The European Commission’s proposed new Bank Recovery and Resolution Directive (BRRD) will have the most impact on covered bonds in 2014, becasue the bonds are not be subject to a so-called “bail-in",said Standard & Poor’s in a report on Wednesday.

The BRRD sets harmonized standards for national resolution regimes across Europe in compliance with the Financial Stability Board’s key attributes. It aims to reduce the costs of bank resolution, make banks resolvable without using taxpayer funds, and push bank creditors to exert more market discipline by proposing creditor-funded recapitalization – otherwise known as bail-in.

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