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BRRD amendments: Senior Creditors Worse Off

New law establishes general depositor preference in Portugal, making common bank debt riskier in the event of a resolution

The amendments to the Portuguese Banking Law, which extend the depositor preference to all deposits, will mean that in the event of a bank insolvency common creditors will likely see their recovery expectations greatly reduced in comparison with the previous regime.

As a consequence, in the event of a bank resolution, the value of the claims and of any “no creditor worse off” compensation granted to investors holding senior debt issued by Portuguese banks could be significantly lower.

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