Recital (59)

Directive (EU) 2019/879 amended Directive 2014/59/EU to introduce dedicated rules to ensure that retail clients do not invest excessively in instruments that are eligible for the MREL of institutions and entities. The excessive holding of MREL instruments by retail clients can be detrimental to the resolvability of an institution or entity and can create problems for financial stability. That can be especially problematic when the retail clients are also depositors of the issuing institution, as those depositors are particularly vulnerable to the inappropriate placement of the institution’s own instruments. Authorities should therefore ensure that sellers, institutions and entities comply with the measures adopted by Member States transposing Directive (EU) 2019/879 to ensure the protection of retail clients. Where those measures are not being applied appropriately, authorities should enforce those rules. It is therefore appropriate to introduce dedicated powers in Directive 2014/59/EU to address failures to comply with the dedicated rules on the protection of retail clients, alongside the existing powers in Directive 2014/65/EU. Moreover, using the existing reporting for resolution planning and MREL purposes, resolution authorities should assess the nature of the investor base in MREL-eligible instruments when carrying out the resolvability assessment of institutions and entities and, where necessary, require the institution or entity to address or remove any impediments found. Finally, EBA, in coordination with the European Supervisory Authority (European Securities and Markets Authority) (ESMA) established by Regulation (EU) No 1095/2010 of the European Parliament and of the Council, should report on the measures adopted by Member States for the protection of retail clients as regards debt instruments that are eligible for the MREL pursuant to Directive 2014/59/EU, comparing and assessing any potential impact on cross-border operations. On that basis, the Commission might adopt a legislative proposal to ensure a more effective protection of retail clients.