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Introduction
Liechtenstein's financial center has, for years, benefitted from a regulatory architecture that is both deeply integrated into the EEA legal space and, at the same time, deliberately calibrated to a comparatively small, highly cross-border market; yet this very combination means that whenever the EU legislator refines systemic safeguards in the bank-resolution framework, the Liechtenstein legislator is compelled – not merely politically, but structurally – to transpose those refinements with enough precision that "equivalence in law" does not quietly erode into "divergence in practice."
Against that backdrop, the Government's Report and Motion to the Parliament (Landtag) proposes targeted amendments to the Sanierungs- und Abwicklungsgesetz (SAG) in order (i) to implement Directive (EU) 2024/1174 – widely discussed under the label "Daisy-Chain Act" – and (ii) to operationalize Regulation (EU) 2022/2036, which fine-tunes the prudential treatment of globally systemically important institutions (G-SRI) operating under multiple-point-of-entry resolution strategies.
What makes this legislative package commercially relevant – even for institutions that are not "G-SRI," and even for market participants who assume that internal MREL is a "big-bank problem" – is that the proposal does two additional things of very practical, operational consequence: first, it introduces a dedicated procedural instrument for executing resolution measures through an edict-based mechanism (Massnahmenedikt), designed precisely for scenarios in which the affected person-circle cannot be identified fast enough without jeopardizing financial stability; and second, it revisits the investor-protection logic for the distribution of subordinated eligible liabilities to non-professional clients, moving away from an overly restrictive national approach that the Government itself characterizes as competitively distortive without delivering the intended incremental protection effect.
1. "Daisy-Chain" in plain terms: why internal MREL gets refined even when no Liechtenstein case exists today
The report is candid on a point that practitioners sometimes understate: the Directive's core refinements concentrate on internal MREL mechanics, especially scope and deduction rules, with a particular lens on G-SRI groups and "intermediate entities," and, at present, Liechtenstein does not host a live fact pattern of that kind; nonetheless, the EEA logic requires the legal infrastructure to be ready, because group structuring, redomiciliations, and post-MiCAR consolidation effects can change the "no case exists" premise faster than board-level governance frameworks typically adapt.
In addition, the report highlights that the EU legislator equips resolution authorities with the competence to impose internal MREL at consolidated level for a broader spectrum of entities – specifically where "intermediate entities" sit within a banking group structure – precisely because the prior deduction framework (the "daisy chain deduction framework") could, in some configurations, produce disproportionately harsh capital and eligible-liability friction.
For Liechtenstein institutions and their group parents, the practical message is not that internal MREL suddenly becomes an everyday compliance deliverable for all players, but rather that group-structuring decisions – especially those involving holding companies at the top of an EEA group, or the insertion of intermediate entities – should be reviewed with resolution planning in mind, because legal capability in the statute is the condition precedent for supervisory and resolution expectations to crystallize when a relevant structure emerges.
2. Liquidation entities: proportionate MREL, and why "not required" does not mean "irrelevant"
A key proportionality lever in the package is the explicit differentiation of "liquidation entities," i.e., legal persons for which the relevant resolution plan (or group resolution plan) foresees liquidation through ordinary insolvency, rather than treatment as a resolution entity; the proposal introduces this concept expressly in the statutory definitions.
On that basis, the amended regime provides, as a rule, that the resolution authority does not set the standard MREL requirement for liquidation entities, while at the same time preserving a targeted "override" where, in view of financial stability and contagion considerations, a higher amount may be justified on an individual basis.
Two strategic implications follow. First, groups that include entities earmarked for liquidation should not treat the classification as mere taxonomy, because it can influence both the requirement-setting logic and the internal distribution of eligible instruments. Second, where an override becomes plausible (e.g., because a liquidation entity is operationally central, or because its failure could transmit stress), early engagement with the authority, supported by a robust stability and contagion narrative, becomes an essential component of resolution-readiness.
3. The "Massnahmenedikt": resolution speed, due-process design, and litigation-risk management
The most operationally novel element, particularly for legal and compliance teams who are used to ordinary administrative process under the LVG, is the introduction of a special instrument for executing resolution measures where the authority cannot quickly identify all affected persons – an archetypal scenario being a large depositor base or the fast transfer of balance-sheet positions to another institution.
The report frames the instrument as a lex specialis vis-à-vis ordinary procedural rules and explains the underlying policy logic in language that is unusually explicit for legislative materials: once the resolution conditions are met, the public interest requires immediate, coordinated measures, and the time cost of a full investigatory procedure prior to the administrative act is incompatible with effective risk containment, particularly where trust of market participants and depositors is at stake.
In the statutory mechanics, affected parties – including, notably, shareholders and creditors – are granted a defined objection route, but with two features that institutions should internalize for their risk planning: (i) objections must be filed within three months from publication of the measures edict, and (ii) the objection does not suspend the effect of the resolution action.
For boards and senior management, this is not merely a "legal procedure update"; rather, it should be translated into concrete readiness measures, including (a) communication protocols for situations where measures become effective before individualized notice is feasible, (b) document retention and decision-logging sufficient to withstand accelerated challenge windows, and (c) a litigation strategy that assumes speed is structurally embedded in the regime, not an exceptional deviation.
4. Distribution of subordinated eligible liabilities: a more workable investor-protection perimeter, anchored to a hard denomination floor
The amendments also re-engineer Liechtenstein's approach to the sale (and advice) of certain subordinated eligible liabilities to non-professional clients by focusing on a denomination threshold of at least EUR 50,000 (or the CHF equivalent), which functions as a blunt but administratively clear separation line between retail-like distribution and higher-ticket investor segments.
Two additional features elevate this from a "paper rule" to a genuinely enforceable compliance point. First, the proposal ties breach to an administrative offence with a potential fine up to CHF 70,000.
Second, it clarifies that the new denomination rule is not retroactively applied to instruments issued before 28 December 2020, which matters for legacy issuance programs and secondary transfers.
What is particularly noteworthy, from a market-design perspective, is the Government's policy justification: it states that prior assumptions – inter alia, that the protective logic primarily concerns "own issuance" – proved incorrect, and that the earlier national transposition had, in practice, imposed a disproportionate limitation on Liechtenstein intermediaries, producing competitive disadvantage without a commensurate increase in investor protection.
The report further explains that the legislative "choice" under Art. 44a(5) BRRD is to be used as an exclusive alternative rather than cumulatively alongside stricter distribution requirements, and it emphasizes the pragmatic reason for fixing the threshold in EUR (or CHF equivalent) so that permissibility of the service does not fluctuate with exchange-rate movements.
For institutions, this means that product governance, suitability/appropriateness logic, and contractual documentation must be reviewed not only for the "headline" denomination requirement, but also for the operational perimeter – who qualifies as "seller," which instruments are in scope, and how advisory and execution-only channels are controlled.
5. When does this bite? Entry into force, and the realistic preparation window
The proposal provides that the amendments enter into force – subject to an unused referendum period – on 1 December 2026 (and otherwise on the day following promulgation).
Separately, the report notes that, as of its drafting, the EEA incorporation process for the Directive and Regulation was ongoing and the timing of the respective EEA Joint Committee decisions was not yet foreseeable, a reminder that EEA alignment is sometimes temporally non-linear, even when the national legislator signals a concrete target date.
From a governance standpoint, however, the message is straightforward: treat 2026 not as a distant horizon, but as the final phase for policy and process remediation, because distribution controls, issuance documentation, and resolution-readiness playbooks are not areas where "late compliance" is a rational strategy.
6. What sophisticated institutions should do now: a practical checklist
Although the package contains elements that, on paper, currently have "no Liechtenstein application case," the discipline of good governance is to prepare on the assumption that structures, business lines, and supervisory focus will evolve; accordingly, we recommend a structured readiness program with at least the following workstreams:
- Instrument mapping and distribution perimeter: identify all subordinated eligible liabilities within scope; confirm minimum denomination settings for sales to non-professional clients; hard-code the EUR/CHF-equivalent logic into systems so the rule is resilient to FX volatility.
- MiFID interface and product governance: recalibrate product governance rules and client-segment restrictions so that the denomination threshold is reflected consistently across advisory, execution-only, and portfolio management channels, and ensure that contractual disclosures and client documentation are aligned with the revised statutory concept of "seller."
- Resolution-readiness and stakeholder management: update internal escalation protocols for the possibility of edict-based measures that take effect rapidly; prepare evidence-grade records so that objections – filed within a defined time window and without suspensive effect – can be managed efficiently and consistently.
- Group structuring and internal MREL scenario analysis: even if today's structure is outside the "intermediate entity / G-SRI" corridor, stress-test future scenarios (acquisitions, holding insertions, cross-border restructurings) against the refined internal MREL and deduction logic, so that strategic decisions do not unknowingly create avoidable resolution friction.
- Sanctions and enforcement posture: treat the CHF 70,000 fine exposure as a governance signal that the distribution rule is expected to be monitored and enforced; ensure lines of responsibility, controls, and audit trails are proportionate to that expectation.
How we may support clients in this transition
Bergt Law advises banks, investment firms, fund managers, and fintech-adjacent institutions on Liechtenstein and EEA financial-market regulation with a focus on regulatory architecture that is not merely "technically compliant," but operationally workable under real-world business constraints; in this legislative cycle, our work typically spans (i) distribution and product-governance remediation, (ii) issuance and documentation strategy for eligible instruments, (iii) resolution-planning interfaces and crisis-readiness governance, and (iv) cross-border structuring where EEA alignment and supervisory expectations must be treated as a single integrated design problem rather than as separate legal checklists.
Sources: Report And Motion By The Government To The Principality Of Liechtenstein Parliament Regarding The Amendment Of The Reorganization And Liquidation Act (SAG) No. 2/2026.
Executive Summary:
- Liechtenstein proposes targeted Reorganization and Liquidation Act (SAG) amendments to transpose Directive (EU) 2024/1174 ("Daisy-Chain Act") and to implement Regulation (EU) 2022/2036, even though Liechtenstein currently has no direct "intermediate entity / G-SRI" fact pattern.
- The regime strengthens proportionality for liquidation entities: as a rule, the authority does not set the standard requirement, while retaining a stability-driven override.
- A new edict-based procedural instrument (Massnahmenedikt) is introduced to enable rapid resolution measures when the affected person-circle cannot be identified quickly enough; objections are possible, but without suspensive effect.
- Sales/advice of certain subordinated eligible liabilities to non-professional clients are constrained by a minimum denomination of EUR 50,000 (or CHF equivalent), with explicit sanction exposure for breaches and a defined legacy carve-out for instruments issued before 28 December 2020.
- Entry into force is targeted for 1 December 2026 (subject to referendum mechanics), creating a clear, finite window for institutions to update governance, distribution controls, and resolution-readiness playbooks.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
