the following types of bonds will be assigned to the Seniority Level “Bail-in”
- Senior bank debt issued by holding companies
- Senior bank debt with a contractual bail-in clause
- Senior bank debt by German issuers that can be bailed in based on the ‘Single Resolution Mechanism’ legislation
Any future statutory changes will be reviewed and considered as they become known.
No file format changes will be required since the additional senior level will be defined by using the existing field “Seniority Level 2”.
These changes will be introduced on January 31st
2017 and will impact the iBoxx EUR Benchmark and the iBoxx GBP Benchmark universe. The details of the reclassified bonds will be available in the EUR and GBP Benchmark previews starting January 13th
IHS Markit will launch new sub-indices for the “Senior Bail-in”, as well as the “Senior Preferred” classification. The current EUR and GBP Senior indices will remain unchanged and incorporate both these seniority levels. The following indices will be calculated starting February 1st
For more information please contact us at iBoxx@markit.com.