What they are

Client assets are the cash and financial instruments that an institution holds, administers or safeguards for its clients, for example securities held in custody or client money segregated under investment-services rules. These assets do not form part of the bank's own balance sheet in economic substance: the bank is a custodian or fiduciary, and the beneficial ownership rests with the client. For this reason they are treated as belonging to the client rather than as a liability that could bear the bank's losses.

The protection depends on the assets being properly identifiable and segregated. Where client money or securities are held in a fiduciary or custodial capacity and can be distinguished from the institution's own assets, they are shielded from the general estate; where they have been commingled and cannot be identified, that protection may be harder to give effect to in practice.

How they are treated in resolution

The bail-in tool operates on the institution's own liabilities. Client assets are not the bank's to write down, so they are excluded from bail-in and must be returned to or preserved for the clients when a resolution action is taken. The framework groups this exclusion with other liabilities that arise from a fiduciary or trust relationship, on the principle that a resolution should not expropriate assets the bank was merely holding on behalf of others.

Preserving client assets through a resolution is also an operational task. Where a resolution transfers a business, for instance through the sale of business or bridge institution tools, the custody and client-money records must move with it so that clients retain access. This links the exclusion to operational continuity: protecting client assets in law is only effective if the systems that track them keep functioning across the resolution.

The exclusion of client assets from bail-in is set out in BRRD Article 44(2), which shields, among other categories, liabilities arising from the holding of client assets or client money where the client is protected under applicable insolvency law, and liabilities arising from a fiduciary relationship where the beneficiary is protected. The general bail-in powers subject to these exclusions are in BRRD Articles 43 and 44 and SRMR Article 27. Segregation and safeguarding obligations that make the assets identifiable derive from the relevant investment-services and custody rules.

Practical relevance for banks and investors

For banks, the exclusion reinforces the importance of robust segregation and record-keeping: the legal protection is only as good as the ability to identify and separate client holdings at the point of resolution. For clients and investors, it means that assets genuinely held on their behalf are, in principle, insulated from the bank's failure and from bail-in, in contrast to unsecured claims on the bank itself. Distinguishing a custodial or fiduciary holding from an ordinary deposit or unsecured claim is therefore essential when judging exposure to a failing institution.