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Senior Preferred bond

Category — Bond Types
Senior Preferred bond – a rank of debt securities available to banks.
This rank was introduced in accordance with the amendments to section 46f of the German Banking Law, which was established on July 21, 2018.

The unsecured bond market is divided into Senior Non-Preferred bonds, i.e. having a built-in “bail-in” procedure, and senior-level preferred bonds, i.e. without the built-in “bail-in” procedure.

In case of liquidation/bankruptcy of a company, senior preferred bonds are ranked higher than senior non-preferred bonds and subordinated bonds.
Senior Preferred Bonds are not subject to MREL (Minimum Equity and Eligible Liabilities) or TLAC (General Loss Absorbing Ability) rules.

Main characteristics:
● Their principal amounts and interest rates are known in advance, the exceptions are indexation or a floating rate;
● Repayment period of at least one year;
● As a rule, the rating of preferred bonds is higher than that of non-preferred bonds;
● Senior preferred notes are direct, unconditional, and unsecured obligations.

EU law obliges banks to have documentation on this type of instrument and indicate the rank.

An example of a senior preferred bond would be: BPCE, 2.74% 27sep2024, EUR
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