In the right-hand panel, banks instead reinvest into senior SBBS.

Figure 1 Hypothetical sovereign default scenarios and their effect on SBBS

During the procedure set out in this paragraph, an SBBS appearing on the list maintained by ESMA pursuant to Article 10(2) shall continue to be considered a SBBS and shall be kept on that list.

(d)verifies that at any point in time the number of SBBSs of one issue is equal to the sum of the SBBSs held by all investors or intermediaries in that issue;

The payoffs accruing to investors in SBBS arise from central government debt.

During that period, an SBBS appearing on the list maintained by ESMA pursuant to Article 10(2) shall continue to be considered an SBBS and shall be kept on that list.

ESMA shall update that list instantly and remove any SBBSs issue that is no longer considered to be an SBBSs issue following a decision of competent authorities in accordance with Article 15.

Similarly, the SBBS market could develop gradually by arranger(s) of SBBS purchasing a small fraction of sovereign bonds in primary markets (or by assembling similarly small volumes in secondary markets).

Use of the designation SBBS and notification, transparency and information requirements

SBBS would not negatively affect existing national bond markets.

SBBS would contribute to weakening the link between banks and their home countries.

This highlights the stabilisation benefits arising from the seniority embedded in SBBS.

(b)segregates the underlying portfolios and proceeds of different SBBSs issues;

The mechanics of issuing SBBS are described in Section 4.1 of Volume II.

5.Payments under an SBBS shall be dependent upon the payments of the underlying portfolio of sovereign bonds.