P7_TA(2014)0095

Resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Bank Resolution Fund ***I

Amendments adopted by the European Parliament on 6 February 2014 on the proposal for a regulation of the European Parliament and of the Council establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Bank Resolution Fund and amending Regulation (EU) No 1093/2010 of the European Parliament and of the Council (COM(2013)0520 — C7-0223/2013 — 2013/0253(COD)) (1)

(Ordinary legislative procedure: first reading)

(2017/C 093/62)

Amendment 1

AMENDMENTS BY THE EUROPEAN PARLIAMENT (*1)

to the Commission proposal

(1) This matter was referred back to the committee responsible for reconsideration pursuant to Rule 57(2), second subparagraph (A7-0478/2013).

(*1) Amendments: new or amended text is highlighted in bold italics; deletions are indicated by the symbol ▌.

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Bank Resolution Fund and amending Regulation (EU) No 1093/2010 of the European Parliament and of the Council

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 114 thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the European Central Bank (1),

Having regard to the opinion of the European Economic and Social Committee (2),

Acting in accordance with the ordinary legislative procedure (3),

Whereas:

(1) Having a better integrated internal market for banking services is essential in order to foster economic recovery in the Union. However, the current financial and economic crisis has shown that the functioning of the internal market in this area is under threat and that there is an increasing risk of financial fragmentation. Interbank markets have become less liquid and cross-border bank activities are decreasing due to fear of contagion, lack of confidence in other national banking systems and in the ability of Member States to support banks. This is a real source of concern in the internal market in which banking institutions have the use of a European passport and where the majority of those institutions operate in several Member States.

(2) Divergences in national resolution rules between different Member States and corresponding administrative practices and the lack of a unified decision making process at Union level for the resolution of cross-border banks contribute to this lack of confidence and market instability, as they do not ensure certainty and predictability as to the possible outcome of a bank failure. Resolution decisions taken at the national level only and under non-harmonised legal frameworks may lead to distortions of competition and ultimately to the undermining of the internal market.

(3) In particular, the different practices of Member States in the treatment of creditors of banks in resolution and in the bail-out of failing banks have an impact on the perceived credit risk, financial soundness and solvency of their banks. This undermines public confidence in the banking sector and obstructs the exercise of the freedom of establishment and the free provision of services within the internal market because financing costs would be lower without such differences in practices of Member States.

(4) Divergences in national resolution rules between different Member States and corresponding administrative practices may lead banks and customers to have higher borrowing costs only because of their place of establishment and irrespective of their real creditworthiness. In addition, customers of banks in some Member States face higher borrowing rates than customers of banks in others irrespective of their own creditworthiness.

(4a) The inability of certain Member States to have well-functioning institutions in the field of bank resolution has increased the damage of the banking crisis over the last years.

(4b) National authorities may have incentives to bail out the banks with public money before embarking on a resolution process, and so the creation of a single European resolution mechanism (SRM) is fundamental to create a level playing field and a more neutral approach to decide if a bank should be resolved.

(5) As long as resolution rules, practices and approaches to burden-sharing remain national and the financial resources needed for funding resolution are raised and spent at national level, the internal market will remain fragmented. Moreover, national supervisors have strong incentives to minimise the potential impact of bank crises on their national economies by adopting unilateral action to ring-fence banking operations, for instance by limiting intra-group transfers and lending, or by imposing higher liquidity and capital requirements on subsidiaries in their jurisdictions of potentially failing parent undertakings . National and contentious home-host issues substantially reduce efficiency in cross-border resolution processes . This restricts the cross-border activities of banks and thus creates obstacles to the exercise of fundamental freedoms and distorts competition in the internal market.

(6) Directive [BRRD] of the European Parliament and of the Council (4) is a decisive step towards harmonisation of national bank resolution rules and has provided for cooperation among resolution authorities when dealing with the failure of cross-border banks. However, the harmonisation provided by the Directive [BRRD] is not absolute and the decision making process is not centralised. Directive [BRRD] essentially provides for common resolution tools and powers available for the national authorities of every Member State but leaves some level of discretion to national authorities in the application of the tools and in the use of national financing arrangements in support of resolution procedures. Despite attributing regulatory and mediation tasks to the European Supervisory Authority (European Banking Authority) (‘EBA’), established by Regulation (EU) No 1093/2010 of the European Parliament and of the Council (5), Directive [BRRD] does not completely avoid the taking of separate and potentially inconsistent decisions by Member States regarding the resolution of cross-border groups which may affect the overall costs of resolution. Moreover, as it provides for national financing arrangements, it does not sufficiently reduce the dependence of banks on the support from national budgets and does not completely prevent different approaches by Member States to the use of the financing arrangements.

(7) Ensuring effective uniform resolution decisions for failing banks within the Union, including on the use of funding raised at Union level, is essential for the completion of the internal market in financial services. Within the internal market, the failure of banks in one Member State may affect the stability of the financial markets of the whole Union. Ensuring effective and uniform resolution rules and equal conditions of resolution financing across Member States is in the best interest not only of the Member States in which banks operate, but also of all Member States in general as a means to preserve competition and improve the functioning of the internal market. Banking systems in the internal market are highly interconnected, bank groups are international and banks have a large percentage of foreign assets. In the absence of a single resolution mechanism, bank crises in Member States participating in the Single Supervisory Mechanism (SSM) would have stronger negative systemic impact also in non-participating Member States. The establishment of SRM will increase stability of the banks of the participating Member States and prevent the spill-over of crises into non-participating Member States and will thus facilitate the functioning of the whole of the internal market. The mechanisms for cooperation regarding institutions established in both participating and non-participating Member States should be clear, and it is important to ensure that non-participating Member States are not discriminated against.

(7a) In order to restore trust and credibility in the banking sector, the European Central Bank (ECB) will conduct a comprehensive balance sheet assessment of all banks supervised directly. For those banks in the participating Member States that are not subject to direct supervision by the ECB, the competent authorities should, in cooperation with the ECB, perform an equivalent balance sheet assessment that is proportionate to the size and business model of the bank. This would equally contribute to restore credibility and ensure that all banks will be subject to review.

(7b) In order to ensure a level playing field within the internal market as a whole, every framework for banking recovery and resolution within the Union should be governed by Directive [BRRD] and by any delegated acts adopted pursuant thereto. In performing their tasks under this Regulation, the Commission and the Board should act in accordance with the requirements of that Directive and of those delegated acts. That Directive should govern recovery and resolution planning, early intervention, conditions for and principles of resolution as well as the use of resolution tools by the SRM. The main aim of this Regulation is to cover those aspects required to ensure that the SRM implements that Directive and that the appropriate funding required is at its disposal. The Commission and the Board should also be subject to all other relevant Union law, including binding regulatory and implementing technical standards developed by EBA and adopted by the Commission in accordance with Articles 10 to 15 of Regulation (EU) No 1093/2010. The Board should be subject to the guidelines and recommendations adopted by EBA in relation to Directive [BRRD] in accordance with Article 16 of that Regulation and, where applicable, to any decisions of EBA in the course of binding mediation pursuant to Article 19(3) of Regulation (EU) No 1093/2010.

(8) Following the establishment of the SSM by Council Regulation (EU) No 1024/2013 (6) where banks in the participating Member States are centrally supervised by the ECB, there is a misalignment between the Union supervision of such banks and the national treatment of those banks in the resolution proceedings pursuant to Directive [BRRD].

(8a) Regulation (EU) No 1024/2013 allows for the possibility of a non-euro area opt-in Member State to terminate its close cooperation with the SSM. Thus a situation may arise in which a Member State decides to leave the SSM but has on its territory an institution benefitting from resolution financing from the SRM fund. This Regulation may, when revised, set out the provisions for addressing such a situation.

(9) Whilst banks in Member States remaining outside the SSM benefit at national level from supervision, resolution and financial backstop arrangements which are aligned, banks in Member States participating in the SSM are subject to Union arrangements for supervision and national arrangements for resolution and financial backstops. This misalignment creates a competitive disadvantage for the banks in the Member States participating in the SSM compared to those in the other Member States. Because supervision and resolution are at two different levels within the SSM, intervention and resolution in banks in the Member States participating in the SSM would not be as rapid, consistent and effective as in banks in the Member States outside of the SSM. This has negative repercussions on the funding costs for these banks and creates a competitive disadvantage with detrimental effects for the Member States in which those banks operate and for the overall functioning of the internal market. Therefore, a centralised resolution mechanism for all banks operating in the Member States participating in the SSM is essential to guarantee a level playing field.

(10) The sharing of resolution responsibilities between the national and the Union levels should be aligned to the sharing of supervision responsibilities between those levels. As long as supervision remains national in a Member State, that Member State should remain responsible for the financial consequences of a bank failure. The single resolution mechanism should therefore only extend to banks and financial institutions established in Member States participating in the SSM and subject to the supervision of the ECB within the framework of the SSM. Banks established in the Member States not participating in the SSM should not be subject to the single resolution mechanism. If such Member States became subject to the single resolution mechanism, this would create the wrong incentives for them. In particular, supervisors in these Member States may become more lenient towards banks in their jurisdictions as they would not have to bear the full financial risk of their failures. Therefore, in order to ensure parallelism with the SSM, the single resolution mechanism should apply to Member States participating in the SSM. As Member States join the SSM, they should also automatically become subject to the single resolution mechanism. Ultimately, the single resolution mechanism is expected to extend to the entire internal market.

(11) A single bank resolution fund (hereinafter referred to as the ‘Fund’) is an essential element without which a single resolution mechanism could not work properly. Different systems of national funding would distort the application of single bank resolution rules in the internal market. If the funding of resolution were to remain national, the link between sovereigns and the banking sector would not be broken, and investors would continue to establish borrowing conditions according to the place of establishment of the banks rather than according to their creditworthiness. The current severe fragmentation of the financial market would also remain. The Fund should help to ensure a uniform administrative practice in the financing of resolution and to avoid the creation of obstacles for the exercise of fundamental freedoms or the distortion of competition in the internal market due to divergent national practices. The Fund should be financed directly by banks and should be pooled at Union level so that the resolution resources can be objectively allocated across Member States thus increasing financial stability and limiting the link between the perceived fiscal position of individual Member States and the funding costs of banks and undertakings operating in those Member States. To further break that link, there should be a prohibition against the decisions of the SRM impinging directly on the fiscal responsibilities of the Member States.

(12) It is therefore necessary to adopt measures to create a single resolution mechanism for all Member States participating in the single supervisory mechanism in order to facilitate the proper and stable functioning of the internal market.

(13) A centralised application of the bank resolution rules set out in Directive [BRRD] by a single Union resolution authority in the participating Member States can only be ensured where the rules governing the establishment and functioning of a single resolution mechanism are directly applicable in the Member States to avoid divergent interpretations across the Member States. In order to ensure the harmonised application of the resolution tools, the Board, together with the Commission, should adopt a resolution handbook setting out clear and detailed guidance for the use of the resolution tools set out in Directive [BRRD]. This should bring benefits to the internal market as a whole because it will contribute to ensuring fair competition and to preventing obstacles to the free exercise of fundamental freedoms not only in the participating Member States but in the whole internal market.

(14) Mirroring the scope of the Regulation (EU) No 1024/2013, a single resolution mechanism should cover all credit institutions established in the participating Member States. However, within the framework of a single resolution mechanism, it should be possible to resolve directly any credit institution of a participating Member State in order to avoid asymmetries within the internal market in the treatment of failing institutions and creditors during a resolution process. To the extent that parent undertakings, investment firms and financial institutions are included in the consolidated supervision by the ECB, they should be included in the scope of the single resolution mechanism. Although the ECB will not supervise those institutions on a solo basis, it will be the only supervisor that will have a global perception of the risk to which a group, and indirectly the individual members, is exposed to. To exclude entities which form part of the consolidated supervision within the scope of the ECB from the scope of the single resolution mechanism would make it impossible to plan for the resolution of banking groups and to adopt a group resolution strategy, and would make any resolution decisions much less effective.

(15) Within the single resolution mechanism, decisions should be taken at the most appropriate level. The Board, and in particular its executive session, should be empowered to prepare and take all decisions concerning the resolution procedure to the fullest extent possible, while respecting the role of the Commission as established in the TFEU, in particular in Articles 114 and 107 thereof.

(15a) The Commission should, when performing its tasks under this Regulation, act separately from its other tasks, and strictly in accordance with the objectives and principles set out in this Regulation and in Directive [BRRD]. The separation of tasks should be guaranteed through organisational separation.

(16) The ECB, as the supervisor within the SSM, is the best placed to assess whether a credit institution is failing or likely to fail and whether there is no reasonable prospect that any alternative private sector or supervisory action would prevent its failure within a reasonable timeframe. The Board, in its executive session, upon notification of the ECB and assessment of the resolution conditions , should provide a draft decision to the Commission ▐ to place an institution under resolution . That draft decision should include a recommendation for a clear and detailed ▐ framework of the resolution tools and, where applicable, of the use of the Fund . Within this framework, the Board , in its executive session, should decide on a resolution scheme and instruct the national resolution authorities on the resolution tools and powers to be executed at national level. Without prejudice to the effectiveness of the Board's decision-making procedures, the members of the Board should strive for consensus when takings decisions.

(17) The Board should be empowered to take decisions, in particular, in connection with resolution planning, the assessment of resolvability, the removal of impediments to resolvability and the preparation of resolution actions. National resolution authorities should assist the Board in resolution planning and in the preparation of resolution decisions. In addition, as the exercise of resolution powers involves the application of national law, national resolution authorities should be responsible for the implementation of resolution decisions.

(18) It is instrumental for the good functioning of the internal market that the same rules apply to all resolution measures, regardless of whether they are taken by national resolution authorities under Directive [BRRD] or within the framework of the single resolution mechanism The Commission will assess those measures under Article 107 […] TFEU. Where the use of resolution financing arrangements does not involve State aid pursuant to Article 107 (1) […] TFEU, the Commission should, in order to ensure a level playing field within the internal market, assess those measures by analogy to Art 107 […] TFEU. If a notification under Article 108 of the TFEU is not necessary as no state aid pursuant to Article 107 of the TFEU is entailed in the proposed use of the Fund by the Board, as envisaged in its executive session, in order to ensure the integrity of the internal market between participating and non-participating Member States, the Commission should apply the relevant State aid rules under Article 107 […] TFEU by way of analogy when assessing the proposed use of the Fund. The Board should not decide on a resolution scheme until the Commission has ensured, by way of analogy with State aid rules, that the use of the Fund follows the same rules as interventions by national financing arrangements.

(19) In order to ensure a swift and effective decision making process in resolution, the Board should be a specific Union agency with a specific structure, corresponding to its specific tasks, and which departs from the model of all other agencies of the Union. Its composition should ensure that due account is taken of all relevant interests at stake in resolution procedures. The Board should operate in executive and plenary sessions. In its executive session, it should be composed of an Executive Director, a Deputy Executive Director, and members appointed by the Commission and the ECB , which should act independently and objectively in the interest of the Union as a whole . Considering the missions of the Board, the Executive Director and the Deputy Executive Director should be appointed on the basis of merit, skills, knowledge of banking and financial matters, and experience relevant to financial supervision and regulation. The Executive Director and the Deputy Director should be chosen on the basis of an open selection procedure of which the European Parliament and the Council should be kept duly informed. The selection procedure should respect the principle of gender balance. The Commission should provide the European Parliament's competent committee with a shortlist of candidates for the positions of Executive Director and Deputy Executive Director. The Commission should submit a proposal for the appointment of the Executive Director and the Deputy Executive Director to the European Parliament for approval. Following the European Parliament’s approval of that proposal, the Council should adopt an implementing decision to appoint the Executive Director and the Deputy Executive Director . When deliberating on the resolution of a bank or group established within a single participating Member State, the executive session of the Board should also convene and involve in the decision-making process the member appointed by the Member State concerned representing its national resolution authority. When deliberating on a cross-border group, the members appointed by the home and all host Member States concerned representing the relevant national resolution authorities should also be convened and involved in the decision-making process of the executive session of the Board. However, home authorities and host authorities should have a balanced influence on the decision, so host authorities should have jointly one single vote. In the decision-making process, due consideration should be given to the relative size and importance of the subsidiary, branch or entity covered by consolidated supervision in the economies of the different Member States and in the group as a whole.

(19a) Since the participants on the decision-making process of the Board in its executive sessions would change depending on the Member State(s) where the relevant institution or group operates, the permanent participants — the Executive Director, the Deputy Executive Director and the members appointed by the Commission and by the ECB — should ensure that the decisions throughout the different formations of the executive sessions of the Board are coherent, appropriate and proportionate.

(19b) EBA should attend the meetings of the Board as an observer. Other observers, such as a representative of the European Stability Mechanism (ESM), may, where appropriate, also be invited to attend the meetings of the Board. The observers should be subject to the same professional secrecy requirements as the members and the staff of the Board and staff exchanged with or seconded by participating Member States carrying out resolution duties.

(19c) The Board should be able to establish internal resolution teams composed of its own staff and staff of the national resolution authorities of the participating Member States, that should be headed by Coordinators appointed from the Board's senior staff, who might be invited as observers to participate in the executive sessions of the Board, but would not be attributed any voting rights.

(19d) The principle of sincere cooperation between the Union’s institutions is enshrined in the Treaties, in particular in Article 13(2) of the Treaty on European Union.

(20) In the light of the Board’s and of the Commission's missions under this Regulation and the resolution objectives which include the protection of public funds, the functioning of the SRM should be financed from contributions paid by the institutions in the participating Member States. Under no circumstances should the budgetary liability of the Member States or the Union be engaged in meeting those costs.

(21) The Commission and the Board, where relevant, should replace the national resolution authorities designated under Directive [BRRD] in respect of all aspects relating to the resolution decision-making process. The national resolution authorities designated under Directive [BRRD] should continue to carry out activities relating to the implementation of resolution schemes adopted by the Board. In order to ensure transparency and democratic control, as well as to safeguard the rights of the Union institutions, the Board should be accountable to the European Parliament and to the Council for any decisions taken on the basis of this proposal. For the same reasons of transparency and democratic control, national parliaments should have certain rights to obtain information about the activities of the Board and to engage in a dialogue with it.

(21a) All relevant authorities should consider the principle of proportionality when applying this Regulation. The principle of proportionality implies, in particular, the evaluation of the impact that the failure of an institution could have, due to the nature of its business, its shareholding structure, its legal form, its risk profile, its size and its legal status, for example, whether it benefits from a waiver pursuant to Article 10 of Regulation (EU) No 575/2013, its interconnectedness with other institutions or to the financial system in general, the scope and the complexity of its activities and its membership of an institutional protection scheme (IPS) that meets the requirements of Article 113(7) of Regulation (EU) No 575/2013 or of another cooperative mutual solidarity systems as referred to in Article 113(6) of that Regulation, and whether it exercises any investment services or activities as defined in Article 4(1)(2) of Directive 2004/39/EC.

(21b) At the request of the national parliaments of the participating Member States, it should be possible for the relevant committees of those parliaments to hold a hearing, in the presence of the competent national authority, with a representative of the Board.

(22) Where Directive [BRRD] provides for the possibility of applying simplified obligations or waivers by the national resolution authorities in relation to the requirement of drafting resolution plans, a procedure should be provided for whereby the Board could authorise the application of such simplified obligations.

(23) To ensure a uniform approach for institutions and groups the Board should be empowered to draw up resolution plans for such institutions and groups , in cooperation with the national resolution authorities, which the Board may require to perform tasks relating to the drawing up of resolution plans . The Board should assess the resolvability of institutions and groups, and take measures aimed at removing impediments to resolvability, if any. The Board should require national resolution authorities to apply such appropriate measures designed to remove impediments to resolvability in order to ensure consistency and the resolvability of the institutions concerned. Because of the institution-specific and confidential nature of the information contained in the resolution plans, decisions concerning the drawing up, assessment, and approval of the resolution plans and the application of appropriate measures should be taken by the Board in its executive session.

(24) Resolution planning is an essential component of effective resolution. The Board should therefore have the power to require changes to the structure and organization of institutions or groups in order to remove practical impediments to the application of resolution tools and ensure the resolvability of the entities concerned. Due to the potentially systemic nature of all institutions, it is crucial in order to maintain financial stability that authorities have the possibility to resolve any institution. In order to respect the right to conduct business laid down by Article 16 of the Charter of Fundamental Rights, the Board's discretion should be limited to what is necessary to simplify the structure and operations of the institution solely to improve its resolvability. In addition, any measure imposed for such purposes should be consistent with Union law. Measures should neither directly nor indirectly be discriminatory on ground of nationality, and should be justified by the overriding reason of the public interest in financial stability. To determine whether an action was taken in the general public interest, the Board, acting in the general public interest, should be able to achieve the resolution objectives without encountering impediments to the application of resolution tools or its ability to exercise the powers conferred on it. Furthermore, an action should not go beyond the minimum necessary to attain the objectives.

(24a) Resolution plans should take the impact on employees into account and, in accordance with Directive [BRRD], should include procedures for informing and consulting with employees or their representatives throughout the resolution process. Where applicable, collective agreements, or other arrangements provided for by the social partners, should be respected in this regard. Information about resolution plans, including any updates, should be communicated to the employees or their representatives as provided for in Directive [BRRD].

(25) The single resolution mechanism should be based on the frameworks of Directive [BRRD] and the SSM. Therefore, the Board should be empowered to intervene at an early stage where the financial situation or the solvency of an institution is deteriorating. The information that the Board receives from ▐ the ECB at this stage is instrumental in making a determination on the action it might take in order to prepare for the resolution of the institution concerned.

(26) In order to ensure rapid resolution action when it becomes necessary, the Board should closely monitor, in cooperation with the relevant competent authority or the ECB, the situation of the institutions concerned and the compliance of those institutions with any early intervention measure taken in their respect.

(27) In order to minimise disruption of the financial market and to the economy, the resolution process should be accomplished in a short time. Depositors should be granted access at least to the guaranteed deposits as promptly as possible, and in any event before depositors are afforded access to guaranteed deposits in the context of a normal insolvency procedure, in accordance with Directive [DGS]. The Commission should, throughout the resolution procedure, have access to any information which it deems necessary to take an informed decision in the resolution process. Where the Commission decides to adopt the draft decision prepared by the Board to put an institution under resolution, the Board should immediately adopt a resolution scheme establishing the details of the resolution tools and powers to be applied, and the use of any financing arrangements.

(28) Liquidation of a failing institution under normal insolvency proceedings could jeopardise financial stability, interrupt the provision of essential services, and affect the protection of depositors. In such a case there is a public interest in applying resolution tools. The objectives of resolution should therefore be to ensure the continuity of essential financial services, to maintain the stability of the financial system, to reduce moral hazard by minimising reliance on public financial support to failing institutions, and to protect depositors.

(29) However, the winding up of an insolvent institution through normal insolvency proceedings should always be considered before a decision could be taken to maintain the institution as a going concern. An insolvent institution should be maintained as a going concern for financial stability purposes and with the use, to the extent possible, of private funds. That may be achieved either through sale to or merger with a private sector purchaser, or after having written down the liabilities of the institution, or after having converted its debt to equity in order to do a recapitalisation.

(30) When exercising resolution powers, the Commission and the Board should make sure that shareholders and creditors bear an appropriate share of the losses, that the managers are replaced or that further managers added , that the costs of the resolution of the institution are minimised, and that all creditors of an insolvent institution that are of the same class are treated in a similar manner in accordance with this Regulation and with Directive [BRRD] .

(31) The limitations on the rights of shareholders and creditors should comply with Article 52 of the Charter of Fundamental Rights. The resolution tools should therefore be applied only to those institutions that are failing or likely to fail, and only when it is necessary to pursue the objective of financial stability in the general interest. In particular, resolution tools should be applied where the institution cannot be wound up under normal insolvency proceedings without destabilizing the financial system and the measures are necessary in order to ensure the rapid transfer and continuation of systemically important functions and where there is no reasonable prospect for any alternative private solution, including any increase of capital by the existing shareholders or by any third party, sufficient to restore the full viability of the institution.

(32) Interference with property rights should not be disproportionate. As a consequence, affected shareholders and creditors should not incur greater losses than those which they would have incurred had the institution been wound up at the time that the resolution decision is taken. In the event of partial transfer of assets of an institution under resolution to a private purchaser or to a bridge institution, the residual part of the institution under resolution should be wound up under normal insolvency proceedings. In order to protect existing shareholders and creditors of the institution during the winding up proceedings, they should be entitled to receive in payment of their claims not less than what it is estimated they would have recovered if the whole institution had been wound up under normal insolvency proceedings.

(33) In order to protect the right of shareholders and ensure that creditors do not receive less than what they would receive in normal insolvency proceedings, clear obligations should be laid down concerning the valuation of the assets and liabilities of the institution and sufficient time should be allowed to estimate properly the treatment that they would have received if the institution had been wound up under normal insolvency proceedings. There should be the possibility to start such a valuation already in the early intervention phase. Before any resolution action is taken, an estimate should be carried out of the value of the assets and liabilities of the institution and of the treatment that shareholders and creditors would receive under normal insolvency proceedings.

(34) It is important that losses be recognised upon failure of the institution. The guiding principles for the valuation of assets and liabilities of failing institutions are provided for in Directive [BRRD] . It should be possible, for reasons of urgency, that the Board makes a rapid provisional valuation of the assets or liabilities of a failing institution which should apply until an independent valuation is carried out.

(35) So as to ensure that the resolution process remains objective and certain, it is necessary to lay down the order in which unsecured claims of creditors against an institution put under resolution should be written down or converted. In order to limit the risk of creditors incurring greater losses than if the institution had been wound up under normal insolvency proceedings, the order to be laid down should be applicable both in normal insolvency proceedings and in the write down or conversion process under resolution. This would also facilitate the pricing of debt.

(35a) Harmonisation of the insolvency law throughout the Union, which would constitute a major step in the construction of a truly internal market, has not yet been achieved. However, both for the entities established in Member States participating in the SSM and for those established in other Member States, due to the harmonisation introduced by Directive [BRRD], the hierarchy of the claims of the creditors in the case of insolvency, which includes depositor's preference, will be the same. Such harmonisation eliminates an important source of regulatory arbitrage. Nevertheless, there should be a progressive move towards a Union regime for insolvency.

(36) The Commission , based on a draft decision prepared by the Board, should provide the framework for the resolution action to be taken following the resolution plans of the entities concerned and depending on the circumstances of the case and should be able to designate for use all necessary resolution tools. Within that clear and precise framework, the Board should decide on the detailed resolution scheme. The relevant resolution tools should include the sale of business tool, the bridge institution tool, the bail-in tool and the asset separation tool, as provided for by Directive [BRRD]. The framework should also make it possible to assess whether the conditions for the write-down and conversion of capital instruments are met.

(37) In accordance with Directive [BRRD], the sale of business tool should enable the sale of the institution or parts of its business to one or more purchasers without the consent of shareholders.

(38) In accordance with Directive [BRRD], the asset separation tool should enable authorities to transfer under-performing or impaired assets to a separate vehicle. That tool should be used only in conjunction with other tools to prevent an undue competitive advantage for the failing institution.

(39) An effective resolution regime should minimise the costs of the resolution of a failing institution borne by the taxpayers. It should also ensure that even large institutions of systemic importance can be resolved without jeopardising financial stability. The bail-in tool achieves that objective by ensuring that shareholders and creditors of the entity suffer appropriate losses and bear an appropriate part of those costs. To this end, statutory debt write down powers should be included in a framework for resolution as an additional option in conjunction with other resolution tools, as recommended by the Financial Stability Board.

(40) In accordance with Directive [BRRD], in order to ensure the necessary flexibility to allocate losses to creditors in a range of circumstances, it is appropriate that the bail-in tool be applicable both where the objective is to resolve the failing institution as a going concern if there is a realistic prospect that the institution’s viability may be restored, and where systemically important services are transferred to a bridge institution and the residual part of the institution ceases to operate and is wound up.

(41) In accordance with Directive [BRRD], where the bail-in tool is applied with the objective of restoring the capital of the failing institution to enable it to continue to operate as a going concern, resolution through bail-in should always be accompanied by the replacement of management and a subsequent restructuring of the institution and its activities in a way that addresses the reasons for its failure. That restructuring should be achieved through the implementation of a business reorganisation plan.

(42) In accordance with Directive [BRRD], it is not appropriate to apply the bail-in tool to claims in so far as they are secured, collateralised or otherwise guaranteed. However, in order to ensure that the bail-in tool is effective and achieves its objectives, it should be possible to apply it to as wide a range of the unsecured liabilities of a failing institution as possible. Nevertheless, it is appropriate to exclude certain kinds of unsecured liability from the scope of application of the bail-in tool. For reasons of public policy and effective resolution, the bail-in tool should not apply to those deposits that are protected under Directive 94/19/EC of the European Parliament and of the Council (7), to liabilities to employees of the failing institution or to commercial claims that relate to goods and services necessary for the daily functioning of the institution.

(43) In accordance with Directive [BRRD], depositors that hold deposits guaranteed by a deposit guarantee scheme should not be subject to the exercise of the bail-in tool. ▐The exercise of the bail-in powers would ensure that depositors continue having access to their deposits▐.

(44) In order to implement the burden-sharing by shareholders and junior creditors, as required under State aid rules, the single resolution mechanism would be able to apply, by way of analogy, as of the entry into application of this Regulation and of Directive [BRRD] , the bail-in tool.

(45) To avoid institutions structuring their liabilities in a manner that impedes the effectiveness of the bail in tool, the Board should be able to establish that the institutions hold an aggregate amount of own funds, subordinated debt and senior liabilities subject to the bail-in tool expressed as a percentage of the total liabilities of the institution, that do not qualify as own funds for the purposes of Regulation (EU) No 575/2013 of the European Parliament and of the Council (8) and of Directive 2013/36/EU of 26 June 2013 of the European Parliament and of the Council (9), which institutions should have at all times and which is set out in the resolution plans .

(46) The best method of resolution should be chosen depending on the circumstances of the case and for this purpose, all the resolution tools provided for by Directive [BRRD] should be available and applied in accordance with that Directive .

(47) Directive [BRRD] has conferred the power to write down and convert capital instruments on national resolution authorities, since the conditions for the write-down and conversion of capital instruments may coincide with the conditions for resolution and in such a case, an assessment is to be made of whether the sole write-down and conversion of the capital instruments is sufficient to restore the financial soundness of the entity concerned or it is also necessary to take resolution action. As a rule, it will be used in the context of resolution. The Board and the Commission should replace national resolution authorities also in this function and should therefore be empowered to assess whether the conditions for the write-down and conversion of capital instruments are met and to decide whether to place an entity under resolution, if the requirements for resolution are also fulfilled.

(48) The efficiency and uniformity of resolution action should be ensured in all the participating Member States. For this purpose, the Board should be empowered , ▐ where a national resolution authority has not or not sufficiently applied the decision of the Board , to issue orders directly to an institution under resolution ▐.

(49) In order to enhance the effectiveness of the single resolution mechanism, the Board should closely cooperate with the European Banking Authority in all circumstances. Where appropriate the Board should also cooperate with the European Securities and Markets Authority, the European Insurance and Occupational Pensions Authority and the European Systemic Risk Board, and the other authorities which form part of the European System of Financial Supervision. Moreover, the Board should closely cooperate with the ECB and the other authorities empowered to supervise credit institutions within the SSM, in particular for groups subject to the consolidated supervision by the ECB. To effectively manage the resolution process of failing banks, the Board should cooperate with the national resolution authorities at all stages of the resolution process. Thus, cooperation with the latter is necessary not only for the implementation of resolution decisions taken by the Board, but also prior to the adoption of any resolution decision, at the stage of resolution planning or during the phase of early intervention. In the exercise of its tasks under this Regulation, the Commission should cooperate closely with EBA and should take appropriate account of the guidelines and recommendations issued by it.

(49a) When applying resolution tools and exercising resolution powers, the Board should ensure that the representatives of the employees of the entities concerned are informed and, where appropriate, are consulted, as provided for in Directive [BRRD]. Where applicable, collective agreements, or other arrangements provided for by social partners, should be respected in this regard.

(50) Since the Board replaces national resolution authorities of the participating Member States in their resolution decisions, the Board should also replace those authorities for the purposes of the cooperation with non-participating Member States as far as the resolution functions are concerned. In particular, the Board should represent all authorities from the participating Members in the resolution colleges including authorities from non-participating Member States.

(50a) The Board and the resolution authorities of Member States that are not participating Member States should conclude a memorandum of understanding describing in general terms how they will cooperate with one another in the performance of their tasks under Directive [BRRD]. The memoranda of understanding could, inter alia, clarify the consultation relating to decisions of the Commission and the Board having effect on subsidiaries or branches established in the non-participating Member State whose parent undertaking is established in a participating Member State. The memoranda should be reviewed on a regular basis.

(51) As many institutions operate not only within the Union, but internationally, an effective resolution mechanism needs to set out principles of cooperation with the relevant third country authorities. Support to third country authorities should be provided in accordance with the legal framework provided by Article 88 of Directive [BRRD]. For this purpose, as the Board should be the single authority empowered to resolve failing banks in the participating Member States, the Board should be exclusively empowered to conclude non-binding cooperation agreements with those third country authorities, on behalf of the national authorities of the participating Member States.

(52) In order to carry out its tasks effectively, the Board should have appropriate investigatory powers. It should be able to require all necessary information either directly or through national resolution authorities, and to conduct investigations and on-site inspections, where appropriate in cooperation with national competent authorities , making full use of all information available to the ECB and the national competent authorities . In the context of resolution, on-site inspections would be available for the Board to effectively monitor implementation by national authorities and to ensure that the Commission and the Board take their decisions on the basis of fully accurate information.

(53) So as to ensure that the Board has access to all relevant information, the relevant entities and their employees should not be able to invoke professional secrecy rules to prevent the disclosure of information to the Board. At the same time, the disclosure of such information to the Board should never be seen as a breach of professional secrecy.

(54) In order to ensure that decisions adopted within the framework of the single resolution mechanism are respected, proportionate and dissuasive penalties should be imposed in the case of an infringement. The Board should be entitled to instruct national resolution authorities to impose administrative penalties or periodic penalty payments on entities for failure to comply with obligations under its decisions. In order to ensure consistent, efficient and effective enforcement practices the Board should be entitled to issue guidelines addressed to national resolution authorities concerning the application of administrative penalties and penalty payments.

(55) Where a national resolution authority infringes the rules of the single resolution mechanism by not using the powers conferred on it under national law to implement an instruction by the Board, the Member State concerned may be liable to make good any damage caused to individuals, including where applicable to the entity or group under resolution, or any creditor of any part of that entity or group in any Member State, in accordance with that case law.

(56) Appropriate rules should be laid down governing the budget of the Board, the preparation of the budget, the adoption of internal rules specifying the procedure for the establishment and implementation of its budget, the monitoring and control of the budget by the Board in its plenary session , and the internal and external audit of the accounts.

(56a) The Board in its plenary session should also adopt, monitor and control its annual work programme and issue opinions and recommendations on the draft report by the Executive Director which should include a section on the resolution activities, including the ongoing resolution cases, and a section on financial and administrative matters.

(57) There are circumstances when the effectiveness of the resolution tools applied may depend on the availability of short-term funding for the institution or a bridge institution, the provision of guarantees to potential purchasers, or the provision of capital to the bridge institution. It is therefore important to set up a fund to avoid that public funds are used for such purposes.

(58) It is necessary to ensure that the Fund is fully available for the purpose of the resolution of failing institutions. Therefore, the Fund should not be used for any other purpose than the efficient implementation of resolution tools and powers. Furthermore, it should be used only in accordance with the applicable resolution objectives and principles , fully respecting the provisions laid down in Directive [BRRD] . Accordingly, the Board should ensure that any losses, costs or other expenses incurred in connection with the use of the resolution tools are first borne by the shareholders and the creditors of the institution under resolution. It is only if the resources from shareholders and creditors are exhausted, that the losses, costs or other expenses incurred with the resolution tools should be borne by the Fund.

(59) As a rule, contributions should be collected from the financial industry prior to and independently of any operation of resolution. When prior funding is insufficient to cover the losses or costs incurred by the use of the Fund, additional contributions should be collected to bear the additional cost or loss. Moreover, the Fund should be able to contract borrowings or other forms of support from financial institutions or other third parties where its available funds are not sufficient to cover the losses, costs and other expenses incurred by the use of the Fund and the extraordinary ex post contributions are not immediately accessible.

(59a) If national bank levies, taxes or resolution contributions in response to the crisis are in place in participating Member States, those should be replaced by contributions to the Fund in order to avoid double payments.

(60) In order to reach a critical mass and to avoid pro-cyclical effects which would arise if the Fund had to rely solely on ex post contributions in a systemic crisis, it is indispensable that the ex-ante available financial means of the Fund amount to a certain target level.

(60a) The target level of the Fund should be established as a percentage of the amount of covered deposits of all credit institutions authorised in the participating Member States. However, since the amount of the total liabilities of those institutions would be, regarding the functions of the Fund, a more adequate benchmark, the Commission should assess if a reference value relating to total liabilities, to be reached additionally to the target funding level, should be introduced in the future, maintaining the level playing field in accordance with Directive [BRRD].

(61) An appropriate time frame should be set to reach the target funding level for the Fund. However, it should be possible for the Board to adjust the contribution period to take into account significant disbursements made from the Fund.

(61a) With a view to breaking the link between sovereigns and banks and ensuring the efficiency and the credibility of the SRM, in particular while the Fund is not entirely funded, it is essential to establish a European public loan facility within a reasonable time after the entry into force of this Regulation. Any loan from that loan facility should be reimbursed by the Fund within an agreed timeframe. That loan facility would ensure the immediate availability of adequate financial means for the purposes established in this Regulation.

(62) Where participating Member States have already established national resolution financing arrangements, they should be able to provide that the national resolution financing arrangements use their available financial means, collected from institutions in the past by way of ex-ante contributions, to compensate institutions for the ex-ante contributions which those institutions should pay into the Fund. Such restitution should be without prejudice to the obligations of Member States under Directive 94/18/EC of the European Parliament and of the Council (10).

(63) In order to ensure a fair calculation of contributions and provide incentives to operate under a model which presents less risk, contributions to the Fund , which are to be determined by the Board in accordance with Directive [BRRD] and the delegated acts adopted pursuant thereto, after consulting the competent authority, should take account of the degree of risk incurred by credit institutions.

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(65) So as to protect the value of the amounts held in the Fund, these amounts should be invested in sufficiently safe, diversified and liquid assets.

(66) The Commission should be empowered to adopt delegated acts in accordance with Article 290 TFEU in order to determine the type of contributions to the Fund and the matters for which contributions are due, the manner in which the amount of the contributions is calculated and the way in which they are to be paid; specify registration, accounting, reporting and other rules necessary to ensure that the contributions are fully and timely paid; determine the contribution system for institutions that have been authorized to operate after the Fund has reached its target level; determine the criteria for the spreading out in time of the contributions; determine the circumstances under which the payment of contributions may be advanced; determine the criteria for establishing the amount of annual contributions; determine the measures to specify the circumstances and modalities under which an institution may be partially or entirely exempted from ex post contributions, and the measures to specify the circumstances and modalities under which an institution may be partially or entirely exempted from ex-post contributions.

(67) To preserve the confidentiality of the work of the Board, its members, staff of the Board, including the staff exchanged with or seconded by participating Member States for the purpose of carrying out resolution duties should be subject to requirements of professional secrecy, even after their duties have ceased. Those requirements should also apply to other persons authorised by the Board and persons authorised or appointed by the national resolution authorities of the Member States to conduct on-site inspections, and to observers invited to attend the plenary and executive session meetings of the Board. For the purpose of carrying out the tasks conferred upon it, the Board should be authorized, subject to conditions, to exchange information with national or Union authorities and bodies.

(68) In order to ensure that the Board is represented in the European System of Financial Supervision, Regulation (EU) No 1093/2010 should be amended in order to include the Board in the concept of competent authorities established by that Regulation. Such assimilation between the Board and competent authorities pursuant to Regulation (EU) No 1093/2010 is consistent with the functions attributed to EBA pursuant to Article 25 of Regulation (EU) No 1093/2010 to contribute and participate actively in the development and coordination of recovery and resolution plans and to aim at the facilitation of the resolution of failing institutions and in particular cross border groups.

(69) Until the Board is fully operational, the Commission should be responsible for the initial operations including collecting contributions necessary to cover administrative expenses and the designation of an interim executive director to authorise all necessary payments on behalf of the Board.

(70) This Regulation respects the fundamental rights and observes the principles recognised in the Charter of Fundamental Rights of the European Union, in particular the right to property, the protection of personal data, the freedom to conduct a business, employees’ right to information and consultation within the undertaking, the right to an effective remedy and to a fair trial, and has to be implemented in accordance with those rights and principles.

(71) Since the objectives of this Regulation, namely to set up an efficient and effective single European framework for the resolution of credit institutions and to ensure the consistent application of resolution rules, cannot be sufficiently achieved at the Member State level but can rather be better achieved at the Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve those objectives,

HAVE ADOPTED THIS REGULATION:

PART I

GENERAL PROVISIONS

Article 1

Subject matter

This Regulation establishes uniform rules and a uniform procedure for the resolution of the entities referred to in Article 2 that are established in the participating Member States referred to in Article 4.

Those uniform rules and procedure shall be applied by the Board, as established under Article 38, together with the Commission and the resolution authorities of the participating Member States within the framework of a single resolution mechanism established by this Regulation. The single resolution mechanism shall be supported by a single bank resolution fund (hereinafter called the ‘Fund’).

Article 2

Scope

This Regulation shall apply to the following entities:

(a) credit institutions established in participating Member States;

(b) parent undertakings established in one of the participating Member States, including financial holding companies and mixed financial holding companies when subject to consolidated supervision carried out by the ECB in accordance with Article 4(1)(i) of Regulation (EU) No 1024/2013;

(c) investment firms and financial institutions established in participating Member States when they are covered by the consolidated supervision of the parent undertaking carried out by the ECB in accordance with Article 4(1)(i) of Regulation (EU) No 1024/2013.

Article 3

Definitions

For the purposes of this Regulation, the definitions laid down in Article 2 of Directive [BRRD] and Article 3 of Directive 2013/36/EU apply. In addition, the following definitions […] apply:

(1) ‘national competent authority’ means any national competent authority as defined in Article 2(2) of Regulation (EU) No 1024/2013;

(1a) ‘competent authority’ means a competent authority as defined in Article 4(1)(40) of Regulation (EU) No 575/2013 and the ECB in its supervisory function in accordance with Regulation (EU) No 1024/2013;

(2) ‘national resolution authority’ means an authority designated by a Member State in accordance with Article 3 of Directive [BRRD];

(3) ‘resolution action’ means the application of a resolution tool to an institution or an entity referred to in Article 2, or the exercise of one or more resolution powers in relation thereto;

(3a) ‘the Board’ means the Single Resolution Board established in accordance with Article 38 of this Regulation;

(4) ‘covered deposits’ mean deposits which are guaranteed by deposit guarantee schemes under national law in accordance with Directive 94/19/EC and up to the coverage level provided for in Article 7 of Directive 94/19/EC;

(5) ‘eligible deposits’ means deposits defined in Article 1 of Directive 94/19/EC which are not excluded from protection according to Article 2 of that Directive, regardless of their amount;

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(11) ‘institution under resolution’ means an entity referred to in Article 2 in respect of which a resolution action is taken;

(12) ‘institution’ means a credit institution or an investment firm covered by consolidated supervision in accordance with point (c) of Article 2;

(13) ‘group’ means a parent undertaking and its subsidiaries, which are entities as referred to in Article 2;

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(19) ‘available financial means’ means the cash, deposits, assets and irrevocable payment commitments available to the Fund for the purposes referred to in Article 74;

(20) ‘target funding level’ means the amount of available financial means to be reached under Article 68.

Article 4

Participating Member States

A participating Member States shall be a Member States whose currency is the euro or a Member State whose currency is not the euro which has established a close cooperation in accordance with Article 7 of Regulation (EU) No 1024/2013.

Article 5

Relation to Directive [BRRD] and applicable national law

-1. Subject to this Regulation, the exercise by the Commission and the Board of tasks or powers under this Regulation shall be governed by Directive [BRRD] and any delegated acts adopted pursuant thereto.

1. Where, by virtue of this Regulation, the Commission or the Board exercises tasks or powers, which, according to Directive [BRRD] are to be exercised by the national resolution authority of a participating Member State, the Board shall, for the application of this Regulation and of Directive [BRRD], be considered to be the relevant national resolution authority or, in the case of cross-border group resolution, the relevant group level resolution authority.

1a. Where the Board exercises the powers conferred on it by this Regulation, it shall be subject to binding regulatory and implementing technical standards developed by EBA and adopted by the Commission in accordance with Articles 10 to 15 of Regulation (EU) No 1093/2010, to any guidelines and recommendations adopted by EBA in accordance to Article 16 of Regulation (EU) No 1093/2010 and to any decisions of EBA in accordance with Article 19 of Regulation (EU) No 1093/2010 under the relevant provisions of Directive [BRRD].

2. The Board, when acting as national resolution authority, shall act, where relevant, under authorisation of the Commission.

3. Subject to the provisions of this Regulation, the national resolution authorities of the participating Member State shall act on the basis of and in conformity with the relevant provisions of national law, as harmonised by Directive [BRRD].

Article 6

General principles

1. No action, proposal or policy of the Board, the Commission or a national resolution authority shall discriminate against entities referred to in Article 2, deposit holders, investors or other creditors established in the Union on grounds of their nationality, or place of business.

1a. Every action, proposal or policy of the Board, the Commission or of a national resolution authority in the framework of the SRM shall be undertaken with a view to promoting the stability of the financial system within the Union and within each participating Member State with full regard and duty of care for the unity and integrity of the internal market.

2. When making decisions or taking action, which may have an impact in more than one ▐ Member State, and in particular when taking decisions concerning groups established in two or more participating Member States, the Commission and the Board shall give due consideration to all of the following factors:

(a) the interests of the ▐ Member States where a group operates and in particular the impact of any decision or action or inaction on the financial stability, the economy, the deposit guarantee scheme or the investor compensation scheme of any of those Member States;

(b) the objective of balancing the interests of the various Member States involved and avoiding unfairly prejudicing or unfairly protecting the interests of a ▐ Member State;

(c) the need to avoid a negative impact for other parts of a group of which an entity referred to in Article 2, which is subject to a resolution, is a member;

(ca) where possible, the interest of the group to continue its cross-border activity;

(d) the need to avoid a disproportionate increase in the costs imposed on the creditors of the entities referred to in Article 2, to the extent that it would be greater than the one that they will have incurred had they been resolved through normal insolvency proceedings;

(e) the decisions to be taken under Article 107 of the TFEU and referred to in Article 16(10).

3. The Commission and the Board shall balance the factors referred to in paragraph 2 with the resolution objectives referred to in Article 12 as appropriate to the nature and circumstances of each case.

4. Decisions or actions of the Board or of the Commission shall neither require Member States to provide extraordinary public financial support nor directly impinge on the fiscal responsibilities of the Member States .

4a. When making decisions or taking actions, the Board shall ensure that the representatives of the employees of the entities concerned are informed and, where appropriate, consulted.

4b. Actions, proposals and policies of the Commission, the Board and national resolution authorities under this Regulation shall respect the principle of non-discrimination with regard to any Member State or group of Member States.

4c. When carrying out the tasks conferred on it by this Regulation, the Commission shall act independently, separately from its other tasks, and strictly in accordance with the objectives and principles set out in this Regulation and in Directive [BRRD]. The separation of tasks should be guaranteed through appropriate organisational adjustments.

PART II

SPECIFIC PROVISIONS

TITLE I

FUNCTIONS WITHIN THE SINGLE RESOLUTION MECHANISM AND PROCEDURAL RULES

Chapter 1

Resolution planning

Article 7

Resolution plans

1. The Board shall draw up , together with national resolution authorities, and shall approve resolution plans for the entities referred to in Article 2 and for groups.

2. For the purposes of paragraph 1, the national resolution authorities shall forward to the Board all information necessary to draw up and implement the resolution plans, as obtained by them in accordance with Article 10 and Article 12(1) of Directive [BRRD], without prejudice to Chapter 5 of this Title.

2a. The resolution plan for each entity and group resolution plans shall be prepared in accordance with Articles 9 to 12 of Directive [BRRD].

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7. The Board shall draw up the resolution plans in cooperation with the supervisor or consolidating supervisor and with the national resolution authorities of the participating Member States in which the entities are established. The Board shall cooperate with resolution authorities in non-participating Member States where there are entities in those Member States included in consolidated supervision.

8. The Board may require national resolution authorities to prepare preliminary draft resolution plans and the group level resolution authority to prepare a preliminary draft group resolution plan for revision and approval by the Board . The Board may require national resolution authorities to perform other tasks relating to the drawing up of resolution plans.

9. Resolution plans shall be reviewed, and where appropriate updated, in accordance with Articles 9 and 12 of Directive [BRRD] .

9a. Decisions regarding the drawing up, assessment and approval of the resolution plans and the application of appropriate measures shall be taken by the Board in its executive session.

Article 8

Assessment of resolvability

1. When drafting resolution plans in accordance with Article 7, the Board, after consulting the competent authorities, including the ECB, and the resolution authorities of non-participating Member States in which subsidiaries are located or in which significant branches are located insofar as is relevant to the significant branch as determined in Articles 13 and 13a of Directive [BRRD] , shall conduct an assessment of the extent to which institutions and groups are resolvable as required by Articles 13 and 13a of Directive [BRRD] .

2. ▐ An entity shall be deemed to be resolvable in the situations provided for in Article 13 of Directive [BRRD] .

3. ▐ A group shall be deemed resolvable in the situations provided for in Article 13a of Directive [BRRD] .

4. For the purpose of the assessment, the Board shall, as a minimum, examine the matters specified in Section C of the Annex of Directive [BRRD].

5. If pursuant to an assessment of resolvability for an entity or a group carried out in accordance with paragraph 1 , the Board, after consulting the competent authority, including the ECB, determines that there are potential substantive impediments to the resolvability of that entity or group, the Board shall prepare a report, in consultation with the competent authorities, addressed to the institution or the parent undertaking analysing the substantive impediments to the effective application of the resolution tools and the exercising of the resolution powers. That report shall also recommend any measures that, in the Board’s view, are necessary or appropriate to remove those impediments in accordance with paragraph 8.

6. The report shall be notified to the entity or parent undertaking concerned, to the competent authorities and to the resolution authorities of non-participating Member States in which significant branches or subsidiaries are located. It shall be supported by reasons for the assessment or determination in question and shall indicate how that assessment or determination complies with the requirement for proportionate application set out in Article 6.

7. Within four months from the date of receipt of the report, the entity or the parent undertaking may submit observations and propose to the Board alternative measures to remedy the impediments identified in the report. The Board shall communicate any measure proposed by the entity or parent undertaking to the competent authorities and to the resolution authorities of non-participating Member States in which significant branches or subsidiaries are located.

8. If the measures proposed by the entity or parent undertaking concerned do not effectively remove the impediments to resolvability, the Board shall take a decision, after consultation with the competent authorities and, where appropriate, the macroprudential authority, indicating that the measures proposed do not effectively remove the impediments to resolvability, and instructing the national resolution authorities to require the institution, the parent undertaking, or any subsidiary of the group concerned, to take any of the measures listed in Article 14 of Directive [BRRD] , based on the following criteria:

(a) the effectiveness of the measure in removing the impediments to resolvability;

(b) the need to avoid a negative impact on financial stability in ▐ Member States where the group operates ;

(c) the need to avoid an impact on the institution or the group concerned which would go beyond what is necessary to remove the impediment to resolvability or would be disproportionate.

9. For the purpose of paragraph 8, the Board shall instruct national resolution authorities to take any of the ▐ measures referred to in Article 14 of Directive [BRRD].

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10. The national resolution authorities shall implement the instructions of the Board in accordance with Article 26.

Article 8a

Resolvability of systemically important institutions

Without prejudice to its powers and independence, the Board shall prioritise the assessment of the resolvability of institutions that carry systemic risks, including but not limited to institutions identified as global systemically important institutions (G-SIIs) or as other systemically important institutions (O-SIIs) pursuant to Article 131 of Directive 2013/36/EU, and, where appropriate, shall draw up a plan for each of those institutions to remove impediments to resolvability in accordance with Article 8 of this Regulation and with Article 14 of Directive [BRRD].

Article 9

Simplified obligations and waivers

1. The Board, on its own initiative or upon proposal by a national resolution authority, may apply simplified obligations in relation to the drafting of recovery and resolution plans in accordance with Article 4 of Directive [BRRD] .

2. National resolution authorities may propose to the Board to apply simplified obligations regarding the drafting of the plans for specific institutions or groups. That proposal shall be reasoned and shall be supported by all the relevant documentation.

3. On receiving a proposal pursuant to paragraph 1, or when acting on its own initiative, the Board shall conduct an assessment of the institutions or group concerned. The assessment shall be made having regard to the elements provided for in Article 4 of Directive [BRRD] .

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4. The Board shall assess the continuing application of simplified obligations and cease to apply those in the situations provided for in Article 4 of Directive [BRRD] .

Where the national resolution authority which has proposed the application of simplified obligation ▐ in accordance with paragraph 1 considers that the decision to apply simplified obligation ▐ must be withdrawn, it shall submit a proposal to the Board to that end. In that case, the Board shall take a decision on the proposed withdrawal taking full account of the justification for withdrawal put forward by the national resolution authority in the light of the elements set out in paragraph 3.

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7. The Board shall inform the EBA about its application of paragraphs 1 and 4.

Article 10

Minimum requirement for own funds and eligible liabilities

1. The Board shall, after consulting competent authorities, including the ECB, determine the minimum requirement of own funds and eligible liabilities, as referred to in paragraph 2, subject to write down and conversion powers, that institutions and parent undertakings referred to in Article 2 shall be required to maintain.

2. The minimum requirement shall be calculated in accordance with Article 39 of Directive [BRRD] .

3. The determination referred to in paragraph 1 shall be made on the basis of the ▐ criteria laid down in Article 39 of Directive [BRRD].

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The determination shall specify the minimum requirement that the institutions shall be required to comply with on an individual basis, and that parent undertakings shall be required to comply with on a consolidated basis. The Board may decide to waive the minimum requirement on a consolidated or individual basis in the situations referred to in Article 39 of Directive [BRRD] ▐.

4. The determination referred to in paragraph 1 may provide that the minimum requirement of own funds and eligible liabilities is partially met on a consolidated or an individual basis through contractual bail-in instrument in accordance with Article 39 of Directive [BRRD] .

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6. The Board shall take any determination referred to in paragraph 1 in the course of developing and maintaining resolution plans pursuant to Article 7.

7. The Board shall address its determination to the national resolution authorities. The national resolution authorities shall implement the instructions of the Board in accordance with Article 26. The Board shall require that the national resolution authorities verify and ensure that institutions and parent undertakings maintain the minimum requirement provided for in paragraph 1.

8. The Board shall inform the ECB and the EBA of the minimum requirement that it has determined for each institution and parent undertaking under paragraph 1.

Chapter 2

Early intervention

Article 11

Early intervention

1. The ECB , on its own initiative or following a communication from a national competent authority of a participating Member State ▐, shall inform the Board of any measure that they require an institution or group to take or that they take themselves pursuant to Article 16 of Regulation (EU) No 1024/2013, pursuant to Articles 23(1) or 24 of Directive [BRRD], or pursuant to Article 104 of Directive 2013/36/EU.

The Board shall notify the Commission of any information which it has received pursuant to the first subparagraph.

2. From the date of receipt of the information referred to in paragraph 1, and without prejudice to the powers of the ECB and competent authorities in accordance with other Union law, the Board may prepare for the resolution of the institution or group concerned.

For the purposes of the first subparagraph, the Board shall closely monitor, in cooperation with the ECB and relevant competent authority, the conditions of the institution or the parent undertaking, and their compliance with any early intervention measure that has been required to take.

3. The Board shall have the power:

(a) to require, in accordance with Chapter 5 of this Title, all information that is necessary in order to prepare for the resolution of the institution or of the group;

(b) to carry out a valuation of the assets and liabilities of the institution or group in accordance with Article 17;

(c) to contact potential purchasers in order to prepare for the resolution of the institution or the group, or to require the institution, parent undertaking, or the national resolution authority to do so, subject to compliance with the confidentiality requirements established by this Regulation and by Article 76 of Directive [BRRD];

(d) to require the relevant national resolution authority to draft a preliminary resolution scheme for the institution or group concerned.

4. If the ECB or the national competent authorities of the participating Member States intend to impose on an institution or a group any additional measure under Article 16 of Regulation (EU) No 1024/2013 or under Articles 23 or 24 of Directive [BRRD] or under Article 104 of Directive 2013/36/EU, before the institution or group has fully complied with the first measure notified to the Board, the ECB, on its own initiative or following a communication from the national competent authority, shall inform the Board before ▐ such additional measure is imposed on the institution or group concerned.

5. The ECB or the competent authority and the Board shall ensure that the additional measure referred to in paragraph 4 and any action of the Board aimed at preparing for resolution under paragraph 2 are consistent.

Chapter 3

Resolution

Article 12

Resolution Objectives

1. When acting under the resolution procedure referred to in Article 16, the Commission and the Board, in respect of their respective responsibilities, shall have regard to the resolution objectives provided for in Article 26 of Directive [BRRD] , and choose the tools and powers that, in its view, best achieve the objectives that are relevant in the circumstances of the case.

2. ▐ When pursuing the above objectives, the Commission and the Board shall act in accordance with Article 26 of Directive [BRRD] .

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Article 13

General principles governing resolution

When acting under the resolution procedure referred to in Article 16, the Commission and the Board shall take all appropriate measures to ensure that the resolution action is taken in accordance with the ▐ principles laid down in Article 29 of Directive [BRRD].

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Article 14

Resolution of financial institutions and parent undertakings

Resolution action in relation to financial institutions and their parent undertakings shall be taken by the Commission , based on a draft decision prepared by the Board, in accordance with Article 28 of Directive [BRRD].

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Article 15

Order of priority of claims

When applying the bail-in tool to an institution under resolution, and without prejudice to liabilities excluded from the bail-in tool under Article 24(3), the Commission , based on a draft decision prepared by the Board, shall decide on, and the Board and the national resolution authorities of the participating Member States shall exercise the write down and conversion powers to claims following the sequence laid down in Article 43 of Directive [BRRD].

Article 16

Resolution procedure

1. Where the ECB , on its own initiative or following a communication from a national competent authority of a participating Member State, assesses that the conditions referred to in points (a) and (b) of paragraph 2 are met in relation to an entity referred to in Article 2, it shall notify that assessment without delay to the Commission and the Board.

The notification referred to in the first subparagraph may take place following a request for assessment from the Board or from a national resolution authority, if any of them considers that there is reason to consider that an institution is failing or likely to fail.

The notification referred to in the first subparagraph shall take place after consultation of the Board and of the national resolution authority.

1a. The Board shall prepare and take all its decisions relating to the resolution procedure in its executive session in accordance with Article 50.

2. On receiving a notification pursuant to paragraph 1, ▐ the Board in its executive session shall conduct an assessment to verify that the following conditions are met:

(a) the entity is failing or likely to fail;

(b) having regard to timing and other relevant circumstances, there is no reasonable prospect that any alternative private sector measures, including measures by IPS, or supervisory action (including early intervention measures or the write down or conversion of capital instruments in accordance with Article 18 ), taken in respect of the entity, would prevent its failure within a reasonable timeframe;

(c) a resolution action is necessary in the public interest pursuant to paragraph 4.

3. For the purposes of point (a) of paragraph 2, the entity is deemed to be failing or likely to fail in any of the ▐ circumstances referred to in Article 27(2) of Directive [BRRD].

▐

4. For the purposes of point (c) of paragraph 2, a resolution action shall be treated as in the public interest in the circumstances referred to in Article 27(3) of Directive [BRRD].

5. Where it assesses that all the conditions established in paragraph 2 are met, the Board shall submit to the Commission , taking into account the notification referred to in paragraph 1, a draft decision providing that the entity be placed under resolution. The draft decision shall include at least the following:

(a) the recommendation to place the entity under resolution;

(b) the framework of the resolution tools referred to in Article 19(32);

(c) the framework of the use of the Fund to support the resolution action in accordance with Article 71.

6. Upon receiving the draft decision from the Board , the Commission shall decide whether or not to adopt the draft decision, on the framework of the resolution tools that shall be applied in respect of the entity concerned and , where appropriate, on the use of the Fund to support the resolution action. ▐

Where the Commission intends not to adopt the draft decision submitted by the Board or to adopt it with amendments, it shall send the draft decision back to the Board, explaining why it does not intend to adopt it or, as the case may be, explaining the reasons for its intended amendments, and requesting its revision. The Commission may establish a deadline within which the Board may amend its initial draft decision on the basis of the Commission's proposed amendments and resubmit it to the Commission. Except in duly justified cases of emergency, the Board shall have at least five working days to revise the draft decision following a request by the Commission .

The Commission shall make every effort to comply with any guidelines and recommendations issued by EBA concerning the exercise of the tasks conferred on it under this paragraph and act, regarding the confirmation of whether it complies or intends to comply with that guideline or recommendation, as provided for in Article 16(3) of Regulation (EU) No 1093/2010.

7. The decision of the Commission shall be addressed to the Board. If the Commission decides not to place the entity under resolution, because the condition laid down in paragraph 2(c) is not met, the entity concerned shall be wound up in accordance with national insolvency law.

8. Within the framework set by the Commission decision, the Board , in its executive session, shall decide on the resolution scheme referred to in Article 20 and shall ensure that the necessary resolution action is taken to carry out the resolution scheme by the relevant national resolution authorities. The decision of the Board shall be addressed to the relevant national resolution authorities and shall instruct those authorities, which shall take all necessary measures to implement the decision of the Board in accordance with Article 26, by exercising any of the resolution powers provided for in Directive [BRRD], in particular those in Articles 56 to 64 of that Directive. Where State aid is present, the Board may only decide after the Commission has taken a decision on that State aid.

9. If the Board considers that resolution measures could constitute State aid pursuant to Article 107(1) TFEU, it shall invite the participating Member State or Member States concerned to immediately notify the envisaged measures to the Commission under Article 108(3) TFEU.

10. To the extent that the resolution action as proposed by the Board , in its executive session, involves the use of the Fund and does not entail the grant of State aid pursuant to Article 107(1) of the TFEU, the Commission shall apply in parallel, by way of analogy, the criteria established for the application of Article 107 TFEU.

11. The Commission shall have the power to obtain from the Board any information which it deems relevant for fulfilling its tasks under this Regulation and, where applicable, Article 107 TFEU. The Board shall have the power to obtain from any person, in accordance with Chapter 5 of this Title, any information necessary for it to prepare and decide upon a resolution action including updates and supplements of information provided in the resolution plans.

12. The Board shall have the power to submit to the Commission draft decisions to amend the framework for the resolution tools and for the use of the Fund in respect of an entity placed under resolution.

12a. In order to preserve a level playing field, the Commission shall, in the performance of its State aid competences and in accordance with Directive [BRRD], treat the use of the Fund as it would treat a national resolution financing arrangement.

Article 17

Valuation

1. Before taking resolution action or exercising the power to write down or convert capital instruments, the Board shall ensure that a fair and realistic valuation of the assets and liabilities of an entity referred to in Article 2 is carried out in accordance with Article 30 of Directive [BRRD] .

▐

16. After the resolution action has been effected, for the purposes of assessing whether shareholders and creditors would have received better treatment if the institution under resolution had entered into normal insolvency proceedings, the Board shall ensure that a valuation is carried out in accordance with Article 66 of Directive [BRRD], distinct from the valuation carried out under paragraph 1▐.

▐

Article 18

Write down and conversion of capital instruments

1. The ECB, on its own initiative or following a communication from a national competent authority of a participating Member State , shall inform the Board where it assesses that the conditions for write down and conversion of capital instruments provided for in Directive [BRRD] are met in relation to an entity referred to in Article 2 or a group established in a participating Member State.

▐

1a. The ECB shall provide the Board with information under paragraph 1 following a request for assessment from the Board or from a national resolution authority, if any of them considers that there is reason to consider that the conditions for write down and conversion of capital instruments are met in relation to an entity referred to in Article 2 or a group established in a participating Member State.

1b. If the conditions established in paragraph 1 are met, the Board shall submit to the Commission, taking into account the information referred to in paragraph 1, a draft decision providing that the powers to write down or convert capital instruments are exercised and whether those powers shall be exercised singly or, following the procedure under Article 16(4) to (7), together with a resolution action.

▌

5. Upon receiving the draft decision from the Board the Commission ▐ shall decide whether or not to adopt the draft decision and whether the powers to write down or convert capital instruments shall be exercised singly or, following the procedure under Article 16(4) to (7), together with a resolution action.

6. Where ▐ the conditions referred to in paragraph 1 are met, but the conditions for resolution in accordance with Article 16(2) are not met, the Board, following a decision of the Commission, shall instruct the national resolution authorities to exercise the write down or conversion powers in accordance with Articles 51 and 52 of Directive [BRRD].

7. Where the conditions for write down and conversion of capital instruments referred to in paragraph 1 are met, and the conditions for resolution referred to in Article 16(2) are also met, the procedure set out in Article 16(4) to (7) shall apply.

8. The Board shall ensure that national resolution authorities exercise the write down or conversion powers in accordance with Directive [BRRD].

▐

9. The national resolution authorities shall implement the instructions of the Board and exercise the write down or conversion of capital instruments in accordance with Article 26.

Article 19

General principles of resolution tools

1. Where the Board decides to apply a resolution tool to an entity referred to in Article 2, and that resolution action would result in losses being borne by creditors or their claims being converted, the Board shall exercise the power under Article 18 immediately before or together with the application of the resolution tool.

2. The resolution tools referred to in point be of Article 16(5) are the following:

(a) the sale of business tool;

(b) the bridge institution tool;

(c) the asset separation tool;

(d) the bail-in tool.

3. When adopting the draft decision referred to in Article 16(5), the Board shall consider the following factors:

(a) the assets and liabilities of the institution under resolution on the basis of the valuation pursuant to Article 17;

(b) the liquidity position of the institution under resolution;

(c) the marketability of the franchise value of the institution under resolution in the light of the competitive and economic conditions of the market;

(d) the time available.

4. The resolution tools may be applied either separately or together, except for the asset separation tool which may be applied only together with another resolution tool.

4a. For the purpose of carrying out the tasks conferred on it by this Regulation, and with the objective of ensuring a level playing field in the application of the resolution tools, the Board, together with the Commission, shall adopt a resolution handbook setting out clear and detailed guidance for the use of the resolution tools.

The resolution handbook referred to in the first subparagraph shall take the form of a delegated act adopted by the Commission in accordance with Article 82.

Article 20

Resolution Scheme

The resolution scheme adopted by the Board under Article 16(8) shall establish, in compliance with the decisions of the Commission on the resolution framework under Article 16(6) and with any decision on State aid where applicable by analogy, the details of the resolution tools to be applied to the institution under resolution concerning at least the measures referred to in Articles 21(2), 22(2), 23(2) and 24(1) and determine the specific amounts and purposes for which the Fund shall be used.

In the course of the resolution process, the Board may amend and update the resolution scheme as appropriate in light of the circumstances in the case and within the resolution framework decided upon by the Commission pursuant to Article 16(6).

Article 21

Sale of business tool

1. Within the framework decided by the Commission, the sale of business tool shall consist of the transfer to a purchaser that is not a bridge institution of the following:

(a) shares or other instruments of ownership of an institution under resolution; or

(b) all or specified assets, rights or liabilities of an institution under resolution.

2. Concerning the sale of business tool, the resolution scheme referred to in Article 16(8) shall establish in particular:

(a) the instruments, assets, rights and liabilities to be transferred by the national resolution authority in accordance with Article 32(1) and (7) to (11) of the Directive [BRRD];

(b) the commercial terms, having regard to the circumstances and to the costs and expenses incurred in the resolution process, pursuant to which the national resolution authority shall make the transfer in accordance with Article 32(2) to (4) of Directive [BRRD];

(c) whether the transfer powers may be exercised by the national resolution authority more than once in accordance with Article 32(5) and (6) of Directive [BRRD];

(d) the arrangements for the marketing by the national resolution authority of that entity or those instruments, assets, rights and liabilities in accordance with Article 33 (1) and (2) of Directive [BRRD];

(e) whether the compliance with the marketing requirements by the national resolution authority is likely to undermine the resolution objectives in accordance with paragraph 3.

3. The Board shall apply the sale of business tool without complying with the marketing requirements under point (e) of paragraph 2 when it determines that compliance with those requirements would be likely to undermine one or more of the resolution objectives and in particular where the following conditions are met:

(a) it considers that there is a material threat to financial stability arising from or aggravated by the failure or potential failure of the institution under resolution;

(b) it considers that compliance with those requirements would be likely to undermine the effectiveness of the sale of business tool in addressing that threat or achieving the resolution objective specified in point (b) of Article 12(2).

Article 22

Bridge institution tool

1. Within the framework decided by the Commission, the bridge institution tool shall consist of the transfer to a bridge institution of any of the following:

(a) shares or other instruments of ownership issued by one or more institutions under resolution;

(b) all or any assets, rights or liabilities of one or more institutions under resolution.

2. With regard to the bridge institution tool the resolution scheme referred to in Article 20 shall establish in particular:

(a) the instruments, assets, rights and liabilities to be transferred to a bridge institution by the national resolution authority in accordance with Article 34(1) to (9) of Directive [BRRD];

(b) the arrangements for the setting up, the operation and the termination of the bridge institution by the national resolution authority in accordance with Article 35(1) to (3) and (5) to (8) of Directive [BRRD];

(c) the arrangements for the marketing of the bridge institution or its assets or liabilities by the national resolution authority in accordance with Article 35(4) of Directive [BRRD].

3. The Board shall make sure that the total value of liabilities transferred by the national resolution authority to the bridge institution does not exceed the total value of the rights and assets transferred from the institution under resolution or provided by other sources.

3a. Any consideration received for the bridge institution or some or all of the property rights and liabilities of the bridge institution shall comply with the relevant provisions within the [BRRD].

Article 23

Asset separation tool

1. Within the framework decided by the Commission, the asset separation tool shall consist of the transfer of assets, rights or liabilities of an institution under resolution to an asset management vehicle that meets the requirements established in Directive [BRRD] for a legal e