Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directives 77/91/EEC and 82/891/EC, Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC and 2011/35/EC and Regulation (EU) No 1093/2010
Date: 2012-06-06
Institutions: European Commission
Subjects: banking system, economic recession, economic recovery, economic stabilisation, financial institution, financial intervention, financial planning, structural adjustment

EUROPEAN COMMISSION 

Brussels, 6.6.2012  
COM(2012) 280 final 

2012/0150 (COD) 

Proposal for a 

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

establishing a framework for the recovery and resolution of credit institutions and 
investment firms and amending Council Directives 77/91/EEC and 82/891/EC, 
Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC and 
2011/35/EC and Regulation (EU) No 1093/2010 

(Text with EEA relevance) 

{SWD(2012) 166 final} 
{SWD(2012) 167 final} 

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EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

The  financial  crisis  severely  tested  the  ability  of  national  and  Union-level  authorities  to 
manage  problems  in  banking  institutions.  Meanwhile,  financial  markets  in  the  Union  have 
become integrated to such an extent that domestic shocks in one Member State may be rapidly 
transmitted to other Member States. 

Against this background, the Commission issued a Communication1 in October 2010 setting 
out  plans  for  a  Union  framework  for  crisis  management  in  the  financial  sector.  The 
framework  would  equip  authorities  with  common  and  effective  tools  and  powers  to  tackle 
bank crises pre-emptively, safeguarding financial stability and minimising taxpayer exposure 
to losses in insolvency. 

At  international  level,  G20-Leaders  have  called  for  a  “review  of  resolution  regimes  and 
bankruptcy laws in light of recent experience to ensure that they permit an orderly wind-down 
of large complex cross-border institutions.”2 In Cannes in November 2011, they endorsed the 
Financial  Stability  Board  (FSB)  "Key  Attributes  of  Effective  Resolution  Regimes  for 
Financial  Institutions"  ('Key  Attributes")3.  These  set  out  the  core  elements  that  the  FSB 
considers  to  be  necessary  for  an  effective  resolution  regime.  Their  implementation  should 
allow  authorities  to  resolve  financial  institutions  in  an  orderly  manner  without  taxpayer 
exposure to loss from solvency support, while maintaining continuity of their vital economic 
functions. In June 2012, the G20 is set to start work on evaluating progress in implementing 
these provisions in the different jurisdictions.  

In June 2010, the European Parliament adopted an own-initiative report on recommendations 
on  cross-border  crisis  management  in  the  banking  sector4.  It  stressed  the  need  for  a  Union-
wide  framework  to  manage  banks  in  financial  distress  and  recommended  moving  toward 
greater integration and coherence in the resolution requirements and arrangements applicable 
to cross-border institutions. In December 2010, the Council (ECOFIN) adopted conclusions5 
calling  for  a  Union  framework  for  crisis  prevention,  management  and  resolution.  The 
conclusions stress that the framework should apply in relation to banks of all sizes, improve 
cross-border cooperation and consist of three pillars (preparatory and preventative measures, 
early intervention, and resolution tools and powers). These should "aim at preserving financial 
stability by protecting public and market confidence; putting prevention and preparation first; 
providing credible resolution tools; enabling fast and decisive action; reducing moral hazard 
and minimising to the fullest possible extent the overall costs to public funds, by ensuring fair 
burden  sharing  among  the  financial  institutions'  stakeholders;  contributing  to  a  smooth 
resolution  of  cross  border  groups;  ensuring  legal  certainty;  and,  limiting  distortions  of 
competition." 

In addition, a high-level group is due to report to the Commission in the second half of 2012 
on whether, on top of on-going regulatory reforms, structural reforms of Union banks would 

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3 
4 
5 

COM (2010) 579 final 
G20 Leaders' declaration of the Summit on financial markets and the world economy, April 2009. 
http://www.financialstabilityboard.org/publications/r_111104cc.pdf 
(2010/2006(INI)) 
17006/1/10 

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strengthen  financial  stability  and  improve  efficiency  and  consumer  protection6.  The  group's 
proposals will be assessed separately upon completion of the work. 

Finally, on 30 May 2012 the Commission indicated that it will initiate a process to "map out 
the  main  steps  towards  full  economic  and  monetary  union  (including),  among  other  things, 
moving  towards  a  banking  union  including  an  integrated  financial  supervision  and  a  single 
deposit guarantee scheme"7. 

2. 

RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND 
IMPACT ASSESSMENTS 

In  the  period  between  2008  and  2012  the  Commission  services  organised  a  number  of 
consultations  and  discussions  with  experts  and  key  stakeholders  concerning  bank  recovery 
and  resolution.  As  the  last  public  consultation  before  the  adoption  of  the  proposal,  a 
Commission  Staff  Working  Paper  describing  in  detail  the  potential  policy  options  under 
consideration  by  the  Commission  services  was  published  for  consultation  in  January  2011. 
The consultation ended on the 3rd of March 2011. On one of the resolution tools, the so called 
bail-in  or  debt  write  down  tool,  targeted  discussions  were  organised  with  experts  from 
Member  States,  banking  industry,  academic  world  and  legal  firms  in  April  2012.  The 
discussions concerned the key parameters of the debt write-down tool, including in particular 
the resolution triggers, the scope of bail-in, its potential minimum level, resolution of groups 
as  well  as  grandfathering.  Documents  related  to  public  consultations  can  be  found  on  the 
website of the European Commission.8  

On  this  basis,  the  Commission  has  prepared  the  attached  legislative  proposal.  The 
Commission services have also prepared an Impact Assessment (IA) for the proposal, which 
can be found on the website of the European Commission.9 

The  comments  by  the  Impact  Assessment  Board  (IAB)  expressed  in  their  first  and  second 
opinion in May and June 2011 have been taken into account. In addition, the text of the IA 
has been updated reflecting latest developments in international fora as well as incorporation 
of results of the discussions on the bail-in tool that took place in April 2012. Concretely, the 
revised IA improves the presentation of the legal and institutional context by describing the 
responsibilities  of  national  supervisors  and  resolution  authorities  and  the  relationships 
between  the  proposal  for  bail-in  and  the  planned  CRD  IV  requirements.  The  text  of  the  IA 
better  explains  the  content  of  options,  in  particular  the  one  related  to  the  bail-in/debt-write 
down  tool.  Also  the  impacts  of  the  bail-in  tool  on  the  costs  of  funding  for  banks  and  non-
financial firms (SMEs) have been added. A section related to the coherence of the proposal 
with  other  regulatory  proposals  has  been  completed.  Finally,  monitoring  and  evaluation 
arrangements  were  further  clarified  by  singling  out  the  most  relevant  indicators  to  be 
monitored. 

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7 
8 
9 

http://ec.europa.eu/internal_market/bank/group_of_experts/index_en.htm#High-level_Expert_Group 
http://ec.europa.eu/europe2020/pdf/nd/eccomm2012_en.pdf 
http://ec.europa.eu/internal_market/bank/index_en.htm 
http://ec.europa.eu/internal_market/bank/index_en.htm 

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The IA concludes the following: 

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• 

• 

The  proposed  Union  bank  resolution  framework  will  achieve  the  objectives  of 
enhancing  financial  stability,  reducing  moral  hazard,  protecting  depositors  and 
critical banking services, saving public money and protecting the internal market for 
financial institutions. 

The  framework  is  expected  to  have  a  positive  social  impact:  first,  by  reducing  the 
probability of a systemic banking crisis and avoiding losses in economic welfare that 
follow a banking crisis; and, second, by minimising taxpayer exposure to losses from 
insolvency support to institutions. 

The  costs  of  the  framework  derive  from  a  possible  increase  in  funding  costs  for 
institutions due to the removal of the implicit certainty of state support, and from the 
costs  related  to  resolution  funds.  Institutions  might  transmit  those  increased  cost  to 
customers  or  shareholders  by  pushing  rates  on  deposits  lower,  increasing  lending 
rates  and  banking  fees  or  reducing  returns  on  equity.  However,  competition  might 
reduce ability of institutions to pass on the costs in full. The potential benefits of the 
framework  in  terms  of  economic  welfare  over  the  long  term  in  terms  of  a  reduced 
likelihood of a systemic crisis are substantially higher than the potential cost. 

3. 

GENERAL EXPLANATION: A RECOVERY AND RESOLUTION FRAMEWORK 

The need for an effective recovery and resolution framework 

Banks  and  investment  firms  (hereinafter  institutions)  provide  vital  services  to  citizens, 
businesses,  and  the  economy  at  large  (such  as  deposit-taking,  lending,  and  the  operation  of 
payment systems). They  operate  largely based on trust, and can quickly become unviable if 
their customers and counterparties lose confidence in their ability to meet their obligations. In 
case  of  failures,  banks  should  be  wound  down  in  accordance  to  the  normal  insolvency 
procedures. However, the extent of interdependencies between institutions creates the risk of 
a  systemic  crisis  when  problems  in  one  bank  can  cascade  across  the  system  as  a  whole. 
Because of this systemic risk and the important economic function played by institutions, the 
normal  insolvency  procedure  may  not  be  appropriate  in  some  cases  and  the  absence  of 
effective tools to manage institutions in crisis has too often required the use of public funds to 
restore  trust  in  even  relatively  small  institutions  so  as  to  prevent  a  domino  effect  of  failing 
institutions from seriously damaging the real economy. 

Accordingly, an effective policy framework is needed to manage bank failures in an orderly 
way and to avoid contagion to other institutions. The aim of such a policy framework would 
be to equip the relevant authorities with common and effective tools  and  powers  to address 
banking  crises  pre-emptively,  safeguarding  financial  stability  and  minimising  taxpayers' 
exposure to losses. 

Preparation and prevention, early intervention and resolution 

To this end, the range of powers available to the relevant authorities should consist of three 
elements:  (i)  preparatory  steps  and  plans  to  minimise  the  risks  of  potential  problems 

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(preparation  and  prevention10);  (ii)  in  the  event  of  incipient  problems,  powers  to  arrest  a 
bank's deteriorating situation at an early stage so as to avoid insolvency (early intervention); 
and (iii) if insolvency of an institution presents a concern as regards the general public interest 
(defined  in  Articles  27  and  28),  a  clear  means  to  reorganise  or  wind  down  the  bank  in  an 
orderly fashion while preserving its critical functions and limiting to the maximum extent any 
exposure of taxpayers to losses in insolvency (resolution). Together, these powers constitute 
an effective framework for the recovery and, where appropriate, the resolution of institutions. 
Since the risk posed by any individual bank to financial stability cannot be fully ascertained in 
advance, these powers should be available to the relevant authorities in relation to any bank, 
regardless of its size or the scope of its activities. 

Resolution - a special insolvency regime for institutions 

In most countries, bank and non-bank companies in financial difficulties are subject to normal 
insolvency proceedings. These proceedings allow either for the reorganization of the company 
(which implies a reduction, agreed with the creditors, of its debt burden) or its liquidation and 
allocation of the losses to the creditors, or both. In all the cases creditors and shareholders do 
not  get  paid  in  full.  However,  the  experience  from  different  banking  crises  indicates  that 
insolvency laws are not always apt to deal efficiently with the failure of financial institutions 
insofar  as  they  do  not  appropriately  consider  the  need  to  avoid  disruptions  to  financial 
stability, maintain essential services or protect depositors. In addition, insolvency proceedings 
are  lengthy  and  in  the  case  of  reorganization,  they  require  complex  negotiations  and 
agreements with creditors, with some potential detriment for the debtors and the creditors in 
terms of delay, costs and outcome.  

Resolution constitutes an alternative to normal insolvency procedures and provides a means to 
restructure  or  wind  down  a  bank  that  is  failing  and  whose  failure  would  create  concerns  as 
regards  the  general  public  interest  (threaten  financial  stability,  the  continuity  of  a  bank's 
critical functions and/or the safety of deposits, client assets and public funds)11. Accordingly, 
resolution  should  achieve,  for  institutions,  similar  results  to  those  of  normal  insolvency 
proceedings taking into account the Union State aid rules, in terms of allocation of losses to 
shareholders  and  creditors,  while  safeguarding  financial  stability  and  limiting  taxpayer 
exposure to loss from solvency support. In the process, it should also ensure legal certainty, 
transparency and predictability regarding the treatment of shareholders and bank creditors and 
preserve value which might otherwise be destroyed in bankruptcy. In addition, by removing 
the  implicit  certainty  of  a  publicly-funded  bail  out  for  institutions,  the  option  of  resolution 
should  encourage  uninsured  creditors  to  better  assess  the  risk  associated  with  their 
investments. Moreover, a design of the national financing arrangements for resolution in line 
with State aid rules will ensure that the overall objectives of the resolution framework can be 
met. 

A balance between predictability for investors and discretion for authorities 

In order to  safeguard existing property rights, a bank should enter into resolution at a point 
very close to insolvency, i.e. when it is on the verge of failure. However, the judgement on the 
point of entry into resolution may depend on several variables and factors linked to prevailing 
market conditions or idiosyncratic liquidity or solvency issues, implying the need for a degree 
of  discretion  for  the  resolution  authority.  Likewise,  the  concrete  actions  to  be  taken  in 

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"Prevention" in this context means the avoidance of disorderly failure capable of causing financial 
instability, not the preclusion of failure altogether. 
If authorities assess that financial stability and taxpayers are not threatened, a bank (or parts of it) may be allowed to fail in the 
ordinary way.  

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resolution should not be pre-determined in relation to any bank but should rather be taken on 
the basis of the concrete circumstances. 

A  Union  framework  with  similar  tools,  principles  and  procedures  is  needed  to  provide 
sufficient  convergence  in  how  national  authorities  implement  resolution.  In  designing  this 
framework,  a  balance  must  be  found  between  the  necessary  discretion  for  supervisors  to 
reflect  the  specificities  of  each  particular  case  and  to  ensure  a  level  playing-field  and  to 
preserve the integrity of the single market. The European Banking Authority (EBA) should be 
vested  with  a  clear  role  to  issue  guidelines  and  technical  standards  to  ensure  consistent 
application of the resolution powers, to participate in resolution planning in relation all cross-
border  institutions,  and  to  carry  out  binding  mediation  between  national  authorities  in  the 
event of disagreement on the application of the framework. 

Finally,  successful  resolution  requires  sufficient  funds,  for  example  to  issue  guarantees  or 
provide short-term loans to help the critical parts of a resolved entity regain viability. These 
funds  should,  as  a  matter  of  principle,  be  provided  for  by  the  banking  sector  in  a  fair  and 
proportionate manner and as far as possible (taking account of the economic cost) contributed 
in  advance.  Taken  together,  these  steps  ensure  that  regardless  of  the  appropriate  resolution 
action  undertaken,  its  costs  are  primarily  borne  by  the  institutions  themselves  and  their 
owners and investors. 

The internal market - Treatment of cross border groups 

Cross border groups are composed of institutions established in different Member States. The 
resolution framework recognises the existence of cross border groups in Europe as one of the 
key  drivers  for  the  integration  of  the  Union  financial  markets.  The  framework  establishes 
special rules for cross border groups covering preparation and prevention Articles 7, 8, 11, 12 
and  15),  early  intervention  (Article  25)  and  the  resolution  phase  (Articles  80  to  83).  It  also 
establishes  rules  concerning  the  transfer  of  assets  between  entities  affiliated  to  a  group  in 
times of financial distress (Articles 16 to 22). 

The rules on groups aim at balancing the interest of achieving, where necessary, an efficient 
resolution  for  the  group  as  a  whole  with  the  protection  of  financial  stability  in  both  the 
Member States where the group operates and the Union. Efficient methods for the resolution 
of  cross  border  groups  are  the  only  way  to  achieve  financial  stability  in  the  Union  and 
consequently  improve  the  functioning  of  the  Single  market  also  in  times  of  crisis.  In 
particular, and without disregarding the necessary safeguards for the host member States, an 
efficient speedy resolution of a group that minimises the loss of value for the group should be 
ensured by giving a prominent role to the group level resolution authority. 

Notwithstanding  the  prominent  role  given  to  the  group  resolution  authority,  the  interests  of 
the host resolution authorities will be sufficiently considered through: a) the establishment of 
arrangements  for  cooperation  between  resolution  authorities  through  the  creation  of  the 
colleges of resolution authorities; b) the recognition that the financial stability in all Member 
States where the group operates has to be considered when taking decisions relative to groups; 
c)  the  design  of  clear  decision  making  process  that  allow  for  all  authorities  to  convey  their 
views whilst ensuring that a single decision is taken with regards to the resolution of a group; 
and  d)  the  establishment  of  mechanisms  for  the  resolution  of  conflicts  between  resolution 
authorities (EBA mediation). 

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The  EBA12  will  perform  a  binding  mediation  role  as  foreseen  in  Regulation  N°  1093/2010 
EBA  regulation,  in  particular  Article  19.  In  this  context,  all  the  relevant  rules  of  that 
regulation apply, including articles 38 and 44 (1). 

All  those  mechanisms  should  ensure  that  the  resolution  of  a  group,  or  the  provision  of 
financial support between affiliated institutions, is not detrimental to any parts of the groups 
and  the  financial  stability  of  the  Member  State  where  a  subsidiary  is  located  is  not 
disregarded.  

4. 

LEGAL ELEMENTS OF THE PROPOSAL 

4.1. 

Legal basis 

The  legal  base  for  this  proposal  is  Article  114  of  the  TFEU,  which  allows  the  adoption  of 
measures  for  the  approximation  of  national  provisions  which  have  as  their  object  the 
establishment and functioning of the internal market. 

The  proposal  harmonises  national  laws  on  recovery  and  resolution  of  credit  institutions  and 
investment firms to the extent necessary to ensure that Member States have the same tools and 
procedures to address systemic failures. In this way, the harmonised framework should foster 
financial stability within the Internal Market by ensuring a minimum capacity for resolution 
of  institutions  in  all  Member  States  and  by  facilitating  cooperation  between  national 
authorities when dealing with the failure of cross-border groups. 

Article 114 of the TFEU is, therefore, the appropriate legal base. 

4.2. 

Subsidiarity 

Under the principle of subsidiarity set out in Article 5.3 of the TEU, in areas which do not fall 
within its exclusive competence, the Union should act only if and in so far as the objectives of 
the  proposed  action  cannot  be  sufficiently  achieved  by  the  Member  States,  either  at  central 
level  or  at  regional  and  local  level,  but  can  rather,  by  reason  of  the  scale  or  effects  of  the 
proposed action, be better achieved at Union level. 

Only  action  at  Union  level  can  ensure  that  Member  States  use  sufficiently  compatible 
measures  to  deal  with  failing  institutions.  Although  the  Union  banking  sector  is  highly 
integrated,  systems  to  deal  with  bank  crises  are  nationally-based  and  differ  significantly. 
Many national legal systems do not currently confer the powers necessary for authorities to 
wind  down  financial  institutions  in  an  orderly  manner  while  preserving  those  services 
essential for financial stability while minimising taxpayers’ exposure to losses from solvency 
support. Such divergent national legislation is ill-suited to dealing adequately with the cross-
border dimension of crises, complicating any arrangements for home-host cooperation.. 

Moreover,  substantial  differences  in  national  procedures  for  resolution  could  result  in 
unacceptable risks to financial stability and jeopardise the effective resolution of cross border 
groups.  As  establishing  adequate  resolution  arrangements  at  the  Union-level  require  a 
significant harmonisation of national practices and procedures, it is appropriate that the Union 

12 

In order to ensure that resolution authorities are represented in EBA and to mitigate conflicts of interest, 
Regulation 1093/2010 is amended in order to include national resolution authorities in the concept of 
competent authorities established by the Regulation. 

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should propose the necessary legislative action. However, resolution is closely linked to non-
harmonised areas of national law, such as insolvency and property law. Therefore, a directive 
is  the  appropriate  legal  instrument  since  transposition  is  necessary  to  ensure  that  the 
framework is implemented in a way that achieves the intended effect, within the specificities 
of relevant national law.  

4.3. 

Proportionality  

Under  the  principle  of  proportionality,  the  content  and  form  of  Union  action  should  not 
exceed what is necessary to achieve the objectives of the Treaties. 

In principle, a failed bank should be subject to normal insolvency procedures like any other 
business. However, the banking sector is different to most other business sectors insofar as it 
performs  critical  functions  in  the  economy  and  is  particularly  vulnerable  to  systemic  crises. 
Because of these features, the liquidation of a bank can have more serious consequences than 
the  exit  of  other  businesses  from  the  market.  This  may  justify  recourse  to  special  rules  and 
procedures in the event of a banking crisis.  

As  the  systemic  importance  of  a  bank  failure  cannot  be  determined  with  full  certainty  in 
advance, the proposed crisis management framework should apply in principle to all banking 
institutions,  irrespective  of  their  size  and  complexity.  If  it  is  certain  that  the  failure  of  an 
institution  of  global  size,  market  importance,  and  global  interconnectedness  would  cause 
significant  disruption  in  the  global  financial  system  and  adverse  economic  consequences 
across a range of countries, it is also clear that the simultaneous failure, in a widespread crisis, 
of many small institutions making up a significant part of the banking sector in a country may 
have  equally  devastating  effects  on  the  economy.  The  framework  therefore  ensures  that 
supervisors and resolution authorities have special rules and procedures at their disposal for 
dealing  efficiently  with  the  failure  or  near-failure  of  any  bank  in  circumstances  of  systemic 
risk. However, the risk, size and interconnectedness of a bank will be taken into account by 
national  authorities  in  the  context  of  recovery  and  resolution  plans  and  when  using  the 
different tools at their disposal, making sure that the regime is applied in an appropriate way. 

The  provisions  are  therefore  proportionate  to  what  is  necessary  to  achieve  the  objectives. 
Furthermore, limitations to the right to property that the exercise of the powers proposed may 
entail  must  be  consistent  with  the  Charter  of  Fundamental  Rights  as  interpreted  by  the 
European Court of Justice. It is for this reason that the point of entry into resolution should be 
as close as possible to insolvency, and the use of the resolution powers should be limited to 
the  extent  necessary  in  order  to  meet  an  objective  of  general  interest,  namely  preserving 
financial stability in the Union. 

4.4. 

Detailed explanation of the proposal 

4.4.1. 

Subject matter and scope of application (Article 1) 

The proposal addresses crisis management (preparation, recovery and resolution) in  relation 
to  all  credit  institutions  and  certain  investment  firms.  The  scope  of  the  proposal  is  identical 
with  that  of  the  Capital  Requirements  Directive13  (CRD),  which  harmonises  prudential 
requirements for institutions including financial institutions included in a banking group, and 

13 

Directive 2006/48/EC relating to the taking up and pursuit of the business of credit institutions and 
Directive 2006/49/EC on the capital adequacy of investment firms and credit institutions. 

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investment firms. Investment firms need to be part of the framework since, as shown by the 
failure  of  Lehman  Brothers,  their  failure  can  have  serious  systemic  consequences.  .  In 
addition, the powers of resolution authorities should also apply to holding companies where 
one or more subsidiary credit institution or investment firm meet the conditions for resolution 
and  the  application  of  the  resolution  tools  and  powers  in  relation  to  the  parent  entity  is 
necessary for the resolution of one or more of its subsidiaries or for the resolution of the group 
as a whole. 

4.4.2.  Resolution authorities (Article 3) 

The  proposal  requires  Member  States  to  confer  resolution  powers  on  public  administrative 
authorities to ensure that the objectives of the framework can be delivered in a timely manner. 
The proposal does not specify the particular authority that should be appointed as resolution 
authority,  since  this  is  not  necessary  to  ensure  effective  resolution  and  would  interfere  with 
the constitutional and administrative orders of Member States. It is therefore open to Member 
States  to  designate  as  their  resolution  authorities,  for  example,  national  central  banks, 
financial supervisors, deposit guarantee schemes, ministries of finance, or special authorities. 

Resolution  authorities  will  need  to  have  adequate  expertise  and  resources  to  manage  bank 
resolutions  at  national  and  cross  border  level.  Given  the  likelihood  of  conflicts  of  interest, 
functional  separation  of  resolution  activities  from  the  other  activities  of  any  designated 
authority is mandated.  

4.4.3.  Recovery and resolution plans (Articles 5 to 13) 

Early action based on recovery plans can prevent the escalation of problems and reduce the 
risk  of  a  bank  failure.  Institutions  will  be  required  to  draw  up  recovery  plans  setting  out 
arrangements and measures to enable it to take early action to restore its long term viability in 
the  event  of  a  material  deterioration  of  its  financial  situation.  Groups  will  be  required  to 
develop  plans  at  both  group  level  and  for  the  individual  institutions  within  the  group. 
Supervisors will assess and approve recovery plans.  

Resolution plans will allow an institution to be resolved minimising taxpayer exposure to loss 
from solvency support while protecting vital economic functions. A resolution plan, prepared 
by  the  resolution  authorities  in  cooperation  with  supervisors  in  normal  times,  will  set  out 
options  for  resolving  the  institution  in  a  range  of  scenarios,  including  systemic  crisis.  Such 
plans  should  include  details  on  the  application  of  resolution  tools  and  ways  to  ensure  the 
continuity  of  critical  functions.  Group  resolution  plans  will  include  a  plan  for  the  group  as 
well as plans for each institution within the group. 

4.4.4.  Powers to address or remove impediments to resolvability (Articles 14 to 16) 

Based on the resolution plan, the resolution authorities shall assess whether an institution or 
group  is  resolvable.  If  resolution  authorities  identify  significant  impediments  to  the 
resolvability  of  an  institution  or  group,  they  may  require  the  institution  or  groups  to  take 
measures in order to facilitate its resolvability.  

Such  measures  might  include  inter  alia:  reducing  complexity  through  changes  to  legal  or 
operational structures in order to ensure that critical functions can be legally and economically 
separated  from  other  functions;  drawing  up  service  agreements  to  cover  the  provision  of 
critical functions; limiting maximum individual and aggregate exposures; imposing reporting 
requirements; limiting or ceasing existing or proposed activities; restricting or preventing the 

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development  of  new  business  lines  or  products;  and  issuing  additional  convertible  capital 
instruments. 

Assessment  of  resolvability  for  groups  rests  upon  coordination,  consultation  and  joint 
assessment of group resolution authorities with the resolution authorities of the subsidiaries, 
other relevant competent authorities and the EBA. 

To ensure that the assessment of resolvability and the use of preventative powers by relevant 
authorities are uniformly applied across the Member States, the EBA will play an important 
role. Concretely, it will need to draft technical standards defining parameters needed for the 
assessment of resolution plans' systemic impact and it will need to draft technical standards 
specifying issues to be examined in order to assess the resolvability of an institution or group. 

4.4.5. 

Intra-group financial support (Articles 17-23) 

The proposal aims to overcome current legal restrictions to the provision of financial support 
from one entity within a group to another. Institutions that operate in a group structure will be 
able to enter into agreements to provide financial support (in the form of a loan, the provision 
of guarantees, or the provision of assets for use as collateral in transaction) to other entities 
within the group that experience financial difficulties. Such early financial help can address 
developing  financial  problems  within  individual  group  members.  The  agreement  may  be 
submitted for approval in advance by the shareholders' meetings of all participating entities in 
accordance with national law and will authorise the management bodies to provide financial 
support  if  needed  within  the  terms  of  the  agreement.  On  this  basis,  legal  certainty  will 
increase  as  it  will  be  clear  when  and  how  such  financial  support  can  be  provided.  The 
agreements  are  voluntary,  allowing  banking  groups  to  assess  whether  such  arrangements 
would be in the group interest (a group might be more or less integrated and pursue more or 
less  strongly  a  common  strategy)  and  to  identify  the  companies  that  should  be  party  to  the 
agreement (it may be appropriate to exclude companies that pursue riskier activities). 

As  a  safeguard,  the  supervisor  of  the  transferor  will  have  the  power  to  prohibit  or  restrict 
financial  support  pursuant  to  the  agreement  when  that  transfer  threatens  the  liquidity  or 
solvency of the transferor or financial stability.  

4.4.6.  Early intervention – Special management (Articles 23-26) 

The proposal expands the powers of supervisors to intervene at an early stage in cases where 
the financial situation or solvency of an institution is deteriorating. The powers contemplated 
in  the  proposal  supplement  those  conferred  on  supervisors  under  Article  136  of  the  CRD. 
These powers do not derogate any rights or procedural obligations established in accordance 
with Company Law. 

Powers  of  early  intervention  include  the  power  to  request  the  institution  to  implement 
arrangements  and  measures  set  out  in  the  recovery  plan;  draw  up  an  action  program  and  a 
timetable for its implementation; request the management to convene, or convene directly, a 
shareholders' meeting, propose the agenda and the adoption of certain decisions; and request 
the institution to draw up a plan for restructuring of debt with its creditors.  

In  addition,  the  supevisor  would  have  the  power  to  appoint  a  special  manager  for  a  limited 
period, when the solvency of an institution is deemed to be sufficiently at risk. The primary 
duty of a special manager is to restore the financial situation of the institution and the sound 
and prudent management of its business. A special manager will replace the management of 

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the  institution  and  have  all  its  powers  without  prejudice  to  ordinary  shareholder  rights.  The 
power to appoint a special manager will serve as an element of discipline for the management 
and shareholders and as a means to foster private sector solutions to problems which, if not 
addressed, could lead to the failure of an institution. 

4.4.7.  Resolution conditions (Article 27) 

The proposal establishes common parameter for triggering the application of resolution tools. 
The authorities shall be able to take an action when an institution is insolvent or very close to 
insolvency to the extent that if no action is taken the institution will be insolvent in the near 
future.  

At  the  same  time,  it  is  necessary  to  ensure  that  intrusive  measures  are  triggered  only  when 
interference with the rights of stakeholders is justified. Therefore resolution measures should 
be implemented only if the institution is failing or likely to fail, and there is no other solution 
that  would  restore  the  institution  within  an  appropriate  timeframe.  In  addition,  the 
intervention by means of resolution measures must be justified by reasons of public interest as 
defined under Article 28. 

4.4.8.  General principles – In particular the no creditor worse off (article 29)  

The framework sets up a number of general principles that will have to be respected by the 
resolution  authorities.  These  principles  refer,  inter  alia,  to  the  allocation  of  losses  and  the 
treatment of shareholders and creditors and to the consequences that the use of the tools could 
have on the management of the institution. 

The framework establishes that the losses, once identified through a valuation process (article 
30)  are  to  be  allocated  between  the  shareholders  and  the  creditors  of  the  Institution  in 
accordance  with  the  hierarchy  of  claims  established  by  each  national  insolvency  regime. 
However, and as it has been pointed out above (see heading 3) normal insolvency regimes do 
not  sufficiently  take  into  account  financial  stability  or  other  public  interest  concerns. 
Therefore, the resolution framework establishes certain principles for the allocation of losses 
that  would  have  to  be  respected  irrespective  of  what  each  national  insolvency  regime 
establishes.  These  principles  are:  a)  that  the  losses  should  first  be  allocated  in  full  to  the 
shareholders and then to the creditors and b) that creditors of the same class might be treated 
differently if it is justified by reasons of public interest and in particular in order to underpin 
financial  stability.  These  principles  apply  to  all  the  resolution  tools.  In  addition,  and  with 
regards  to  the  bail-in  tool,  the  framework  establishes  a  more  detailed  hierarchy  of  claims 
(article 43). This more detailed hierarchy will complement and where necessary supersede the 
one established in each national insolvency law. 

In those cases where the creditors receive less in economic terms, than if the institution had 
been liquidated under normal insolvency proceedings, the authorities have to ensure that they 
receive  the  difference.  This  compensation,  if  any,  shall  be  paid  by  the  resolution  fund.  The 
principle that losses have to be allocated to first to shareholders and then to creditors together 
with the fact that resolution action has to be taken prior to availing any extraordinary public 
financial support is, in principle instrumental to ensuring the effectiveness of the objective of 
minimising taxpayers’ exposure to losses (article 29). 

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4.4.9.  Valuation (Article 30)  

The implementation of the resolution tools and powers is based on an assessment of the real 
value  of  the  assets  and  liabilities  of  the  institution  that  is  about  to  fail.  To  this  end,  the 
framework incorporates a valuation based on the principle of 'market value'. This will ensure 
that the losses are recognised at the moment when the institution enters into resolution.  

The valuation should be done by an independent expert, unless there are reasons of urgency, 
in which case the resolution authorities would proceed with a provisional valuation that will, 
afterwards,  be  complemented  by  a  definitive  valuation  with  the  involvement  of  an 
independent  expert.  The  resolution  authorities  have  been  granted  the  necessary  powers  to 
modify  their  resolution  actions14  in  accordance  with  possible  discrepancies,  if  any,  between 
the provisional and the definitive valuation.  

4.4.10.  Resolution tools and powers (Articles 31-64) 

When  the  trigger  conditions  for  resolution  are  satisfied,  resolution  authorities  will  have  the 
power to apply the following resolution tools: 

(a) 

sale of business; 

(b)  bridge institution; 

(c) 

asset separation; 

(d)  bail-in. 

In  order  to  apply  those  tools,  resolution  authorities  will  have  powers  to  take  control  of  an 
institution that has failed or is about to fail, take over the role of shareholders and managers, 
transfer assets and liabilities and enforce contracts. 

The  resolution  tools  can  be  applied  singly  or  in  conjunction.  All  entail  a  degree  of 
restructuring of the bank. Such restructuring is not a feature accompanying the bail-in only. 
The asset separation tool has to be applied in all circumstances in conjunction with the other 
tools  (Article  32).  When  applicable,  the  use  of  any  of  the  resolution  tools  will  need  to  be 
consistent with the Union State aid framework. In this respect, any recourse to public support 
and/or the use of the resolution funds to assist in the resolution of failing institutions will have 
to be notified to the Commission and will be assessed in accordance with the relevant State 
aid provisions in order to establish its compatibility with the internal market. 

The proposal set out a minimum set of resolution tools that all Member States should adopt. 
However,  national  authorities  will  be  able  to  retain,  in  addition,  specific  national  tools  and 
powers  to  deal  will  failing  institutions  if  they  are  compatible  with  the  principles  and 
objectives  of  the  Union  resolution  framework  and  the  Treaty  on  the  functioning  of  the 
European  Union  and  if  they  do  not  pose  obstacles  to  effective  group  resolution15.  National 
resolution authorities would only be able to use those national tools and powers if they justify 

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For example the resolution authorities can transfer back or forth assets or liabilities transferred to a 
bridge institution. 
In this respect a tool consisting in the ring fencing of an institution would not be compatible with the 
framework. 

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that none of the tools (singly or in conjunction) included in the Union framework allows them 
to take effective resolution action. 

The sale of business tool enables resolution authorities to effect a sale of the institution or the 
whole  or  part  of  its  business  on  commercial  terms,  without  requiring  the  consent  of  the 
shareholders or complying with procedural requirements that would otherwise apply. As far 
as possible in the circumstances, the resolution authorities should market the institution or the 
parts of its business that are to be sold. 

The bridge institution tool enables resolution authorities to transfer all or part of the business 
of  an  institution  to  a  publicly  controlled  entity.  The  bridge  institution  must  be  licensed  in 
accordance  with  the  Capital  Requirements  Directive  and  will  be  operated  as  a  commercial 
concern within any limits prescribed by the State aids framework. The operations of a bridge 
institution are temporary, the aim being to sell the business to the private sector when market 
conditions are appropriate. 

The purpose of the asset separation tool is to enable resolution authorities to transfer impaired 
or problem assets to an asset management vehicle to allow them to be managed and worked 
out  over  time.  Assets  should  be  transferred  at  market  or  long  term  economic  value  (in 
accordance with Article 30) so that any losses are recognised at the moment when the transfer 
takes place. In order to minimise competitive distortions and risks of moral hazard, this tool 
should only be used in conjunction with another resolution tool. 

The bail-in tool (articles 37 to 51) 

The  bail-in  tool  will  give  resolution  authorities  the  power  to  write  down  the  claims  of 
unsecured creditors of a failing institution and to convert debt claims to equity. The tool can 
be  used  to  recapitalise  an  institution  that  is  failing  or  about  to  fail,  allowing  authorities  to 
restructure it through the resolution  process and  restore its viability after reorganisation and 
restructuring. This would allow authorities greater flexibility in their response to the failure of 
large,  complex  financial  institutions.  It  would  be  accompanied  by  removal  of  management 
responsible  for  the  problems  of  the  institution,  and  the  implementation  of  a  business 
restoration plan.  

The resolution authorities should have the power to bail-in all the liabilities of the institution. 
There  are,  however  some  liabilities  that  would  be  excluded  ex-ante  (such  as  secured 
liabilities,  covered  deposits  and  liabilities  with  a  residual  maturity  of  less  than  one  month). 
Exceptionally and where there is a justified necessity to ensure the critical operations of the 
institution and its core business lines or financial stability (Article 38) the resolution authority 
could  exclude  derivatives'  liabilities.  Harmonised  application  of  the  possible  exclusion  at 
Union level would be ensured by Commission delegated acts. 

In order to apply the bail in tool it is necessary that the resolution authorities can ensure that 
institutions would have a sufficient amount of liabilities in their balance sheet that could be 
subject  to  the  bail  in  powers.  The  minimum  amount  will  be  proportionate  and  adapted  for 
each  category  of  institutions  on  the  basis  of  their  risk  or  the  composition  of  its  sources  of 
funding  (Article  39).  Harmonised  application  of  the  minimum  requirement  at  Union  level 
would be ensured by Commission delegated acts. As an example, and on the basis of evidence 
from  the  recent  financial  crisis  and  of  performed  model  simulations,  an  appropriate 
percentage of total liabilities which could be subject to bail in could be equal to 10% of total 
liabilities (excluding regulatory capital). 

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As explained in 4.4.8, Articles 43 and 44 establish a detailed hierarchy that complements and 
were necessary supersedes the one established in each national insolvency law. In principle, 
Shareholders  claims  should  be  exhausted  before  those  of  subordinated  creditors.  It  is  only 
when  those  claims  are  exhausted  that  the  resolution  authorities  can  impose  losses  on  senior 
claims  (Articles  43  and  44).  However,  there  might  be  circumstances  when  the  resolution 
authorities could interfere on creditors’ rights without having exhausted shareholders’ claims. 
These circumstances are specific to the bail in tool and could occur when an institution under 
resolution  might  have  some  residual  capital  (according  to  the  conditions  for  resolution  an 
institution  would  be  failing  or  likely  to  fail  if  it  has  depleted  all  or  substantially  all  of  its 
capital). In this case, the resolution authorities could, after having allocated the losses to the 
shareholders and reduced or cancelled most of the shareholders’ claims, convert into capital 
subordinated and, if necessary, senior liabilities. This conversion will have to take place in a 
manner that seriously dilutes the remaining shareholders’ claims. 

4.4.11.  Restrictions  on  termination  and  safeguards  for  counterparties  (Articles  68-73  and 

77) 

For the effective application of resolution tools, it is necessary to allow resolution authorities 
to impose a temporary stay on the exercise by creditors and counterparties of rights to enforce 
claims and close out, accelerate or otherwise terminate contracts against a failing institution. 
Such a temporary suspension, which would last no longer than until 5pm on the next business 
day,  gives  authorities  a  period  of  time  to  identify  and  value  those  contracts  that  need  to  be 
transferred to a solvent third party, without the risk that financial contracts would be changing 
in value and scope as counterparties exercised termination rights. Termination rights for those 
counterparties  remaining  with  the  failed  institution  would  resume  at  the  end  of  the  stay. 
However,  transfer  to  a  performing  third  party  should  not  qualify  as  an  event  of  default  that 
triggers termination rights. 

These  necessary  restrictions  on  contractual  rights  are  balanced  by  safeguards  for 
counterparties  to  prevent  authorities  from  splitting  linked  liabilities,  rights  and  contracts: 
under a partial property transfer, linked arrangements must either all be transferred, or not at 
all.  Arrangements  include  close  out  netting  agreements,  set-off  arrangements,  title  transfer 
financial collateral arrangements, security arrangements and structured finance arrangements. 

4.4.12.  Restriction on judicial proceedings (Articles 78 and 77) 

In  accordance  with  Article  47  of  the  Charter  of  Fundamental  Rights,  the  concerned  parties 
have a right to due process and to having an effective remedy against the measures affecting 
them. Therefore, the decisions taken by the resolution authorities should be subject to judicial 
review. However, in order to protect third parties who have bought assets, rights and liabilities 
of  the  institution  under  resolution  by  virtue  of  the  exercise  of  the  resolution  powers  by  the 
authorities and to ensure the stability of the financial markets, the judicial review should not 
affect  any  administrative  act  and/or  transaction  concluded  on  the  basis  of  the  annulled 
decision.  Remedies  for  a  wrongful  decision  should  therefore  be  limited  to  the  award  of 
compensation for the damages suffered by the affected persons. 

Furthermore, it is necessary to prevent the opening or pursuit of other legal actions in relation 
to  a  bank  that  is  under  resolution.  To  this  effect,  the  framework  provides  that,  before  the 
national  judge  opens  the  insolvency  proceedings  in  relation  to  an  institution,  it  notifies  the 
resolution  authority  of  any  application;  the  resolution  authority  has  then  the  right,  within  a 

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period of 14 days form the notification, to decide to take a resolution action with regard to the 
institution concerned.  

4.4.13.  Cross border resolution (Articles 80-83) 

The  recovery  and  resolution  framework  takes  into  account  the  cross  border  nature  of  some 
banking  groups,  with  an  objective  to  create  a  comprehensive  and  integrated  framework  for 
bank recovery and resolution in the Union.  

Accordingly, recovery and resolution plans need to be prepared agreed and implemented for 
the group as a whole while taking into account the particularities of each group's structure and 
the  division  between  the  responsibilities  of  host  and  home  national  authorities.  This  will  be 
done  through  measures  that  will  require  enhanced  cooperation  between  national  authorities 
and creation of incentives for applying a group approach in all phases of preparation, recovery 
and resolution.  

Resolution  colleges  will  be  established  with  clearly  designated  leadership  and  with  the 
participation of the European Banking Authority (EBA). The EBA will facilitate cooperation 
of  authorities  and  mediate  if  necessary.  The  objective  of  the  colleges  is  to  coordinate 
preparatory and resolution measures among national authorities to ensure optimal solutions at 
Union level. 

4.4.14.  Relations with third countries (Articles 84-89) 

Because many Union institutions and banking groups are active in third countries, an effective 
framework for resolution needs to provide for cooperation with third country authorities. The 
proposal provides Union authorities with the necessary powers to support foreign resolution 
actions of a failed foreign bank by giving effect to transfers of its assets and liabilities that are 
located in or governed by the law of their jurisdiction. However, such support would only be 
provided  if  the  foreign  action  ensured  fair  and  equal  treatment  for  local  depositors  and 
creditors  and  did  not  jeopardise  financial  stability  in  the  Member  State.  Union  resolution 
authorities should also have the power to apply resolution tools to national branches of third 
country institutions where separate resolution is necessary for reasons of financial stability or 
the  protection  of  local  depositors.  The  proposal  provides  that  support  for  foreign  resolution 
actions  will  be  given  where  resolution  authorities  have  a  cooperation  agreement  with  the 
foreign resolution authority. Such agreements should be a means to ensure effective planning, 
decision-making and coordination in respect of international groups.  

EBA should develop and enter into framework  administrative arrangements  with authorities 
of  third  countries  in  accordance  with  Article  33  of  Regulation  No  1093/2010  and  national 
authorities should conclude bilateral arrangements that are as far as possible in line with the 
EBA framework arrangements.  

4.4.15.  Resolution funding (Articles 90-99) 

Resolution  allows  a  better  burden  sharing  of  the  resolution  costs  by  the  shareholders  and 
creditors in the process of resolution when insolvency procedures are deemed inappropriate in 
light of possible risks to financial stability. However, this might not always be sufficient and 
might  have  to  be  supplemented  by  additional  funding  in  order,  for  example,  to  provide 
liquidity  to  a  bridge  bank.  Based  on  past  experience,  it  is  necessary  to  establish  funding 
arrangements financed by institutions themselves in order to minimize taxpayer's exposure to 

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losses  from  solvency  support.  Articles  90  to  99  lay  down  the  necessary  provisions  to  that 
purpose. 

Article 89 provides for the setting up of financing arrangements in each Member State. The 
purposes for which they may be used are listed under article 89, paragraph 2 and range from 
guarantees to loans or contributions. Losses are primarily borne by shareholders and creditors, 
but other financing arrangements cannot be excluded in principle. 

Article  90  lays  down  the  rules  on  the  contributions  to  the  financing  arrangements,  and 
involves  a  mix  of  ex  ante  contributions,  supplemented  by  ex  post  contributions  and,  where 
indispensable, borrowing facilities from financial institutions or the central bank. In order to 
ensure that some funds are available at all times, and given the pro-cyclicality associated with 
ex  post  funding,  a  minimum  target  fund  level  is  set,  to  be  reached  through  ex  ante 
contributions  in  a  time  span  of  10  years.  Based  on  model-calculation,  an  optimal  minimum 
target fund level is set at 1% of covered deposits. 

In order to enhance the resilience of national financing arrangements, Article 97 provides for 
a right for national arrangements to borrow from their counterparts in other Member States. In 
order to reflect the distribution of competences among the various national authorities in the 
resolution  of  groups,  Article  98  lays  down  rules  on  the  respective  contributions  of  national 
financing arrangements to the resolution of groups. This contribution will be based on the one 
previously  agreed  in  the  context  of  the  group  resolution  plans.  National  financing 
arrangements,  together  with  borrowing  mechanisms  and  the  mutualisation  of  national 
arrangements  in  the  case  of  the  resolution  of  cross  border  groups  (Article  98)  make  up  a 
European system of financing arrangements. 

Article  99  deals  with  the  role  of  Deposit  Guarantee  Schemes  (DGS)  in  the  resolution 
framework. DGS may be called to contribute to resolution in two manners. 

First,  deposit  guarantee  schemes  must  contribute  for  the  purpose  of  ensuring  continuous 
access  to  covered  deposits.  Deposit  Guarantee  Schemes  are  currently  established  in  all 
Member States in accordance with Directive 94/19/EC. They compensate retail depositors up 
to  EUR100,000  in  respect  of  unavailable  deposits,  before  being  subrogated  to  them  in 
liquidation proceedings. By contrast, resolution avoids the unavailability of covered deposits, 
which is preferable from the depositor's point of view. It is therefore desirable that the DGS 
contributes  for  an  amount  equivalent  to  the  losses  that  it  would  have  had  to  bear  in  normal 
insolvency  proceedings,  as  reflected  in  paragraph  1  of  Article  99.  In  order  to  provide  for 
sufficient  funding,  the  ranking  of  deposit  guarantee  schemes  in  the  hierarchy  of  claims  is 
introduced,  with  DGS  ranking  pari  passu  with  unsecured  non-preferred  claims.  The  DGS 
contribution must be made in cash in order to absorb the losses pertaining to covered deposits. 

Secondly, while Member States must at least use DGS for the purpose of providing cash to 
ensure  continuous  access  to  covered  deposits,  they  retain  discretion  as  to  how  to  fund 
resolution: they may decide to create financing arrangements separate from the DGS, or use 
their  DGS  also  as  financing  arrangements  under  Article  91.  Indeed,  there  are  synergies 
between deposit guarantee schemes and resolution. When a resolution framework that limits 
contagion is in place, it reduces the number of bank failures, and therefore the likeliness of 
DGS  pay-outs.  The  proposal  therefore  allows  Member  States  to  use  DGS  for  resolution 
funding  in  order  to  reap  economies  of  scale.  Where  the  two  arrangements  are  separate,  the 
DGS is liable for the protection of covered depositors to the extent and in the conditions laid 
down in Article 99, paragraphs 1 to 4, while supplementary funding is provided by separate 

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financing arrangements established under Article 91. By contrast, where they opt for a single 
financing  arrangement,  it  will  cover  both  the  losses  affecting  covered  deposits,  and  other 
purposes  under  Article  92.  In  that  case,  the  DGS  has  to  comply  with  all  the  conditions  on 
contributions, borrowing and mutualisation laid down under Articles 93 to 98. 

In any case, if following a contribution by the DGS, the institution under resolution fails at a 
later  stage  and  the  DGS  does  not  have  sufficient  funds  to  repay  depositors,  the  DGS  must 
have arrangements in place in order to raise the corresponding amounts immediately from its 
members. 

State aid is likely to be present in the intervention of the resolution funds irrespective of the 
type  of  national  financial  arrangements  (i.e.  a  resolution  fund  separate  from  the  Deposit 
Guarantee Scheme or using the Deposit Guarantee Scheme as a resolution fund).  

4.4.16.  Compliance with Articles 290 and 291 TFEU 

On 23 September 2009, the Commission adopted proposals for Regulations establishing EBA, 
EIOPA,  and  ESMA16.  In  this  respect  the  Commission  wishes  to  recall  the  Statements  in 
relation to Articles 290 and 291 TFEU it made at the adoption of the Regulations establishing 
the  European  Supervisory  Authorities  according  to  which:  "As  regards  the  process  for  the 
adoption  of  regulatory  standards,  the  Commission  emphasises  the  unique  character  of  the 
financial services sector, following from the Lamfalussy structure and explicitly recognised in 
Declaration  39  to  the  TFEU.  However,  the  Commission  has  serious  doubts  whether  the 
restrictions  on  its  role  when  adopting  delegated  acts  and  implementing  measures  are  in  line 
with Articles 290 and 291 TFEU." 

4.4.17.  Changes to the Winding Up Directive, Company Law Directives and EBA Regulation 

(Articles 104 - 111) 

Directive 2001/24/EC provides for the mutual recognition and enforcement of reorganization 
or winding up measures in relation to credit institutions that have branches in other Member 
States. The Directive seeks to ensure that a credit institution and its branches in other Member 
States  are  reorganised  or  wound  up  according  to  the  principles  of  unity  and  universality 
ensuring that there is only one set of insolvency proceedings in which the credit institution is 
treated  as  one  entity.  Unity  and  universality  of  proceedings  ensure  the  equal  treatment  of 
creditors irrespective of their nationality, place of residence or domicile. In order to ensure the 
equal treatment of creditors also in resolution processes, Directive 2001/24/EC is amended to 
extend  its  scope  to  investment  firms  and  to  the  use  of  the  resolution  tools  to  any  entity 
covered by the resolution regime. 

The  Union  Company  Law  Directives  contain  rules  for  the  protection  of  shareholders  and 
creditors. Some of these rules may hinder rapid action by resolution authorities. 

The Second Company Law Directive requires that any increase in capital in a public limited 
liability  company  be  agreed  by  the  general  meeting,  while  Directive  2007/36  (the 
Shareholders'  Rights  Directive)  requires  a  21  day  convocation  period  for  that  meeting. 
Restoring the financial situation of a credit institution rapidly by means of capital increase is 
therefore  not  possible.  The  proposal  therefore  amends  the  Shareholders'  Rights  Directive  to 
allow the general meeting to decide in advance that a shortened convocation period will apply 

16 

COM(2009) 501, COM(2009) 502, COM(2009) 503. 

EN 

17 

   EN 

                                                 
for  a  general  meeting  to  decide  on  an  increase  of  capital  in  emergency  situations.  Such 
authorisation  will  be  part  of  the  recovery  plan.  This  will  allow  rapid  action  while  retaining 
shareholders' decision-making powers. 

Moreover,  Company  Law  Directives  require  that  increase  and  decrease  of  capital,  mergers 
and divisions are subject to shareholders' agreement, and pre-emption rights apply whenever 
the  capital  is  increased  by  consideration  in  cash.  In  addition,  the  Takeover  Bids  Directive 
requires  mandatory  bids  when  any  person  –  including  the  State  -  acquires  shares  in  a  listed 
company  above  the  control  threshold  (usually  30-50%).  To  address  these  obstacles,  the 
proposal allows  Member  States to derogate from those  provisions that require consent from 
creditors or shareholders or otherwise hinder the effective and rapid resolution. 

In  order  to  ensure  that  the  authorities  responsible  for  resolution  are  represented  in  the 
European  System  of  Financial  Supervision  established  by  Regulation  (EU),  No  1093/2010 
and to ensure that EBA has the expertise necessary to carry out the tasks provided for in this 
directive,  Regulation  (EU)  No  1093/2010  should  be  amended  in  order  to  include  national 
resolution  authorities  as  defined  in  this  Directive  in  the  concept  of  competent  authorities 
established by that Regulation. 

4.4.18.  Entry into force 

The Directive will enter into force on the twentieth day following its publication in the OJ. 

In line with common practice, the transposition deadline of the Directive is set at 18 months, 
i.e. 31 December 2014. 

The provisions on the bail-in tool are subject to a longer transposition period and should be 
applied as from 1 January 2018. That date takes into account the observed maturity cycles of 
existing debt, the need to avoid deleveraging and the need for institutions to implement new 
capital requirements by 2018. 

In accordance with the Joint Political Declaration of Member States and the Commission of 
28  September  2011  on  explanatory  documents,  Member  States  should  accompany  the 
notification of the implementing measures with correlation tables. This is justified in view of 
the  complexity  of  the  Directive,  which  covers  different  subjects  and  is  likely  to  require  a 
plurality of implementing measures and in view of the fact some Member States have already 
adopted legislations partially implementing this Directive. 

5. 

BUDGETARY IMPLICATION 

The above policy options will have implications for the budget of the Union. 

The present proposal would require EBA to (i) develop around 23 technical standards and 5 
guidelines  (ii)  take  part  in  resolution  colleges,  make  decisions  in  case  of  disagreement  and 
exercise  binding  mediation  and  (iii)  provide  for  recognition  of  third  country  resolution 
proceedings  according  to  Article  85  and  conclude  non-binding  framework  cooperation 
arrangements with third countries according to Article 88. The delivery of technical standards 
is due 12 months after the entry into force of the Directive which is estimated to be between 
June and December 2013. The proposal of the Commission includes long-term tasks for EBA 
that will require the establishment of 5 additional posts (temporary agents) as from 2014. In 

EN 

18 

   EN 

addition,  11  seconded  national  experts  "SNE"  are  foreseen  to  carry  out  temporary  tasks 
limited to 2014 and 2015 years. 

EN 

19 

   EN 

2012/0150 (COD) 

Proposal for a 

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

establishing a framework for the recovery and resolution of credit institutions and 
investment firms and amending Council Directives 77/91/EEC and 82/891/EC, 
Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC and 
2011/35/EC and Regulation (EU) No 1093/2010 

(Text with EEA relevance) 

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,17 

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

Having regard to the opinion of the European Economic and Social Committee,18 

Having regard to the opinion of the European Central Bank,19 

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1) 

(2) 

The  financial  crisis  that  started  in  2008  has  shown  that  there  is  a  significant  lack  of 
adequate  tools  at  Union  level  to  effectively  deal  with  unsound  or  failing  credit 
institutions.  Such  tools  are,  in  particular,  needed  to  prevent  insolvency  or,  when 
insolvency occurs, to minimize negative repercussions by preserving the systemically 
important  functions  of  the  institution  concerned.  During  the  crisis,  those  challenges 
were a major factor that forced Member States to save credit institutions using public 
funds. 

Union  financial  markets  are  highly  integrated  and  interconnected  with  many  credit 
institutions  operating  extensively  beyond  national  borders.  The  failure  of  a  cross-
border  credit  institution  is  likely  to  affect  the  stability  of  financial  markets  in  the 
different Member States in which it operates. The inability of Member States to seize 
control of a failing credit institution and resolve it in a way that effectively prevents 

17 
18 
19 

OJ C , , p. . 
OJ C , , p. . 
OJ C , , p. . 

EN 

20 

   EN 

                                                 
broader  systemic  damage  can  undermine  Member  States'  mutual  trust  and  the 
credibility  of  the  internal  market  in  the  field  of  financial  services.  The  stability  of 
financial  markets  is,  therefore,  an  essential  condition  for  the  establishment  and 
functioning of the internal market. 

There is currently no harmonisation of the procedures for resolving credit institutions 
at Union level. Some Member States apply to credit institutions the same procedures 
that they apply to other insolvent enterprises, which in certain cases have been adapted 
for  credit  institutions.  There  are  considerable  substantial  and  procedural  differences 
between  the  laws,  regulations  and  administrative  provisions  which  govern  credit 
institutions'  insolvency  in  the  Member  States.  In  addition,  the  financial  crisis  has 
exposed that general corporate insolvency procedures may not always be appropriate 
for credit institutions as they may not always ensure sufficient speed of intervention, 
the continuation of the essential functions of credit institutions and the preservation of 
financial stability. 

A  regime  is,  therefore,  needed  to  provide  authorities  with  the  tools  to  intervene 
sufficiently early and quickly in an unsound or failing credit institution so as to ensure 
the  continuity  of  the  credit  institution's  essential  financial  and  economic  functions, 
while  minimizing  the  impact  of  an  institution's  failure  on  the  financial  system  and 
ensuring  that  shareholders  and  creditors  bear  appropriate  losses.  New  powers  should 
enable  authorities  to  maintain  uninterrupted  access  to  deposits  and  payment 
transactions, sell viable portions of the firm where appropriate, and apportion losses in 
a manner that is fair and predictable. Those objectives should help avoid destabilizing 
financial markets and minimize the costs for taxpayers. 

Some  Member  States  have  already  enacted  legislative  changes  that  introduce 
mechanisms to resolve failing credit institutions; others have indicated their intention 
to  introduce  such  mechanisms  if  they  are  not  adopted  at  Union  level.  National 
differences  in  the  conditions,  powers  and  processes  for  the  resolution  of  credit 
institutions  are  likely  to  constitute  barriers  to  the  smooth  operation  of  the  internal 
market and hinder cooperation between national authorities when dealing with failing 
cross-border banking groups. This is particularly true where different approaches mean 
that  national  authorities  do  not  have  the  same  level  of  control  or  the  same  ability  to 
resolve  credit  institutions.  Those  differences  in  resolution  regimes  may  also  affect 
bank  funding  costs  differently  across  Member  States  and  potentially  create 
competitive  distortions  between  banks.  Effective  resolution  regimes  in  all  Member 
States are also necessary to ensure that institutions cannot be restricted in the exercise 
of  the  single  market  rights  of  establishment  by  the  financial  capacity  of  their  home 
Member State to manage their failure. 

Those obstacles should be eliminated and rules should be adopted in order to ensure 
that  the  internal  market  provisions  are  not  undermined.  To  that  end,  rules  governing 
the  resolution  of  institutions  should  be  made  subject  to  common  minimum 
harmonisation rules. 

Since the objectives of the action to be taken, namely the harmonisation of the rules 
and processes for the resolution of credit institutions, cannot be sufficiently achieved 
by  the  Member  States,  and  can  therefore  by  reason  of  the  effects  of  a  failure  of  any 
institution in the whole Union, be better achieved at Union level, the Union may adopt 
measures, in accordance with the principle of subsidiarity as set out in Article 5 of the 

(3) 

(4) 

(5) 

(6) 

(7) 

EN 

21 

   EN 

(8) 

Treaty on European Union. In accordance with the principle of proportionality, as set 
out  in  that  Article,  this  Directive  does  not  go  beyond  what  is  necessary  in  order  to 
achieve those objectives. 

In order to ensure consistency with existing Union legislation in the area of financial 
services as well as the greatest possible level of financial stability across the spectrum 
of  institutions,  the  resolution  regime  should  not  only  apply  to  credit  institutions  but 
also to investment firms subject to the prudential requirements laid down by Directive 
2006/49/EC  of  the  European  Parliament  and  of  the  Council  of  14  June  2006  on  the 
capital adequacy of investment firms and credit institutions20. The regime should also 
apply to financial holding companies, mixed financial holding companies provided for 
in  Directive  2002/87/EC  of  the  European  Parliament  and  of  the  Council  of  16 
December  2002  on  the  supplementary  supervision  of  credit  institutions,  insurance 
undertakings and investment firms in a financial conglomerate and amending Council 
Directives  73/239/EEC,  79/267/EEC,  92/49/EEC,  92/96/EEC,  93/6/EEC  and 
93/22/EEC, and Directives 98/78/EC and 2000/12/EC of the European Parliament and 
of the Council21,mixed-activity holding companies and financial institutions, when the 
latter  are  subsidiaries  of  a  credit  institution  or  an  investment  firm.  The  crisis  has 
demonstrated that the insolvency of an entity affiliated to a group can rapidly impact 
the solvency of the whole group and, thus, even have its own systemic implications. 
Authorities  should,  therefore,  also  possess  effective  means  of  action  with  respect  to 
these entities in order to prevent contagion and produce a consistent resolution scheme 
for  the  group  as  a  whole,  as  the  insolvency  of  an  entity  affiliated  to  a  group  could 
rapidly impact the solvency of the whole group. 

(9) 

The use of resolution tools and powers provided for in this Directive may disrupt the 
rights  of  shareholders  and  creditors.  In  particular,  the  power  of  the  authorities  to 
transfer  the  shares  or  all  or  part  of  the  assets  of  an  institution  to  a  private  purchaser 
without  the  consent  of  shareholders  affects  the  property  rights  of  shareholders.  In 
addition,  the  power  to  decide  which  liabilities  to  transfer  out  of  a  failing  credit 
institution based upon the objectives of ensuring the continuity of services and avoid 
adverse effect on financial stability may affect the equal treatment of creditors. 

(10)  National Authorities should take into account the risk, size and interconnectedness of 
an  institution  in  the  context  of  recovery  and  resolution  plans  and  when  using  the 
different  tools  at  their  disposal,  making  sure  that  the  regime  is  applied  in  an 
appropriate way. 

(11) 

In  order  to  ensure  the  required  speed  of  action,  to  guarantee  independence  from 
economic  actors  and  to  avoid  conflicts  of  interest,  Member  States  should  appoint 
public  administrative  authorities  to  perform  the  functions  and  tasks  in  relation  to 
resolution  pursuant  to  this  Directive.  Member  States  should  ensure  that  appropriate 
resources  are  allocated  to  those  resolution  authorities.  The  designation  of  public 
authorities  should  not  exclude  delegation  under  the  responsibility  of  the  resolution 
authority.  However,  it  is  not  necessary  to  prescribe  the  exact  authority  that  Member 
States  should  appoint  as  the resolution  authority.  While  harmonisation  of  that  aspect 
may facilitate coordination, it would also considerably interfere with the constitutional 
and administrative systems of Member States. A sufficient degree of coordination can 

20 
21 

OJ L 177, 30.6.2006, p. 2011. 
OJ L35, 11.2.2003, p.1. 

EN 

22 

   EN 

                                                 
still be achieved with a less intrusive requirement: all the national authorities involved 
in  the  resolution  of  institutions  should  be  represented  in  resolution  colleges,  where 
coordination at cross-border or Union level should take place. Member States should, 
therefore, be free to  choose  which  authorities  should be responsible for applying the 
resolution tools and exercising the powers provided for in this Directive. 

(12) 

In light of the consequences that the failure of a credit institution or an investment firm 
may have on the financial system and the economy of a Member State as well as the 
possible need to use public funds to resolve a crisis, the Ministries of Finance or other 
relevant ministries in the Member States should be closely involved, at an early stage, 
in the process of crisis management and resolution. 

(13)  Effective  resolution  of  institutions  or  groups  operating  across  the  Union  requires 
cooperation among competent authorities and resolution authorities within supervisory 
and resolution colleges in all the stages covered by this Directive, from the preparation 
of recovery and resolution plans to the actual resolution of an institution. In the event 
of  disagreement  between  national  authorities  on  decisions  to  be  taken  in  accordance 
with this Directive with regard to institutions, the European Banking Authority (EBA) 
should, as a last resort, play a role of binding mediation. For that purpose, EBA should 
be empowered to take decisions requiring national authorities to take or to refrain from 
specific  actions  in  accordance  with  the  provisions  of  Regulation  1093/2010  of  the 
European  Parliament  and  of  the  Council  of  24 November  2010  establishing  a 
European  Supervisory  Authority  (European  Banking  Authority),  amending  Decision 
No 716/2009/EC and repealing Commission Decision 2009/78/EC22. 

(14) 

(15) 

(16) 

In  order  to  ensure  uniform  and  consistent  approach  in  the  area  covered  by  this 
Directive,  EBA  should  also  be  empowered  to  adopt  guidelines,  and  elaborate 
regulatory  and  technical  standards  to  be  endorsed  by  the  Commission  by  means  of 
delegated  acts  pursuant  to  Article  290  of  the  Treaty  on  the  Functioning  of  the 
European Union. 

In order to deal in an efficient manner with failing institutions, authorities should have 
the power to impose preparatory and preventative measures. 

It is essential that all institutions prepare and regularly update recovery plans that set 
out  measures  to  be  taken  by  those  institutions  under  different  circumstances  or 
scenarios. Such plans should be detailed and based on realistic assumptions applicable 
in a range of robust and severe scenarios. The requirement to prepare a recovery plan 
should, however, be applied proportionately, reflecting the systemic importance of the 
institution or group. In that vein, the required content should also take into account the 
nature  of  the  institution's  sources  of  funding  and  the  degree  to  which  group  support 
would  be  credibly  available.  Institutions  should  be  required  to  submit  their  plans  to 
supervisors for a complete assessment, including whether the plans are comprehensive 
and could feasibly restore an institution's viability, in a timely manner, even in periods 
of financial stress. 

(17)  Where an institution does not present an adequate recovery plan, supervisors should be 
empowered  to  require  that  institution  to  take  any  measure  necessary  to  redress  the 
deficiencies  of  the  plan,  including  making  changes  to  its  business  model  or  to  its 

22 

OJ L.., p.. 

EN 

23 

   EN 

                                                 
funding  strategy.  That  requirement  may  affect  the  freedom  to  conduct  a  business  as 
guaranteed by Article 16 of the Charter of Fundamental Rights. The limitation of that 
fundamental  right  is  however  necessary  to  meet  the  objectives  of  financial  stability 
and  for  protecting  depositors  and  creditors.  More  specifically,  such  a  limitation  is 
necessary in order to strengthen the business of institutions and avoid that institutions 
grow  excessively  or  take  excessive  risks  without  being  able  to  tackle  setbacks  and 
losses  and  to  restore  their  capital  base.  The  limitation  is  also  proportionate  as  only 
preventative  action  can  ensure  that  adequate  precautions  are  taken  and  therefore 
complies with Article 52 of the Charter of Fundamental Rights of the European Union. 

(18)  Resolution  planning  is  an  essential  component  of  effective  resolution.  Authorities 
should have all the information necessary in order to plan how the essential functions 
of  an  institution  or  of  a  cross-border  group  may  be  isolated  from  the  rest  of  the 
business  and  transferred  in  order  to  ensure  the  preservation  and  continuance  of 
essential functions. The requirement to prepare a resolution plan should, however, be 
simplified, reflecting the systemic importance of the institution or group.  

(19)  Resolution  authorities  should  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  authorities'  discretion  should  be  limited  to 
what  is  necessary  in  order  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  be  neither  directly  nor 
indirectly  discriminatory  on  ground  of  nationality,  and  be  justified  by  the  overriding 
reason  of  being  conducted  in  the  public  interest  in  financial  stability.  To  determine 
whether  an  action  was  taken  in  the  general  public  interest,  resolution  authorities, 
acting  in  the  general  public  interest,  should  be  able  to  achieve  their  resolution 
objectives without encountering impediments to the application of resolution tools or 
their ability to exercise the powers conferred to them. Furthermore, an action should 
not go beyond the minimum necessary to attain the objectives. When determining the 
measures to be taken, resolution authorities should take into account the warnings and 
recommendations of the European Systemic Risk Board established under Regulation 
(EU)  No 1092/2010  of  the  European  Parliament  and  of  the  Council  of  24 November 
2010  on  European  Union  macro-prudential  oversight  of  the  financial  system  and 
establishing a European Systemic Risk Board.23 

(20)  Measures  proposed  to  address  or  remove  impediments  to  the  resolvability  of  an 
institution  or  a  group  should  not  prevent  institutions  from  exercising  the  right  of 
establishment conferred by the Treaty on the Functioning of the European Union. 

(21)  Recovery  and  resolution  plans  should  not  assume  access  to  extraordinary  public 
financial support or expose taxpayers to the risk of loss. Access to liquidity facilities 
provided  by  central  banks,  including  emergency  liquidity  facilities,  should  not  be 
considered  as  extraordinary  public  financial  support  provided  that  the  institution  is 

23 

OJ L 331, 15.12.2010, p. 1. 

EN 

24 

   EN 

                                                 
solvent  at  the  moment  of  the  liquidity  provision,  and  such  liquidity  provision  is  not 
part  of  a  larger  aid  package;  that  the  facility  is  fully  secured  by  collateral  to  which 
haircuts are applied, in function of its quality and market value, that the central bank 
charges  a  penal  interest  rate  to  the  beneficiary;  and  that  the  measure  is  taken  at  the 
central bank's own initiative and, in particular, is not backed by any counter-guarantee 
of the State. 

take 

into  account 

(22)  The provision of financial support from one entity of a cross-border group to another 
entity of the same group is currently restricted by a number of provisions laid down by 
national laws. Those provisions are designed to protect the creditors and shareholders 
of  each  entity.  Those  provisions,  however,  do  not 
the 
interdependency  of  the  entities  of  the  same  group  or  the  group  interest.  At  the 
international level, only in certain legal systems has the concept of group interest been 
developed through jurisprudence or legal rules. That concept takes into account, beside 
the  interest  of  each  individual  group  entity,  the  indirect  interest  that  each  entity  in  a 
group has in the prosperity of the group as a whole. However, it differs from Member 
State  to  Member  State  and  does  not  provide  the  necessary  legal  certainty.  It  is, 
therefore,  appropriate  to  set  out  under  which  conditions  financial  support  may  be 
transferred among entities of a cross-border banking group with a view to ensuring the 
financial  stability  of  the  group  as  a  whole.  Financial  support  between  group  entities 
should be voluntary. It is appropriate that the exercise of the right of establishment is 
not  directly  or  indirectly  made  conditional  by  Member  States  to  the  existence  of  an 
agreement to provide financial support. 

(23) 

In  order  to  preserve  financial  stability,  it  is  important  that  competent  authorities  be 
able  to  remedy  the  deterioration  of  an  institution's  financial  and  economic  situation 
before  that  institution  reaches  a  point  at  which  authorities  have  no  other  alternative 
than  to  resolve  it.  To  this  end,  competent  authorities  should  be  granted  early 
intervention  powers,  including  the  power  to  replace  the  management  body  of  an 
institution with a special manager; this would serve as a means of exerting pressure on 
the institution in question to take measures to restore its financial soundness and/or to 
reorganise  its  business  so  as  to  ensure  its  viability  at  an  early  stage.  The  task  of  the 
special  manager  should  be  to  take  all  measures  necessary  and  promote  solutions  in 
order  to  redress  the  financial  situation  of  the  institution.  The  appointment  of  the 
special manager should not however derogate from any rights of the shareholders or 
owners  or  procedural  obligations  established  under  Union  or  national  company  law 
and should respect international obligations of the Union or Member States, relating to 
investment  protection.  The  early  intervention  powers  should  include  those  already 
specified under Directive 2006/48/EC of the European Parliament and of the Council 
of  14  June  2006  relating  to  the  taking  up  and  pursuit  of  the  business  of  credit 
institutions24  for  circumstances  other  than  those  considered  as  early  intervention  as 
well as other situations considered necessary to restore the financial soundness of an 
institution. 

(24)  The  resolution  framework  should  provide  for  timely  entry  into  resolution  before  a 
financial  institution  is  balance-sheet  insolvent  and  before  all  equity  has  been  fully 
wiped out. Resolution should be initiated when a firm is no longer viable or likely to 
be no longer viable and other measures have proved insufficient to prevent failure. The 

24 

OJ L 177, 30.6.2006, p. 1. 

EN 

25 

   EN 

                                                 
fact  that  an  institution  does  not  meet  the  requirements  for  authorization  should  not 
justify per-se the entry into resolution, especially if the institution is still or likely to be 
still viable. An institution should be considered as failing or likely to fail when it is or 
is  to  be  in  breach  of  the  capital  requirements  for  continuing  authorisation  because  it 
has incurred or is likely to incur in losses that are to deplete all or substantially all of 
its own funds, when the assets of the institution are or are to be less than its liabilities, 
when the institution is or is to be unable to pay its obligations as they fall due, or when 
the institution requires extraordinary public financial support. The need for emergency 
liquidity  assistance  from  a  central  bank  should  not  in  itself  be  a  condition  that 
sufficiently  demonstrates  that  an  institution  is  or  will  be,  in  the  near-term,  unable  to 
pay its liabilities as they fall due. In order to preserve financial stability, in particular 
in  case  of  a  systemic  liquidity  shortage,  State  guarantees  on  liquidity  facilities 
provided  by  central  banks  or  State  guarantees  on  newly  issued  liabilities  should  not 
trigger  the  resolution  framework  provided  that  a  number  of  conditions  are  met.  In 
particular  the  State  guarantee  measures  should  to  be  approved  under  the  State  aid 
framework and should not be part of a larger aid package, and the use of the guarantee 
measures  should  be  strictly  limited  in  time.  In  both  instances,  the  bank  needs  to  be 
solvent. 

(25)  The  powers  of  resolution  authorities  should  also  apply  to  holding  companies  where 
both  the  holding  company  is  failing  or  likely  to  fail  and  a  subsidiary  institution  is 
failing  or  likely to  fail.  In addition,  notwithstanding the fact  that  a holding  company 
might not be failing or likely to fail, the powers of resolution authorities should apply 
to the holding company where one or more subsidiary credit institution or investment 
firm meet the conditions for resolution and the application of the resolution tools and 
powers  in  relation  to  the  holding  company  is  necessary  for  the  resolution  of  one  or 
more of its subsidiaries or for the resolution of the group as a whole. 

(26)  Where an institution is failing or likely to fail, national authorities should have at their 
disposal  a  minimum  harmonised  set  of  resolution  tools  and  powers.  Their  exercise 
should be subject to common conditions, objectives, and general principles. Once the 
resolution  authority  has  taken  the  decision  to  put  the  institution  under  resolution, 
normal insolvency proceedings should be excluded. Member States should be able to 
confer onto the resolution authorities powers and tools in addition to those conferred 
onto them under this Directive. The use of these additional tools and powers, however, 
should comply with the resolution principles and objectives as set out in this Directive. 
In  particular,  the  use  of  such  tools  or  powers  should  not  impinge  on  the  effective 
resolution of cross-border groups and should ensure that shareholders bear losses. 

(27) 

In  order  to  avoid  moral  hazard,  any  insolvent  institution  should  be  able  to  exit  the 
market,  irrespective  of  its  size  and  interconnectedness,  without  causing  systemic 
disruption.  A  failing  institution  is  in  principle  liquidated  under  normal  insolvency 
proceedings.  However,  liquidation  under  normal  insolvency  proceedings  might 
jeopardise  financial  stability,  interrupt  the  provision  of  essential  services,  and  affect 
the  protection  of  depositors.  In  such  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. 

EN 

26 

   EN 

(28)  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  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 effect a recapitalisation. 

(29)  When  applying  resolutions  tools  and  exercising  resolution  powers,  resolution 
authorities should make sure that shareholders and creditors bear an appropriate share 
of  the  losses,  that  the  managers  are  replaced,  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.  When  the  use  of  the  resolution  tools 
involves  the  granting  of  State  aid,  interventions  should  have  to  be  assessed  in 
accordance  with  the  relevant  State  aid  provisions.  State  aid  may  be  involved,  inter 
alia,  where  resolution  funds  or  deposit  guarantee  funds  intervene  to  assist  in  the 
resolution of failing institutions. 

(30)  The  limitations  on  the  rights  of  shareholders  and  creditors  should  be  in  accordance 
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. 

(31) 

Interference  with  property  rights  should  not  be  disproportionate.  In  consequence, 
affected  shareholders  and  creditors  should  not  incur  greater  losses  than  those  which 
they  would  have  incurred  if  the  institution  had  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  bank,  the  residual  part  of  the 
institution under resolution should be wound up under normal insolvency proceedings. 
In  order  to  protect  shareholders  and  creditors  who  are  left  in  the  winding  up 
proceedings  of  the  institution,  they  should  be  entitled  to  receive  in  payment  of  their 
claims  in  the  winding  up  proceedings  not  less  than  what  it  is  estimated  they  would 
have recovered if the whole institution had been wound up  under  normal  insolvency 
proceedings. 

(32)  For the purpose of protecting the right of shareholders and creditors to receive not 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 properly estimate 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 

EN 

27 

   EN 

insolvency  proceedings.  Such  valuation  should  be  subject  to  judicial  review  only 
together  with  the  resolution  decision.  In  addition,  there  should  be  an  obligation  to 
carry out, after the resolution tools have been applied, an ex post comparison between 
the  treatment  that  shareholders  and  creditors  have  actually  been  afforded  and  the 
treatment  they  would  have  received  under  normal  insolvency  proceedings.  If  it  is 
determined that shareholders and creditors have received, in payment of their claims, 
less  than  the  amount  that  they  would  have  received  under  normal  insolvency 
proceedings, they should be entitled to the payment of the difference. As opposed to 
the  valuation  prior  to  the  resolution  action,  it  should  be  possible  to  challenge  this 
comparison separately from the resolution decision. Member States should be free to 
decide  on  the  procedure  as  to  how  to  pay  any  difference  of  treatment  that  has  been 
determined,  to  shareholders  and  creditors.  That  difference,  if  any,  should  be  paid  by 
the financial arrangements established in accordance with this directive.  

(33) 

It  is  important  that  losses  be  recognised  upon  failure  of  the  institution.  The  guiding 
principle for the valuation of assets and liabilities of failing institutions should be their 
market value at the moment when the resolution tools are applied and to the extent that 
markets  are  functioning  properly.  When  markets  are  truly  dysfunctional,  valuation 
may  be  performed  at  the  duly  justified  long  term  economic  value  of  assets  and 
liabilities. It should be possible, for reasons of urgency, that the resolution authorities 
make  a  rapid  valuation  of  the  assets  or  the  liabilities  of  a  failing  institution.  That 
valuation  should  be  provisional  and  should  apply  until  an  independent  valuation  is 
carried out. 

(34)  Rapid action is necessary to sustain market confidence and minimise contagion. Once 
an institution is deemed to be failing or likely to fail, resolution authorities should not 
delay  in  taking  appropriate  action.  The  circumstances  under  which  the  failure  of  an 
institution may occur, and in particular taking account of the possible urgency of the 
situation,  should  allow  resolution  authorities  to  take  resolution  action  without 
imposing an obligation to first use the early intervention powers. 

(35)  The resolution tools should be applied before any public sector injection of capital or 
equivalent  extraordinary  public  financial  support  to  an  institution.  This,  however, 
should not impede the use, for the purpose of financing resolution, of funds from the 
deposit  guarantee  schemes  or  the  resolution  funds.  In  this  respect,  the  use  of 
extraordinary public financial support or resolution funds, including deposit guarantee 
funds, to assist in the resolution of failing institutions should be assessed in accordance 
with relevant State aid provisions. 

(36)  The resolution tools should include the sale of the business to a private purchaser, the 
setting up of a bridge institution, the separation of the good from the bad assets of the 
failing institution, and the bail in of the failing institution. 

(37)  Where  the  resolution  tools  have  been  used  to  transfer  the  systemically  important 
services or viable business of an institution to a sound entity such as a private sector 
purchaser or bridge institution, the residual part of the institution should be liquidated 
within an appropriate time frame having regard to any need for the failed institution to 
provide services or support to enable the purchaser or bridge institution to carry on the 
activities or services acquired by virtue of that transfer. 

EN 

28 

   EN 

(38)  The sale of business tool should enable authorities to effect a sale of the institution or 
parts  of  its  business  to  one  or  more  purchasers  without  the  consent  of  shareholders. 
When applying the sale of business tool, authorities should make arrangements for the 
marketing  of  that  institution  or  part  of  its  business  in  an  open,  transparent  and  non-
discriminatory process, while aiming at maximising as far as possible the sale price. 

(39)  For the purpose of protecting the right of shareholders and creditors to receive not less 
than they would receive in normal insolvency proceedings, any proceeds from a partial 
transfer of assets should benefit the institution under resolution. In the event of transfer 
of all of the shares or of all of the assets, rights and liabilities of the institution, any 
proceeds from the transfer should benefit the shareholders of the failed institution. The 
proceeds should be calculated net of the costs arisen from the failure of the institution 
and from the resolution process.  

(40) 

(41) 

In  order  to  perform  the  sale  of  business  in  a  timely  manner  and  protect  financial 
stability,  the  assessment  of  the  buyer  of  a  qualifying  holding  should  be  carried  out 
without  delay  by  way  of  derogation  from  the  time  limits  set  out  by  Directive 
2006/48/EC. 

Information concerning the marketing of a failed institution and the negotiations with 
potential acquirers prior to the application of the sale-of-business tool is likely to be of 
systemic  importance.  In  order  to  ensure  financial  stability,  it  is  important  that  the 
disclosure  to  the  public  of  such  information  required  by  Directive  2003/6/EC  of  the 
European  Parliament  and  of  the  Council  of  28  January  2003  on  insider  dealing  and 
market manipulation (market abuse)25 may be delayed for the time necessary to plan 
and  structure  the  resolution  of  the  institution  in  accordance  with  delays  permitted 
under the market abuse regime. 

(42)  As an institution controlled by the resolution authority a bridge institution would have 
as its main purpose ensuring that essential financial services continue to be provided to 
the clients of the insolvent institution and that essential financial activities continue to 
be performed. The bridge institution should be operated as a viable going concern and 
be put back on the market as soon as possible or wound down if not viable. 

(43)  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. 

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

(45) 

In order to ensure that resolution authorities have the necessary flexibility to allocate 
losses to creditors in a range of circumstances, it is appropriate that those authorities 

25 

OJ L 96, 12.4.2003, p. 16. 

EN 

29 

   EN 

                                                 
be  able  to  apply  the  bail-in  tool  both  where  the  objective  is  to  resolve  the  failing 
institution as a going concern if there is a realistic prospect that the institution 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 down. 

(46)  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, the resolution 
through bail-in should always be accompanied by replacement of management and a 
subsequent restructuring of the institution and its activities in a way that addresses the 
reasons  for 
the 
its  failure.  That  restructuring  should  be  achieved 
implementation of a business reorganisation plan. Where applicable, such plans should 
be compatible with the restructuring plan that the institutions is required to submit to 
the  Commission  under  the  Union  State  aid  framework.  In  particular,  in  addition  to 
measures aiming at restoring the long term viability of the institution, the plan should 
include measures limiting the aid to the minimum and burden sharing, and measures 
limiting distortions of competition. 

through 

(47) 

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 is desirable that it can be applied 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/EC26 of the European Parliament and of the Council of 30 May 1994 on deposit-
guarantee  schemes,  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. 

(48)  Depositors that hold deposits guaranteed by the deposit guarantee scheme should not 
be subject to the exercise of the bail-in tool. The deposit guarantee scheme, however, 
contributes  to  funding  the  resolution  process  to  the  extent  that  it  would  have  had  to 
indemnify  the  depositors.  The  exercise  of  the  bail-in  powers  would  ensure  that 
depositors continue having access to their deposits which is the main reason why the 
deposit  guarantee schemes have  been established. Not foreseeing  the involvement of 
those schemes in such cases would constitute an unfair advantage with respect to the 
rest of creditors which would be subject to the exercise of the powers by the resolution 
authority. 

(49) 

In  general,  resolution  authorities  should  apply  the  bail-in  tool  in  a  way  that  respects 
the  pari  passu  treatment  of  creditors  and  the  statutory  ranking  of  claims  under  the 
applicable  insolvency  law.  Losses  should  first  be  absorbed  by  regulatory  capital 
instruments and should be allocated to shareholders either through the cancellation of 
shares  or  through  severe  dilution.  Where  those  instruments  are  not  sufficient, 
subordinated  debt  should  be  converted  or  written  down.  Finally,  senior  liabilities 
should be converted or written down if the subordinate classes have been converted or 
written down entirely. 

26 

OJ L 135, 31.5.1994, p. 5–14. 

EN 

30 

   EN 

                                                 
(50)  To  avoid  institutions  structuring  their  liabilities  in  a  manner  that  impedes  the 
effectiveness of the bail in tool it is appropriate to establish that the institutions should 
have  at  all  times  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  Directive 
2006/48/EC  or  Directive  2006/49/EC.  Resolution  authorities  should  also  be  able  to 
require  that  this  percentage  is  totally  or  partially  composed  of  own  funds  and 
subordinated debt. 

(51)  Member  States  should  ensure  that  Additional  Tier  1  and  Tier  2  capital  instruments 
fully absorb losses at the point of non-viability of the issuing institution. Accordingly, 
resolution authorities should be required at that point to write down those instruments 
in full, or to convert them to Common Equity Tier 1 instruments, at the point of non-
viability and before any other resolution action is taken. For this purpose, the point of 
non-viability should be understood as the point at which the relevant national authority 
determines that the institution meets the conditions for resolution or the point at which 
the authority decides that the institution ceases to be viable if those capital instruments 
are not written down. The fact that the instruments are to be written down or converted 
by authorities in the circumstances required by this Directive should be recognised in 
the  terms  governing  the  instrument,  and  in  any  prospectus  or  offering  documents 
published or provided in connection with the instruments. 

(52)  The bail-in tool, maintaining the institution as a going concern, should maximise the 
value of the creditors' claims, improve market certainty and reassure counterparties. In 
order to reassure investors and market counterparties and to minimise its impact it is 
necessary to allow not to apply the bail-in tool until 1 January 2018. 

(53)  Resolution authorities should have all the legal powers that, in different combinations, 
may be exercised when applying the resolution tools. Those should include the powers 
to  transfer  shares  in,  or  assets,  rights  or  liabilities  of,  a  failing  institution  to  another 
entity such as another institution or a bridge institution, powers to write off or cancel 
shares, or write down or convert debt of a failing institution, the power to replace the 
management and power to impose a temporary moratorium on the payment of claims. 
Supplementary powers may also be needed, including a power to require continuity of 
essential services from other parts of a group. 

(54) 

It  is  not  necessary  to  prescribe  the  exact  means  through  which  the  resolution 
authorities  should  intervene  in  the  insolvent  institution.  The  resolution  authorities 
should  have  the  choice  between  taking  control  through  a  direct  intervention  in  the 
institution  or  through  executive  order.  They  should  decide  according  to  the 
circumstances  of  the  case.  It  does  not  appear  necessary  for  efficient  cooperation 
between Member States to impose a single model at this stage. 

(55)  The  resolution  framework  should  include  procedural  requirements  to  ensure  that 
resolution  measures  are  properly  notified  and  made  public.  However,  as  information 
obtained by resolution authorities and their professional advisers during the resolution 
process  is  likely  to  be  sensitive,  before  the  resolution  decision  is  made  public,  that 
information should be subject to an effective confidentiality regime. 

(56)  National  authorities  should  have  ancillary  powers  to  ensure  the  effectiveness  of  the 
transfer  of  shares or  debt  instruments  and assets, rights and liabilities. Those powers 

EN 

31 

   EN 

should  include  the  power  to  remove  third  parties  rights  from  the  transferred 
instruments or assets, the power to enforce contracts and to provide for the continuity 
of  arrangements  vis-à-vis  the  recipient  of the  transferred  assets  and  shares.  However 
the rights of employees to terminate a contract of employment should not be affected. 
The right of a party to terminate a contract for reasons other than the mere substitution 
of  the  failing  institution  with  the  new  institution  should  not  be  affected  either. 
Resolution  authorities  should  also  have  the  ancillary  power  to  require  the  residual 
institution  that  is  being  wound  up  under  normal  insolvency  proceeding,  to  provide 
services that are necessary to enable the institution to which assets or shares have been 
transferred  by  virtue  of  the  application  of  the  sale  of  business  tool  or  the  bridge 
institution tool, to operate its business. 

In  accordance  with  Article  47  of  the  Charter  of  Fundamental  Rights,  the  concerned 
parties  have  a  right  to  due  process  and  to  having  an  effective  remedy  against  the 
measures  affecting  them.  Therefore,  the  decisions  taken  by  the  resolution  authorities 
should  be  subject  to  judicial  review.  However,  since  this  Directive  aims  to  cover 
situations  of  extreme  urgency,  and  since  the  suspension  of  any  decision  of  the 
resolution  authorities  might  impede  the  continuity  of  essential  functions,  it  is 
necessary  to  provide  that  the  lodging  of  any  application  for  review  and  any  interim 
court order cannot suspend the enforcement of the resolution decisions. In addition, in 
order  to  protect  third  parties  who  have  bought  assets,  rights  and  liabilities  of  the 
institution  under  resolution  by  virtue  of  the  exercise  of  the  resolution  powers  by  the 
authorities  and  to  ensure  the  stability  of  the  financial  markets,  the  judicial  review 
should  not  affect  any  administrative  act  or  transaction  concluded  on  the  basis  of  an 
annulled decision. Remedies for a wrongful decision should therefore be limited to the 
award of compensation for the damages suffered by the affected persons. 

It  is  in  the  interest  of  an  efficient  resolution,  and  in  order  to  avoid  conflicts  of 
jurisdiction,  that  no  normal  insolvency  proceedings  for  the  failing  institution  be 
opened or continued whilst the resolution authority is exercising its resolution powers 
or applying the resolution tools. It is also useful and necessary to suspend for a limited 
period of time certain contractual obligations so that the resolution authority has time 
to put into practice the resolution tools. 

In order to ensure that resolution authorities, when transferring assets and liabilities to 
a  private  sector  purchaser  or  bridge  institution,  have  an  adequate  period  to  identify 
contracts  that  need  to  be  transferred,  it  is  appropriate  to  impose  proportionate 
restrictions  on  counterparties'  rights  to  close  out,  accelerate  or  otherwise  terminate 
financial contracts before the transfer is made. Such a restriction is necessary to allow 
authorities  to  obtain  a  true  picture  of  the  balance  sheet  of  the  failing  institution, 
without  the  changes  in  value  and  scope  that  extensive  exercise  of  termination  rights 
would entail. In order to interfere  with the contractual rights of counterparties to the 
minimum extent necessary, the restriction on termination rights should apply only in 
relation to the resolution action, and rights to terminate arising from any other default, 
including failure to pay or deliver margin, should remain. 

(57) 

(58) 

(59) 

(60) 

In order to preserve legitimate capital market arrangements in the event of a transfer of 
some,  but  not  all,  of  the  assets,  rights  and  liabilities  of  a  failing  institution,  it  is 
appropriate  to  include  safeguards  to  prevent  the  splitting  of  linked  liabilities,  rights 
and  contracts.  Such  a  restriction  on  selected  practices  in  relation  to  linked  contracts 
should  extend  to  contracts  with  the  same  counterparty  covered  by  security 

EN 

32 

   EN 

arrangements,  title  transfer  financial  collateral  arrangements,  set-off  arrangements, 
close  out  netting  agreements,  and  structured  finance  arrangements.  Where  the 
safeguard  applies,  resolution  authorities  should  be  bound  to  transfer  all  linked 
contracts  within  a  protected  arrangement,  or  leave  them  all  with  the  residual  failed 
bank.  Those  safeguards  should  ensure  that  the  regulatory  capital  treatment  of 
exposures covered by a netting agreement for the purposes of Directive 2006/48/EC is 
not affected. 

(61)  When  resolution  authorities  intend  to  transfer  a  set  of  linked  contracts,  and  that 
transfer cannot be effective in relation to all the contracts comprised in the set because 
some rights or liabilities covered by the contracts are governed by the law of a territory 
outside the Union, the transfer should not be made. Any transfer in breach of this rule, 
should be void. 

(62)  While  ensuring  that  resolution  authorities  have  the  same  tools  and  powers  at  their 
disposal  will  facilitate  coordinated  action  in  the  event  of  a  failure  of  a  cross-border 
group,  further  action  appears  necessary  to  promote  cooperation  and  prevent 
fragmented  national  responses.  Resolution  authorities  should  be  required  to  consult 
each other and cooperate when resolving affiliated entities in resolution colleges with 
a  view  to  agreeing  a  group  resolution  scheme.  Resolution  colleges  should  be 
established around the core of the existing supervisory colleges through the inclusion 
of  resolution  authorities,  and  the  involvement,  where  appropriate,  of  Ministries  of 
Finance,  for  group  entities.  In  the  event  of  a  crisis,  the  resolution  college  should 
provide  a  forum  for  the  exchange  of  information  and  the  coordination  of  resolution 
measures. 

(63)  Resolution of cross border groups should strike the balance between the need, on the 
one hand, for procedures that take into account the urgency of the situation and allow 
for efficient, fair and timely solutions for the group as a whole and, on the other hand, 
the  necessity  to  protect  financial  stability  in  all  the  Member  States  where  the  group 
operates. The different resolution authorities should share their views in the resolution 
college. Resolution actions proposed by the group level resolution authority should be 
prepared and discussed amongst different national resolution authorities in the context 
of the group resolution plans. Resolution colleges should incorporate the views of the 
resolution authorities of all the Member States in which the group is active, in order to 
facilitate swift and joint decisions wherever possible. Resolution actions by the group 
level resolution authority should always take into account their impact on the financial 
stability in the Member States where the group operates. This should be ensured by the 
possibility for the resolution authorities of the Member State in which a subsidiary is 
established  to  object  to  the  decisions  of  the  group  resolution  authority,  not  only  on 
appropriateness of resolution actions and measures but also on ground of the need to 
protect financial stability in that Member State. Any dispute regarding, among others, 
whether  the  financial  stability  in  all  the  different  Member  States  where  the  group 
operates is sufficiently safeguarded should be resolved by EBA. EBA should ensure in 
particular  that  the  final  decision  on  the  resolution  action  to  be  taken  considers 
adequately the interests of all the resolution authorities in protecting financial stability 
in the Union as well as in all the Member States where the group operates. 

(64)  The production of a group resolution scheme should facilitate coordinated resolution 
that is more likely to deliver the best result for all institutions of a group. The group 
resolution scheme should be proposed by the group resolution authority and should be 

EN 

33 

   EN 

binding for the members of the resolution college. National resolution authorities that 
disagreed with the scheme should have the possibility to refer the matter to EBA. EBA 
should  be  enabled  to  settle  the  disagreement  on  the  basis  of  an  assessment  as  to 
whether independent action by the Member State concerned is necessary for reasons of 
national  financial  stability,  having  regard  to  the  impact  of  that  action  on  financial 
stability in other Member States and the maximisation of the value of the group as a 
whole. 

(65)  As part of a group resolution scheme, national authorities should be invited to apply 
the  same  tool  to  legal  entities  meeting  the  conditions  for  resolution.  National 
authorities  should  not  have  the  power  to  object  to  resolution  tools  applied  at  group 
level  which  falls  within  the  responsibility  of  the  group  resolution  authority,  such  as 
application  of  bridge  bank  tool  at  parent  level,  sell  of  assets  of  the  parent  credit 
institution,  debt  conversion  at  parent  level.  The  group  level  resolution  authorities 
should also have the power to apply the bridge bank institution at group level (which 
may involve, where appropriate, burden sharing arrangements) to stabilise a group as a 
whole. Ownership of subsidiaries could be transferred to the bridge bank with a view 
to  onward  sale,  either  as  a  package  or  singly,  when  market  conditions  are  right.  In 
addition, the group level resolution authority should have the power to apply the bail-
in tool at parent level. 

(66)  Effective  resolution  of  internationally  active  institutions  and  groups  requires 
cooperation  agreements  between  the  Union  and  third  country  resolution  authorities. 
Cooperation will be facilitated if the resolution regimes of third countries are based on 
common principles and approaches that are being developed by the Financial Stability 
Board and  the  G20. For this purpose EBA should develop and enter into framework 
administrative  arrangements  with  authorities  of  third  countries  in  accordance  with 
Article  33  of  Regulation  No  1093/2010  and  national  authorities  should  conclude 
bilateral arrangements in line, as far as possible, with EBA framework arrangements. 
The  development  of  these  arrangements  between  national  authorities  responsible  for 
managing the failure of global firms should be a means to ensure effective planning, 
decision-making and coordination in respect of international groups. EBA should also 
be  entrusted  with  recognition  of  measures  taken  by  resolution  authorities  in  third 
countries. Member States should be responsible  for implementing EBA's recognition 
decisions. 

(67)  Cooperation  should  take  place  both  with  regard  to  subsidiaries  of  Union  or  third 
country  groups  and  with  regard  to  branches  of  Union  or  third  country  institutions. 
Subsidiaries  of  third  country  groups  are  enterprises  established  in  the  Union  and 
therefore are fully subject to Union law, including the resolution tools provided for in 
this Directive. It is however necessary that Member States maintain the right to apply 
the  resolution  tools  also  to  branches  of  institutions  having  their  head  office  in  third 
countries, when the recognition and application of third country proceedings related to 
a branch would endanger the financial stability in the Union or when Union depositors 
would not receive equal treatment with third country depositors. For this reasons, EBA 
should  have  the  right,  after  consulting  the  national  resolution  authorities,  to  refuse 
recognition  of  third  country  proceedings  with  regard  to  Union  branches  of  third 
countries institutions. 

(68)  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 

EN 

34 

   EN 

institution,  the  provision  of  guarantees  to  potential  purchasers,  or  the  provision  of 
capital to the bridge institution. Notwithstanding the role of central banks in providing 
liquidity  to  the  financial  system  even  in  times  of  stress,  it  is  important  that  Member 
States set up financing arrangements to avoid that the funds needed for such purposes 
come  from  the  national  budgets.  It  should  be  the  financial  industry,  as  a  whole,  that 
finances the stabilisation of the financial system. 

(69)  As  a  principle,  contributions  should  be  collected  from  the  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 financing arrangements, additional 
contributions should be collected to bear the additional cost or loss. 

(70) 

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

(71) 

In order to ensure a fair calculation of contributions and provide incentives to operate 
under a less risky model, contributions to national financing arrangements should take 
account of the degree of risk incurred by credit institutions. 

(72)  Ensuring  effective  resolution  of  failing  financial  institutions  within  the  Union  is  an 
essential  element  in  the  completion  of  the  internal  market.  The  failure  of  such 
institutions  has  an  effect  not  only  on  the  financial  stability  of  the  markets  where  it 
directly operates but also on the whole Union financial market. With the completion of 
the  internal  market  in  financial  services  the  interplay  between  the  different  national 
financial  systems  is  reinforced.  Institutions  operate  outside  their  Member  State  of 
establishment  and  are  interrelated  to  each  other  through  the  interbank  and  other 
markets  which,  in  essence  are  pan-European.  Ensuring  effective  financing  of  the 
resolution of those institutions at equal conditions across Member States is in the best 
interest of the Member States in which they operate but also of all the Member States 
in  general  as  a  means  to  ensure  equal  conditions  of  competition  and  improve  the 
functioning  of  the  single  Union  financial  market.  Setting  up  a  European  System  of 
Financing  Arrangements  should  ensure  that  all  institutions  that  operate  in  the  Union 
are subject to equally effective resolution funding arrangements and contribute to the 
stability of the single market. 

(73) 

In order to build up the resilience of the European System of Financing Arrangements, 
and in line with the objective requiring that financing should come primarily from the 
industry  rather  than  from  public  budgets,  national  arrangements  should  be  able  to 
borrow from each other in case of need. 

(74)  While financing arrangements are set up at national level, they should be mutualised in 
the  context  of  group  resolution.  When  a  resolution  action  ensures  that  depositors 
continue  having  access  to  their  deposits,  Deposit  Guarantee  Schemes  to  which  an 
institution under resolution is affiliated should be liable, up to the amount of covered 
deposits,  for the amount of losses  that they would have  had to bear if the  institution 
had been wound up under normal insolvency proceedings. 

(75) 

In  addition  to  ensuring  payout  of  depositors  or  the  continuous  access  to  covered 
deposits,  Member  States  should  retain  the  discretion  to  decide  whether  deposit 

EN 

35 

   EN 

guarantee  schemes  could  also  be  used  as  arrangements  for  the  financing  of  other 
resolution  actions.  Such flexibility should not be used in a way that would endanger 
the financing of deposit guarantee schemes or the function of guaranteeing the payout 
of covered deposits.  

(76)  Where deposits are transferred to another institution in the context of the resolution of 
a  credit  institution,  depositors  should  not  be  insured  beyond  the  level  of  coverage 
provided in Directive 94/19/EC. Therefore claims with regard to deposits remaining in 
the credit institution under resolution should be limited to the difference between the 
funds  transferred  and  the  coverage  level  provided  for  by  Directive  94/19/EC.  Where 
transferred  deposits  are  superior  to  the  coverage  level,  the  depositor  should  have  no 
claim  against  the  deposit  guarantee  scheme  with  regard  to  deposits  remaining  in  the 
credit institution under resolution. 

(77)  The  setting  up  of  financing  arrangements  establishing  the  European  System  of 
Financing Arrangements laid down in this Directive should ensure coordination of the 
use of funds available at national level for resolution..  

(78)  Technical  standards  in  financial  services should  ensure  consistent  harmonisation  and 
adequate  protection  of  depositors,  investors  and  consumers  across  the  Union.  As  a 
body with highly specialised expertise, it would be efficient and appropriate to entrust 
EBA,  with  the  elaboration  of  draft  regulatory  and  implementing  technical  standards 
which do not involve policy choices, for submission to the Commission. 

(79)  The  Commission  should  adopt  the  draft  regulatory  technical  standards  developed  by 
EBA  by  means  of  delegated  acts  pursuant  to  Article  290  of  the  Treaty  on  the 
Functioning  of  the  European  Union  and  in  accordance  with  Articles  10  to  14  of 
Regulation (EU) No 1093/2010. 

(80)  The  Commission  should  be  empowered  to  adopt  delegated  acts  in  accordance  with 
Article  290  of  the  Treaty  on  the  Functioning  of  the  European  Union  in  order  to: 
specify  the  definitions  of  "critical  functions"  and  "core  business  lines",  specify  the 
circumstances when an institution is failing or likely to fail, specify the circumstances 
when the asset separation tool should be applied, specify the liabilities excluded from 
the scope of application of the bail-in tool, specify the circumstances when exclusion 
from the bail-in tool is necessary to ensure the continuation of critical operations and 
core business lines, specify the criteria for the determination of the minimum amount 
of  eligible  liabilities  required  from  institutions  for  the  purposes  of  the  bail  in  tool, 
specify  the  circumstances  when,  in  application  of  the  bail-in  tool,  existing  shares 
should  be  cancelled  and  liabilities  should  be  converted  into  shares,  specify  the 
circumstances  when  third  country  resolution  proceedings  should  not  be  recognised, 
further specify the conditions under which it should be considered that the target level 
of  the  financing  arrangements  has  significantly  deviated  from  the  initial  level,  adopt 
criteria aimed at adjusting the contributions to the financing arrangements to the risk 
profile  of  institutions,  define  obligations  aimed  at  ensuring  the  effective  payment  of 
the  contributions  to  the  financing  arrangements  and  specify  the  conditions  for  the 
mutual  borrowing  between  national  financing  arrangements.  It  is  of  particular 
importance  that  the  Commission  carry  out  appropriate  consultations  during  its 
preparatory work, including at expert level. 

EN 

36 

   EN 

(81) 

It is appropriate that in certain cases EBA first promote convergence of the practice of 
national  authorities  through  guidelines  and  at  a  later  stage,  on  the  basis  of  the 
convergence  developed  in  the  application  of  EBA  guidelines,  the  Commission  be 
empowered to adopt delegated acts.  

(82)  When  preparing  and  drawing  up  delegated  acts,  the  Commission  should  ensure  the 
early  and  on-going  transmission  of  information  on  relevant  documents  to  the  n 
Parliament and the Council. 

(83)  The  European  Parliament  and  the  Council  should  have  two  months  from  the  date  of 
notification  to  object  to  a  delegated  act.  It  should  be  possible  for  the  European 
Parliament  and  the  Council  to  inform  the  other  institutions  of  their  intention  not  to 
raise objections. 

(84) 

In  the  Declaration  on  Article  290  of  the  Treaty  on  the  Functioning  of  the  Union, 
annexed  to  the  Final  Act  of  the  Intergovernmental  Conference  which  adopted  the 
Treaty of Lisbon, the Conference took note of the Commission's intention to continue 
to  consult  experts  appointed  by  the  Member  States  in  the  preparation  of  draft 
delegated  acts  in  the  financial  services  area,  in  accordance  with  its  established 
practice. 

(85)  The  Commission  should  also  be  empowered  to  adopt  implementing  technical 
standards by means of implementing acts pursuant to Article 291 of the Treaty on the 
Functioning of the European Union and in accordance with Article 15 of Regulation 
(EU)  No  1093/2010.  EBA  should  be  entrusted  with  drafting  implementing  technical 
standards for submission to the Commission. 

(86)  Directive 2001/24/EC of the European Parliament and of the Council of 4 April 2001 
on  the  reorganisation  and  winding-up  of  credit  institutions27  provides  for  the  mutual 
recognition  and  enforcement  in  all  Member  States  of  decisions  concerning  the 
reorganization or winding up of credit institutions having branches in Member States 
other than those in which they have their head offices. That directive ensures that all 
assets  and  liabilities  of  the  credit  institution,  regardless  of  in  which  country  they  are 
situated, are dealt with in a single process in the home Member State and that creditors 
in the host States are treated in the same way as creditors in the home Member State; 
in order to achieve an effective resolution, Directive 2001/24/EC should apply also in 
the  event  of  use  of  the  resolution  tools  both  when  these  instruments  are  applied  to 
credit institutions and when they are applied to other entities covered by the resolution 
regime. Directive 2001/24/EC should therefore be amended accordingly. 

(87)  Union  company  law  directives  contain  mandatory  rules  for  the  protection  of 
shareholders  and  creditors  of  credit  institutions  falls  within  the  scope  of  those 
directives.  In  a  situation  where  resolution  authorities  need  to  act  rapidly,  those  rules 
may  hinder  their  effective  action  and  use  of  resolution  tools  and  powers  and 
derogations  should  be  provided.  In  order  to  guarantee  the  maximum  degree  of  legal 
certainty for the stakeholders, the derogations should be clearly and narrowly defined, 
and  they  should  only  be  used  in  the  public  interest  and  when  resolution  triggers  are 
met.  The  use  of  resolution  tools  presupposes  that  the  resolution  objectives  and  the 
conditions for resolution laid down in this Directive are respected.  

27 

OJ L 125, 5.5.2001, p. 15. 

EN 

37 

   EN 

                                                 
(88)  Second  Council  Directive  77/91/EEC  of  13  December  1976  on  coordination  of 
safeguards  which,  for  the  protection  of  the  interests  of  members  and  others,  are 
required by Member States of companies within the meaning of the second paragraph 
of  Article  58  of  the  Treaty,  in  respect  of  the  formation  of  public  limited  liability 
companies and the maintenance and alteration of their capital, with a view to making 
such safeguards equivalent28, contains rules on the shareholders' right to decide on the 
capital increase and decrease, on their right to participate in any new share issue for 
cash  consideration,  on  creditor  protection  in  the  event  of  capital  reduction  and  the 
convening of shareholders' meeting in the event of serious loss of capital. Those rules 
may hinder the rapid action of resolution authorities and derogations from them should 
be provided for. 

(89)  Directive 2011/35/EU of the European Parliament and of the Council of 5 April 2011 
concerning mergers of public limited liability companies29, lays down rules inter alia 
on the approval of mergers by the general meeting of each of the merging companies, 
on  the  requirements  concerning  the  draft  terms  of  merger,  management  report  and 
expert report, and on the creditor protection. Sixth Council Directive 82/891/EEC of 
17 December 1982 based on Article 54(3)(g) of the Treaty, concerning the division of 
public  limited  liability  companies30  contains  similar  rules  on  the  division  of  public 
limited liability companies. Directive 2005/56/EC of the European Parliament and of 
the  Council  of  26  October  2005  on  cross-border  mergers  of  limited  liability 
companies31  provides  for  corresponding  rules  concerning  cross-border  mergers  of 
limited  liability  companies.  Derogation  from  those  directives  should  be  provided  in 
order to allow a rapid action of resolution authorities. 

(90)  Directive 2004/25/EC of the European Parliament and of the Council of 21 april 2004 
on  takeover  bids32,  sets  out  an  obligation  to  launch  a  mandatory  takeover  bid  on  all 
shares of the company for the equitable price, as defined in the directive, if someone 
acquires, directly or indirectly and alone or in concert with others, a certain percentage 
of shares of that company, which gives him control of that company and is defined by 
national law. The purpose of the mandatory bid rule is to protect minority shareholders 
in case of change of control. However, the prospect of such a costly obligation might 
deter  possible  investors  in  the  affected  institution,  thereby  making  it  difficult  for 
resolution authorities to make use of all their resolution powers. Derogation should be 
provided  from  the  mandatory  bid  rule,  to  the  extent  necessary  for  the  use  of  the 
resolution powers, while after the resolution period the mandatory bid rule should be 
applied to anyone acquiring control in the affected institution. 

(91)  Directive 2007/36/EC of the European Parliament and of the Council of 11 July 2007 
on the exercise of certain rights of shareholders in listed companies33, provides for on 
the  procedural  shareholders'  rights  related  to  the  general  meeting.  Directive 
2007/36/EC  provides  inter  alia  on  the  minimum  convocation  period  to  the  general 
meeting and the content of the convocation. Those rules may hinder the rapid action of 
resolution authorities and derogation from the directive should be provided for. Prior 

28 
29 
30 
31 
32 
33 

OJ L 26, 31.1.1977, p. 1. 
OJ L 110, 29.4.2011, p. 1. 
OJ L 378, 31.12.1982, p. 47. 
OJ L 310, 25.11.2005, p. 1. 
OJ L 142, 30.4.2004, p. 12. 
OJ L 184, 14.7.2007, p. 17. 

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38 

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to resolution there may be a need for a rapid increase of capital when the institution 
does not meet or is likely not to meet the requirements of Directives 2006/48/EC and 
2006/49/EC  and  an  increase  of  capital  is  likely  to  restore  the  financial  situation  and 
avoid  a  situation  where  the  threshold  condition  for  the  resolution  are  met.  In  such 
situations  a  possibility  for  convening  a  general  meeting  in  a  shortened  convocation 
period  should  be  provided.  However,  the  shareholders  should  retain  the  decision 
making power on the increase and on the shortening of the convocation period of the 
general  meeting.  Derogation  from  Directive  2007/36/EC  should  be  provided  for  the 
establishment of that mechanism. 

In order to ensure that the authorities responsible for resolution are represented in the 
European  System  of  Financial  Supervision  established  by  Regulation  (EU),  No 
1093/2010 and to ensure that EBA has the expertise necessary to carry out the tasks 
provided  for  in  this  directive,  Regulation  (EU)  No  1093/2010  should  be  amended  in 
order  to  include  national  resolution  authorities  as  defined  in  this  Directive  in  the 
concept  of  competent  authorities  established  by  that  Regulation.Such  assimilation 
between  resolution  authorities  and  competent  authorities  pursuant  to  Regulation  N° 
1093/2010 is consistent with the functions attributed to EBA pursuant to Article 25 of 
Regulation N° 1093/2010 to contribute and participate actively in the development and 
coordination  of  recovery  and  resolution  plans  and  to  aim  at  the  facilitiation  of  the 
resolution of failing institutions and in particular cross border groups. 

In  order  to  ensure  compliance  by  institutions,  those  who  effectively  control  their 
business  and  the  members  of  the  institutions'  management  body  with  the  obligations 
deriving  from  this  Directive  and  to  ensure  that  they  are  subject  to  similar  treatment 
across  the  Union,  Member  States  should  be  required  to  provide  for  administrative 
sanctions  and  measures  which  are  effective, proportionate and dissuasive. Therefore, 
administrative sanctions and measures set out by Member States should satisfy certain 
essential requirements in relation to addressees, criteria to be taken into account when 
applying a sanction or measure, publication of sanctions or measures, key sanctioning 
powers and levels of administrative pecuniary sanctions. 

(92) 

(93) 

(94)  This Directive refers to both administrative sanctions and measures in order to cover 
all  actions  applied  after  a  violation  is  committed,  and  which  are  intended  to  prevent 
further  infringements,  irrespective  of  their  qualification  as  a  sanction  or  a  measure 
under national law. 

(95)  This  Directive  should  be  without  prejudice  to  any  provisions  in  the  law  of  Member 

States relating to criminal sanctions. 

(96) 

In  accordance  with  the  Joint  Political  Declaration  of  Member  States  and  the 
Commission of 28 September 2011 on explanatory documents34, Member States have 
undertaken  to  accompany,  in  justified  cases,  the  notification  of  their  transposition 
measures  with  one  or  more  documents  explaining  the  relationship  between  the 
components  of  a  directive  and  the  corresponding  parts  of  national  transposition 
instruments. With regard to this Directive, the legislator considers the transmission of 
such documents to be justified. 

34 

OJ C 369, 17.12.2011, p. 14. 

EN 

39 

   EN 

                                                 
(97)  This Directive respects the fundamental rights and observes the rights, freedoms and 
principles  recognised  in  particular  by  the  Charter  of  Fundamental  Rights  of  the 
European Union, and notably the right to property, the right to an effective remedy and 
to a fair trial and the right of defence. 

HAVE ADOPTED THIS DIRECTIVE: 

TITLE I 

SCOPE, DEFINITIONS AND AUTHORITIES 

Article 1 

Subject matter and scope 

This Directive lays down rules and procedures relating to the recovery and resolution of the 
following: 

(a) 

credit institutions and investment firms; 

(b) 

financial  institutions  when  the  financial  institution  is  a  subsidiary  of  a  credit 
institution or investment firm, or of a company referred to in points (c) and (d), 
and is covered by the supervision of the parent undertaking on a consolidated 
basis in accordance with Subsection I of Section 2 of Chapter 2 of Title V of 
Directive 2006/48/EC; 

(c) 

financial  holding  companies,  mixed  financial  holding  companies,  mixed-
activity holding companies;  

(d)  parent financial holding companies in a Member State, Union parent financial 
holding  companies,  parent  mixed  financial  holding  companies  in  a  Member 
State, Union parent mixed financial holding companies; 

(e)  branches  of  institutions  having  their  head  office  outside  the  Union  in 

accordance with the specific conditions laid down in this Directive. 

Article 2 

Definitions 

For the purposes of this Directive the following definitions apply: 

(1) 

'resolution' means the restructuring of an institution in order to ensure the continuity of 
its essential functions, preserve financial stability and restore the viability of all or part 
of that institution; 

EN 

40 

   EN 

(2) 

(3) 

(4) 

(5) 

(6) 

(7) 

(8) 

(9) 

(10) 

(11) 

(12) 

(13) 

(14) 

'credit  institution'  means  a  credit  institution  as  defined  in  Article  4(1)  of  Directive 
2006/48/EC; 

'investment firm' means an investment firm as defined in Article 3(1)(b) of Directive 
2006/49/EC that are subject to the initial capital requirement specified in Article 9 of 
that Directive; 

'financial  institution'  means  a  financial  institution  as  defined  in  Article  4(5)  of 
Directive 2006/48/EC; 

'subsidiary' means subsidiary as defined in Article 4(13) of Directive 2006/48/EC; 

'parent  undertaking'  means  a  parent  undertaking  as  defined  in  Article  4(12)  of 
Directive 2006/48/EC; 

‘consolidated  basis’  means  on  the  basis  of  the  consolidated  financial  situation  of  a 
group subject to supervision on a consolidated basis in accordance with Subsection I 
of Section 2 of Chapter 2 of Title V of Directive 2006/48/EC or sub-consolidation in 
accordance with Article 73(2) of that Directive; 

'financial holding company' means a financial institution, the subsidiary undertakings 
of which are either exclusively or mainly institutions or financial institutions, at least 
one  of  such  subsidiaries  being  an  institution,  and  which  is  not  a  mixed  financial 
holding company within the meaning of Article 2(15) of Directive 2002/87/EC; 

'mixed  financial  holding  company'  means  a  mixed  financial  holding  company  as 
defined in Article 2(15) of Directive 2002/87/EC; 

'mixed-activity holding company' means a mixed-activity holding company as defined 
in  Article  4(20)  of  Directive  2006/48/EC,  or  a  mixed-activity  holding  company  as 
defined in Article 3(3(b) of Directive 2006/49/EC; 

'parent  financial  holding  company  in  a  Member  State'  means  a  financial  holding 
company  which  is  not  itself  a  subsidiary  of  an  institution  authorised  in  the  same 
Member State, or of a financial holding company or mixed financial holding company 
set up in the same Member State; 

'Union parent financial holding company’ means a parent financial holding company 
which  is  not  a  subsidiary  of  an  institution  authorised  in  any  Member  State  or  of 
another financial holding company or mixed financial holding company set up in any 
Member State; 

'parent mixed financial holding company in a Member State' means a mixed financial 
holding  company  which  is  not  itself  a  subsidiary  of  an  institution  authorised  in  the 
same  Member  State,  or  of  a  financial  holding  company  or  mixed  financial  holding 
company set up in the same Member State; 

‘Union  parent  mixed  financial  holding  company’  means  a  parent  mixed  financial 
holding  company  which  is  not  a  subsidiary  of  a  credit  institution  authorised  in  any 
Member  State  or  of  another  financial  holding  company  or  mixed  financial  holding 
company set up in any Member State; 

EN 

41 

   EN 

(15) 

'resolution objectives' means the objectives specified in Article 26(2); 

(16) 

'branch' means a branch as defined in Article 4 (3) of Directive 2006/48/EC; 

(17) 

(18) 

'resolution authority' means an authority designated by a Member States in accordance 
with Article 3; 

'resolution  tool'  means  the  sale  of  business  tool,  the  bridge  institution  tool,  the  asset 
separation tool or the bail-in tool; 

(19) 

'resolution power' means a power as referred to in Article 56(1); 

(20) 

(21) 

(22) 

'competent authority' means competent authority as defined in Article 4(4) of Directive 
2006/48/EC or as defined in Article 3(3)( c) of Directive 2006/49/EC; 

'competent ministries' means the finance ministries or other ministries responsible for 
economic, financial and budgetary decisions according to national competencies; 

'control'  means  the  relationship  between  a  parent  undertaking  and  a  subsidiary,  as 
defined  in  Article  1  of  Directive  83/349/EEC,  or  a  similar  relationship  between  any 
natural or legal person and an undertaking; 

(23) 

'institution' means a credit institution or an investment firm; 

(24) 

'management'  means  the  persons  who  effectively  direct  the  business  of  the  credit 
institution in accordance with Article 11 of Directive 2006/48/EC; 

(25) 

'group' means a parent undertaking and its subsidiaries; 

(26) 

'extraordinary public financial support' means State Aid within the meaning of Article 
107  (1)  of  the  Treaty  on  the  Functioning  of the  European  Union,  that  is  provided  in 
order to preserve or restore the viability, liquidity or solvency of an institution; 

(27) 

'group entity' means a legal entity that is part of a group; 

(28) 

(29) 

(30) 

(31) 

(32) 

'recovery plan' means a plan drawn up and maintained by an institution in accordance 
with Article 5; 

'critical functions' means those activities, services and operations the discontinuance of 
which  would  be  likely  to  result  in  a  disruption  of  the  economy  of,  or  the  financial 
markets in, one or more Member States; 

'core  business  lines'  means  business  lines  and  associated  services  which  represent 
material source of revenue, profit or franchise value for an institution; 

'consolidating  supervisor'  means  the  competent  authority  responsible  for  supervision 
on a consolidated basis as defined in Article 4(48) of Directive 2006/48/EC; 

'own funds' means own funds within the meaning of Chapter 2 of Title V of Directive 
2006/48/EC; 

(33) 

'conditions for resolution' means the conditions specified in Article 27(1); 

EN 

42 

   EN 

(34) 

'resolution action' means the decision to place an institution under resolution pursuant 
to  Article  27,  the  application  of  a  resolution  tool  to,  or  the  exercise  of  one  or  more 
resolution power in relation to an institution; 

(35) 

'resolution  plan'  means  a  plan  drawn  up  for  an  institution  by  the  relevant  resolution 
authority in accordance with Article 9; 

(36) 

'group resolution' means one of the following: 

(a) 

(b) 

the  taking  of  a  resolution  action  at  the  level  of  the  parent  undertaking  or 
institution subject to consolidated supervision, or 

the  coordination  of  the  application  of  resolution  tools  and  the  exercise  of 
resolution  powers  by  resolution  authorities  in  relation  to  group  entities  that 
meet the conditions for resolution; 

'group resolution plan' means a plan for group resolution drawn up in accordance with 
Articles 11 and 12; 

'group level resolution authority' means the resolution authority in the Member State in 
which the consolidating supervisor is situated; 

'resolution college' means a college established in accordance with Article 80 to carry 
out the tasks required by Articles 12, 13 and 83; 

'normal  insolvency  proceedings'  mean  the  collective  insolvency  proceedings  which 
entail  the  partial  or  total  divestment  of  a  debtor  and  the  appointment  of  a  liquidator, 
normally  applicable  to  institutions  under  national  law  and  either  specific  for  those 
institutions or generally applicable to any natural or legal person; 

'debt instruments' referred to in points (d), (i), (l) and (m) of Article 56 means bonds 
and other forms of transferable debt, any instrument creating or acknowledging a debt, 
and instruments giving rights to acquire debt instruments; 

'parent  institution  in  a  Member  State'  means  a  parent  credit  institution  in  a  Member 
State as defined in Article 4(14) of Directive 2006/48/EC, or a parent investment firm 
in a Member State as defined in Article 3(f) of Directive 2006/49/EC; 

'Union parent institution' means a Union parent credit institution as defined in Article 
4(16)  of  Directive  2006/48/EC,  or  an  Union  parent  investment  firm  as  defined  in 
Article 3(g) of Directive 2006/49/EC; 

'own  funds  requirements'  means  the  requirements  of  Article  75  of  Directive 
2006/48/EC; 

'supervisory  colleges'  means  a  college  of  supervisors  established  in  accordance  with 
Article 131a of Directive 2006/48/EC; 

'Union State aid framework' means the framework established by Articles 107 and 108 
of  the  Treaty  on  the  Functioning  of  the  European  Union  and  regulations  made  or 
adopted pursuant to Article 107 or Article 106(4) of the Treaty on the Functioning of 
the European Union; 

(37) 

(38) 

(39) 

(40) 

(41) 

(42) 

(43) 

(44) 

(45) 

(46) 

EN 

43 

   EN 

(47) 

'winding up' means the realisation of assets of an institution; 

(48) 

(49) 

(50) 

(51) 

(52) 

(53) 

(54) 

(55) 

(56) 

(57) 

(58) 

35 

'asset  separation  tool'  means  the  transfer  by  a  resolution  authority  exercising  the 
transfer  powers  of  assets  and  rights  of  an  institution  that  meets  the  conditions  for 
resolution to an asset management vehicle in accordance with Article 36; 

'bail-in  tool'  means  the  exercise  by  a  resolution  authority  of  the  write-down  and 
conversion powers in relation to liabilities of an institution that  meets the conditions 
for resolution in accordance with Article 37; 

'sale  of  business  tool'  means  the  transfer  by  a  resolution  authority  of  instruments  of 
ownership, or assets, rights or liabilities, of an institution that meets the conditions for 
resolution to a purchaser that is not a bridge institution, in accordance with Article 32; 

'bridge institution tool' means the power to transfer the assets, rights or liabilities of an 
institution that meets the conditions for resolution to a bridge institution, in accordance 
with Article 34; 

'bridge  institution'  means  a  legal  entity  that  is  wholly  owned  by  one  or  more  public 
authorities  (which  may  include  the  resolution  authority)  and  that  is  created  for  the 
purpose  of  receiving  some  or  all  of  the  assets,  rights  and  liabilities  of  an  institution 
under resolution with a view to carrying out some or all of its services and activities; 

'instruments of ownership' means shares, instruments that confer ownership in mutual 
associations, instruments that are convertible into or give the right to acquire shares or 
instruments  of  ownership,  and  instruments  representing  interests  in  shares  or 
instrument of ownership; 

'transfer powers' means the powers specified in points (c), (d) or (e) of Article 56(1) to 
transfer  shares,  other  instruments  of  ownership,  debt  instruments,  assets,  rights  or 
liabilities, or any combination of those items from an institution under resolution to a 
recipient; 

'central  counterparty'  means  a  legal  entity  that  interposes  itself  between  the 
counterparties to a trade within one or more financial markets, becoming the buyer to 
every seller and the seller to every buyer; 

'derivatives', means a financial instrument listed in points (4) to (10) of Section C of 
Annex I to Directive 2004/39/EC of the European Parliament and of the Council35; 

'write-down and conversion powers' means the powers specified in points (f) to (l) of 
Article 56(1); 

'secured liability' means a liability where the right of the creditor to payment is secured 
by a charge over assets, a pledge or lien, or collateral arrangements including liabilities 
arising from repurchase transactions and other title transfer collateral arrangements; 

Directive 2004/49/EC of the European Parliament and of the Council of 21 April 2004 on markets in 
financial instruments amending Council Directives 85/611/EC and 93/6/EEC and Directive 2000/12/EC 
of the European Parliament and of the Council and repealing Council Directive 93/22/EC – OJ L 145, 
30.4.2004, p.1 

EN 

44 

   EN 

                                                 
(59) 

(60) 

(61) 

(62) 

(63) 

(64) 

(65) 

(66) 

(67) 

(68) 

(69) 

(70) 

(71) 

(72) 

(73) 

'Additional  Tier  1  instruments'  means  capital  instruments  that  qualify  as  own  funds 
under Article 57(ca) of Directive 2006/48/EC; 

'aggregate amount' means the aggregate amount by which the resolution authority has 
assessed that eligible liabilities must be written down or converted, in accordance with 
Article 41(1); 

'Common  Equity  Tier  1  instruments'  means  capital  instruments  that  qualify  as  own 
funds in accordance with Article 57(a) of Directive 2006/48/EC; 

'eligible liabilities' means the liabilities of an institution that are not excluded from the 
scope of the write-down tool by virtue of Article 38(2); 

'deposit guarantee scheme' means a deposit guarantee scheme introduced and officially 
recognised by a Member State pursuant to Article 3 of Directive 94/19/EC; 

'Tier 2 instruments' means capital instruments that qualify as own funds under Article 
56(f) and (h) of Directive 2006/48/EC; 

'relevant  capital  instruments'  for  the  purposes  of  Sections  5  and  6  of  Chapter  III  of 
Title IV, means Additional Tier 1 instruments and Tier 2 instruments; 

'conversion rate' means the factor that determines the number of ordinary shares into 
which a liability of a specific class will be converted, by reference either to a single 
instrument of the class in question or to a specified unit of value of a debt claim; 

'affected creditor' means a creditor whose claim relates to a liability that is reduced or 
converted to shares by exercise of a write down or conversion power; 

'affected shareholder" means a shareholder whose shares are cancelled by means of the 
power referred to in point (j) of Article 56(1); 

'appropriate authority', means authority of the Member State identified in accordance 
with Article 54 that is responsible under the national law of that State for making the 
determinations referred to in Article 51(1); 

'relevant  parent  institution'  means  a  parent  institution  in  a  Member  State,  a  Union 
parent institution, a financial holding company, a mixed financial holding company, a 
mixed-activity  holding,  a  parent  financial  holding  company  in  a  Member  State,  a 
Union parent financial holding company, a parent mixed financial holding company in 
a  Member  State,  or  a  Union  parent  mixed  financial  holding  company,  in  relation  to 
which the bail-in tool is applied; 

'recipient' means the entity to which the shares, other instruments of ownership, debt 
instruments,  assets,  rights  or  liabilities,  or  any  combination  of  those  items  from  an 
institution under resolution are transferred; 

'business  day'  means  any  day  other  than  Saturday,  Sunday  and  any  day  which  is  a 
public holiday in the home Member State of the institution; 

'termination  right'  means  a  right  to  terminate  a  contract  on  an  event  of  default  as 
defined  in  or  for  the  purposes  of  the  contract,  and  includes  any  related  right  to 

EN 

45 

   EN 

accelerate, close out, set-off or net obligations or any related provision that suspends, 
modifies or extinguishes an obligation of a party to the contract to make a payment; 

'institution  under  resolution'  means  an  institution,  a  financial  institution,  a  financial 
holding  company,  a  mixed  financial  holding  company,  a  mixed-activity  holding 
company,  a  parent  financial  holding  company  in  a  Member  State,  a  Union  parent 
financial  holding  company,  a  parent  mixed  financial  holding  company  in  a  Member 
State,  or  a  Union  parent  mixed  financial  holding  company,  in  respect  of  which  a 
resolution action is taken; 

'domestic subsidiary institution' means an institution which is established in a Member 
State that is a subsidiary of a third country institution or financial holding company; 

'Union parent undertaking' means a Union parent institution, an Union parent financial 
holding company or a Union parent mixed financial holding company; 

'third country institution' means an entity, the head office of which is established in a 
third country, that is authorised or licensed under the law of that third country to carry 
on  any  of  the  activities  listed  in  Annex  I  to  Directive  2006/48/EC  or  Section  A  of 
Annex I to Directive 2004/39/EC; 

'third country resolution proceeding' means an action under the law of a third country 
to  manage  the  failure  of  a  third  country  institution  that  is  comparable,  in  terms  of 
results, to resolution actions under this Directive; 

'domestic branch' means a branch of a third country institution that is established in a 
Member State; 

‘relevant  third  country  authority’  means  a  third  country  authority  responsible  for 
carrying  out  functions  comparable  to  those  of  resolution  authorities  or  competent 
authorities pursuant to this Directive; 

'group financing arrangement' means the financing arrangement or arrangements of the 
Member State of the group level resolution authority; 

'back to back transaction' means a transaction entered into between two group entities 
for  the  purpose  of  transferring,  in  whole  or  in  part,  the  risk  generated  by  another 
transaction entered into between one of those group entities and a third party; 

(74) 

(75) 

(76) 

(77) 

(78) 

(79) 

(80) 

(81) 

(82) 

(83) 

'intra-group  guarantee'  means  a  contract  by  which  one  group  entity  guarantees  the 
obligations of another group entity to a third party. 

Where this Directive refers to Regulation (EU) No 1093/2010, resolution authorities, 
shall, for the purpose of that Regulation, be considered competent authorities within 
the meaning of Article 4(2) of that Regulation. 

The  Commission  shall  be  empowered  to  adopt  delegated  acts  in  accordance  with 
Article  103  in  order  to  specify  the  definitions  of  "critical  functions"  and  "core 
business  lines"  provided  for  in  points  (29)  and  (30)  in  order  to  ensure  uniform 
application of this Directive.  

EN 

46 

   EN 

Article 3 

Designation of authorities responsible for resolution 

Each  Member  States  shall  designate  one  or  more  resolution  authorities  that  are 
empowered to apply the resolution tools and exercise the resolution powers. 

Resolution authorities shall be public administrative authorities. 

Resolution  authorities  may  be  the  competent  authorities  for  supervision  for  the 
purposes  of  Directives  2006/48/EC  and  2006/49/EC,  central  banks,  competent 
ministries  or  other  public  administrative  authorities,  provided  that  Member  States 
adopt  rules  and  arrangements  necessary  to  avoid  conflicts  of  interest  between  the 
functions  of  supervision  pursuant  to  Directives  2006/48/EC  and  2006/49/EC  or  the 
other  functions  of  the  relevant  authority  and  the  functions  of  resolution  authorities 
pursuant to this Directive. In particular, Member States shall ensure that, within the 
competent  authorities,  central  banks,  competent  ministries  or  other  public 
administrative  authorities  there  is  a  separation  between  the  resolution  function  and 
the supervisory or other functions of the relevant authority. 

Where  the  resolution  authority  and  the  competent  authority  pursuant  to  Directive 
2006/48/EC  are  separate  entities,  Member  States  shall  require  that  they  cooperate 
closely in the preparation, planning and application of resolution decisions. 

Where the designated authority in accordance with paragraph 1 is not the competent 
ministry in a Member State, any decision of the designated authority pursuant to this 
Directive shall be taken in consultation with the competent ministry. 

Member States shall ensure that the authorities designated in accordance paragraph 1 
have the expertise, resources and operational capacity to apply resolution measures, 
and are able to exercise their powers with the speed and flexibility that are necessary 
to achieve the resolution objectives. 

Where  a  Member  State  designates  more  than  one  authority  to  apply  the  resolution 
it  shall  allocate  functions  and 
tools  and  exercise 
responsibilities  clearly  between  these  authorities,  ensure  adequate  coordination 
between them and designate a single authority as a contact authority for the purposes 
of cooperation and coordination with the relevant authorities of other Member States. 

the  resolution  powers, 

Member  States  shall  inform  European  Banking  Authority  (EBA)  of  the  national 
authority or authorities appointed as resolution authorities and contact authority and, 
where  relevant,  their  specific  functions  and  responsibilities.  EBA  shall  publish  the 
list of those resolution authorities. 

1. 

2. 

3. 

4. 

5. 

6. 

7. 

8. 

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47 

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TITLE II 

PREPARATION 

CHAPTER I 

RECOVERY AND RESOLUTION PLANNING 

SECTION 1 

GENERAL PROVISIONS 

Article 4 

Simplified obligations for certain institutions 

Having regard to the impact that the failure of the institution could have, due to the 
nature of its business, its size or its interconnectedness to other institutions or to the 
financial  system  in  general,  on  financial  markets,  on  other  institutions,  on  funding 
conditions,  Member  States  shall  ensure  that  competent  and  resolution  authorities 
determine the extent to which the following apply to institutions: 

(a) 

(b) 

the  contents  and  details  of  recovery  and  resolution  plans  provided  for  in 
Articles 5, 7, 9 and 11; 

the  contents  and  details  of  the  information  required  from  institutions  as 
provided for in Articles 5 (5) and Articles 10 and 11.  

The  Commission  shall  be  empowered  to  adopt  delegated  acts  in  accordance  with 
Article 103 in order to specify the criteria referred to in paragraph 1, for assessing, in 
accordance  with  paragraph  1,  the  impact  of  an  institution  failure  on  financial 
markets, on other institutions and on funding conditions. 

Competent and resolution authorities shall inform EBA of the way they have applied 
the  requirement  referred  to  in  paragraph  1  to  institutions  in  their  jurisdiction.  EBA 
shall  report  to  the  Commission  by  1st  January  2018  at  the  latest  on  the 
implementation of the requirement referred to in paragraph 1. In particular EBA shall 
report 
the 
the  Commission  whether 
implementation at national level of that requirement. 

there  are  divergences 

regarding 

to 

1. 

2. 

3. 

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48 

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SECTION 2 

RECOVERY PLANNING 

Article 5 

Recovery plans 

1. 

2. 

3. 

4. 

5. 

6. 

Member States shall ensure that each institution draws up and maintains a recovery 
plan providing, through measures taken by the management of the institution or by a 
group  entity,  for  the  restoration  of  its  financial  situation  following  significant 
deterioration.  Recovery  plans  shall  be  considered  as  a  governance  arrangement 
within the meaning of Article 22 of Directive 2006/48/EC. 

Member States shall ensure that the institutions update their recovery plans at least 
annually or after change to the legal or organisational structure of the institution, its 
business  or  its  financial  situation,  which  could  have  a  material  effect  on,  or 
necessitates  a  change  to  the  recovery  plan.  Competent  authorities  may  require 
institutions to update their recovery plans more frequently. 

Recovery  plans  shall  not  assume  any  access  to  or  receipt  of  extraordinary  public 
financial support but shall include, where applicable, an analysis of how and when an 
institution may apply for the use of central bank facilities in stressed conditions and 
available collateral. 

Member States shall ensure that the recovery plans include the information listed in 
Section A of the Annex. 

The  competent  authorities  shall  ensure  that  institutions  include  in  recovery  plans 
appropriate  conditions  and  procedures  to  ensure  the  timely  implementation  of 
recovery actions as well as a wide range of recovery options. Competent authorities 
shall  ensure  that  firms  test  their  recovery  plans  against  a  range  of  scenarios  of 
financial distress, varying in their severity including system wide events, legal-entity 
specific stress and group-wide stress.  

EBA, in consultation with the European Systemic Risk Board (ESRB), shall develop 
draft technical standards specifying the range of scenarios to be used for the purposes 
of  paragraph  5  of  this  Article  in  accordance  with  Article  25(3)  of  Regulation  (EU) 
No 1093/2010. 

EBA  shall  submit  those  draft  regulatory  technical  standards  to  the  Commission 
within twelve months from the date of entry into force of this Directive. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first subparagraph in accordance with the procedure laid down in 
Articles 10 to 14 of Regulation (EU) No 1093/2010. 

EN 

49 

   EN 

7. 

EBA shall develop draft regulatory technical standards specifying the information to 
be contained in the recovery plan referred to in paragraph 4. 

EBA  shall  submit  those  draft  regulatory  technical  standards  to  the  Commission 
within twelve months from the date of entry into force of this Directive. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first subparagraph in accordance with the procedure laid down in 
Articles 10 to 14 of Regulation (EU) No 1093/2010. 

Article 6 

Assessment of recovery plans 

1. 

2. 

3. 

4. 

Member  States  shall  require  institutions  to  submit  recovery  plans  to  the  competent 
authorities for review. 

The  competent  authorities  shall  review  those  plans  and  assess  the  extent  to  which 
each plan satisfies the requirements set out in Article 5 and the following criteria: 

(a) 

(b) 

the implementation of the arrangements proposed in the plan would be likely to 
restore  the  viability  and  financial  soundness  of  the  institution,  taking  into 
account the preparatory measures that the institution has taken or has planned 
to take; 

the  plan  or  specific  options  could  be  implemented  effectively  in  situations  of 
financial  stress  and  without  causing  any  significant  adverse  effect  on  the 
financial  system,  including  in  the  event  that  other  institutions  implemented 
recovery plans within the same time period. 

Where competent authorities assess that there are deficiencies in the recovery plan, 
or  potential  impediments  to  its  implementation,  they  shall  notify  the  institution  of 
their assessment and require the institution to submit, within three months, a revised 
plan demonstrating how those deficiencies or impediments have been addressed. 

If the institution fails to submit a revised recovery plan, or if the competent authority 
determines  that  the  revised  recovery  plan  does  not  adequately  remedy  the 
deficiencies  or  potential  impediments  identified  in  its  original  assessment,  the 
competent  authorities  shall  require  the  institution  to  take  any  measure  it  considers 
necessary to ensure that the deficiencies or impediments are removed. In addition to 
the  measures  that  may  be  required  in  accordance  with  Article  136  of  Directive 
2006/48/EC,  the  competent  authorities  may,  in  particular,  require  the  institution  to 
take actions to: 

(a) 

facilitate the reduction of the risk profile of the institution; 

(b) 

enable timely recapitalisation measures; 

(c)  make changes to the firm strategy; 

EN 

50 

   EN 

(d)  make changes to the funding strategy so as to improve the resilience of the core 

business lines and critical operations; 

(e)  make changes to the governance structure of the institution. 

5. 

EBA shall develop draft regulatory technical standards specifying the matters that the 
competent authority must assess for the purposes of the assessment of paragraph 2 of 
this Article. 

EBA  shall  submit  those  draft  regulatory  technical  standards  to  the  Commission 
within twelve months from the date of entry into force of this Directive. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first subparagraph in accordance with the procedure laid down in 
Articles 10 to 14 of Regulation (EU) No 1093/2010. 

Article 7 

Group recovery plans 

1. 

2. 

3. 

4. 

5. 

Member States shall ensure that parent undertakings or institutions that are subject to 
consolidated supervision pursuant to Articles 125 and 126 of Directive 2006/48/EC 
draw  up  and  submit  to  the  consolidating  supervisor  a  group  recovery  plan  that 
includes a recovery plan for the whole group, including for the companies referred to 
in points (c) and (d) of Article 1, as well as a recovery plan for each institution that is 
part of the group. 

The consolidating supervisor shall transmit the group recovery plans to the relevant 
competent  authorities  referred  to  in  Article  131a  of  Directive  2006/48/EC  and  to 
EBA. 

The  group  recovery  plan  shall  aim  to  achieve  the  stabilisation  of  the  group  as  a 
whole,  or  any  institution  of  the  group,  when  it  is  in  a  situation  of  stress  so  as  to 
address or remove the causes of the distress and restore the financial situation of the 
group or the institution in question. 

The group recovery plan shall include arrangements to ensure the coordination and 
consistency of measures to be taken at the level of the parent undertaking or relevant 
institution  subject  to  consolidated  supervision,  and  at  the  level  of  the  companies 
referred to in points (c) and (d) of Article 1 as well as measures to be  taken  at the 
level of individual institutions. 

The group recovery plan shall include for the whole group and for each of its entities 
the  elements  and  arrangements  provided  in  Article  5.  It  shall  also  include,  where 
applicable,  arrangements  for  possible  intra-group  financial  support  adopted  in 
accordance with any agreement for group financial support that has been concluded 
in accordance with Article 16. 

The  consolidating  supervisor  shall  ensure  that  the  parent  undertaking  or  the 
institution  subject  to  consolidated  supervision  referred  to  in  paragraph  1  provide  a 

EN 

51 

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6. 

1. 

range of recovery options setting out actions to address those scenarios provided for 
in Article 5(5).  

For  each  of  the  scenarios,  the  group  recovery  plan  shall  identify  whether  there  are 
obstacles to the implementation of recovery measures within the group, and whether 
there  are  substantial  practical  or  legal  impediments  to  the  prompt  transfer  of  own 
funds or the repayment of liabilities or assets within the group. 

The  management  body  of  the  parent  undertaking  or  institution  subject  to 
consolidated  supervision  referred  to  in  paragraph  1  and  the  management  body  of 
institutions  that  are  part  of  the  group  shall  approve  the  group  recovery  plan  before 
submitting it to the consolidating supervisor. 

Article 8 

Assessment of group recovery plans 

The  consolidating  supervisor  shall  review  the  group  recovery  plan,  including  the 
recovery  plans  for  individual  institutions  that  are  part  of  the  group,  and  assess  the 
extent to which it satisfies the requirements and criteria set out in Articles 6 and 7. 
That  assessment  shall  be  made  in  accordance  with  the  procedure  established  in 
Article 6 and the provisions of this Article. 

The consolidating supervisor shall carry out the review and assessment of the group 
recovery plan, including the recovery plans for individual institutions that are part of 
the group, in consultation and cooperation with the competent authorities referred to 
in Article 131a of Directive 2006/48/EC. The review and assessment in accordance 
with Article 6(2) of this Directive of the group recovery plan and, if necessary, the 
request to take measures in accordance with Article 6(4) of this Directive shall take 
the form of joint decisions by the authorities referred to in Article 131a of Directive 
2006/48/EC. 

2. 

The competent authorities shall endeavour to reach the joint decision within a period 
of four months. 

In  the  absence  of  a  joint  decision  between  the  competent  authorities  within  four 
months, the consolidating supervisor shall make its own decision on the review and 
assessment  of  the  group  recovery  plan  or  on  the  measures  required  in  accordance 
with  Article  6(4).  The  decision  shall  be  set  out  in  a  document  containing  the  fully 
reasoned  decision  and  should  take  into  account  the  views  and  reservations  of  the 
the  four-month  period.  The 
other  competent  authorities  expressed  during 
consolidating  supervisor  shall  notify  the  decision  to  the  parent  undertaking  of  the 
institution subject to consolidated supervision and to the other competent authorities. 

EBA  may  on  its  own  initiative  assist  the  competent  authorities  in  reaching  an 
agreement in accordance with Article 19 of Regulation (EU) No 1093/2010. 

3. 

Any  competent  authority  that  disagrees  with  the  assessment  of  the  group  recovery 
plan or any action that the parent undertaking or institution would be required to take 
as  a  result  of  that  assessment  in  accordance  with  Article  6(2)  and  (4)  of  this 

EN 

52 

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4. 

5. 

1. 

2. 

3. 

4. 

Directive, may refer the matter to EBA in accordance with Article 19 of Regulation 
(EU)  No  1093/2010.  The  matter  may  not  be  referred  to  EBA  after  the  end  of  the 
four-month period or after a joint decision has been reached. 

EBA shall take its decision within one month, and the four-month period referred to 
in  paragraph  3  will  be  treated  as  the  conciliation  period  within  the  meaning  of 
Regulation (EU) No 1093/2010. 

If  any  competent  authority  has  referred  the  matter  to  EBA  in  accordance  with 
paragraph  3,  the  consolidating  supervisor  shall  defer  its  decision  and  await  any 
decision that EBA may take. The subsequent decision of the consolidating supervisor 
shall comply with the decision of EBA.  

SECTION 3 

RESOLUTION PLANNING 

Article 9 

Resolution plans 

Resolution  authorities,  in  consultation  with  competent  authorities,  shall  draw  up  a 
resolution plan for each institution that is not part of a group subject to consolidated 
supervision  pursuant  to  Articles  125  and  126  of  Directive  2006/48/EC.  The 
resolution  plan  shall  provide  for  the  resolution  actions  which  the  resolution  and 
competent  authorities  may  take  where  the  institution  meets  the  conditions  for 
resolution. 

The resolution plan shall take into consideration a range of scenarios including that 
the event of failure may be idiosyncratic or may occur at a time of broader financial 
instability  or  system  wide  events.  The  resolution  plan  shall  not  assume  any 
extraordinary public financial support besides the use of the financing arrangements 
established in accordance with Article 91.  

Resolution plans shall be reviewed, and where appropriate updated, at least annually 
and  after  any  material  changes  to  the  legal  or  organisational  structure  of  the 
institution or to its business or its financial situation that could have a material effect 
on the effectiveness of the plan. 

The  resolution  plan  shall  set  out  options  for  applying  the  resolution  tools  and 
resolution powers referred to in Title IV to the institution. It shall include: 

(a) 

a summary of the key elements of the plan; 

(b) 

a  summary  of  the  material  changes  to  the  institution  that  have  occurred  after 
the latest resolution information was filed; 

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(c) 

a  demonstration  of  how  critical  functions  and  core  business  lines  could  be 
legally  and  economically  separated,  to  the  extent  necessary,  from  other 
functions so as to ensure continuity on the failure of the institution; 

(d) 

an estimation of the timeframe for executing each material aspect of the plan; 

(e) 

(f) 

(g) 

(h) 

(i) 

a  detailed  description  of  the  assessment  of  resolvability  carried  out  in 
accordance with Article 13; 

a  description  of  any  measures  required  pursuant  to  Article  14  to  address  or 
remove  impediments  to  resolvability  identified  as  a  result  of  the  assessment 
carried out in accordance with Article 13; 

a  description  of  the  processes  for  determining  the  value  and  marketability  of 
the critical functions , core business lines and assets of the institution; 

a  detailed  description  of  the  arrangements  for  ensuring  that  the  information 
required  pursuant  to  Article  11  is  up  to  date  and  at  the  disposal  of  the 
resolution authorities at all times; 

an  explanation  by  the  resolution  authority  as  to  how  the  resolution  options 
could be financed without the assumption of any extraordinary public financial 
support; 

(j) 

a detailed description of the different resolution strategies that could be applied 
according to the different possible scenarios; 

(k) 

a description of critical interdependencies; 

(l) 

an analysis of the impact of the plan on other institutions within the group; 

(m)  a  description  on  options  for  preserving  access  to  payments  and  clearing 

services and other infrastructures; 

(n) 

a plan for communicating with the media and the public. 

5. 

EBA,  in  consultation  with  the  ESRB,  shall  develop  draft  regulatory  technical 
standards specifying a range of scenarios for the event of failure for the purposes of 
paragraph 2. 

EBA  shall  submit  those  draft  regulatory  technical  standards  to  the  Commission 
within twelve months from the date of entry into force of this Directive. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first subparagraph in accordance with the procedure laid down in 
Articles 10 to 14 of Regulation (EU) No 1093/2010. 

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1. 

2. 

3. 

1. 

2. 

3. 

Article 10 

Information for the purpose of resolution plans 

Member  States  shall  ensure  that  resolution  authorities  have  the  power  to  require 
institutions  to  provide  them  with  all  of  the  information  necessary  to  draw  up  and 
implement  resolution  plans.  In  particular  the  resolution  authorities  shall  have  the 
power to require, among other information, the information and analysis specified in 
Section B of the Annex. 

Competent authorities in the relevant Member States shall cooperate with resolution 
authorities  in  order  to  verify  whether  some  or  all  of  the  information  referred  to  in 
paragraph  1  is  already  available.  Where  such  information  is  available,  competent 
authorities shall provide that information to the resolution authorities. 

EBA  shall  develop  draft  implementing  technical  standards  on  standard  forms, 
templates and procedures for such provision of information. 

EBA  shall  submit  those  draft  implementing  technical  standards  to  the  Commission 
within twelve months from the date of entry into force of this Directive. 

Power is conferred on the Commission to adopt the implementing technical standards 
referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) 
No 1093/2010. 

Article 11 

Group resolution plans 

Member  States  shall  ensure  that  resolution  authorities  draw  up  group  resolution 
plans. Group resolution plans shall include both a plan for resolution at the level of 
the parent undertaking or institution subject to consolidated supervision pursuant to 
Article  125  and  126  of  Directive  2006/48/EC  and  the  resolution  plans  for  the 
individual  subsidiary  institutions  drawn  up  in  accordance  with  Article  9  of  this 
Directive. The group resolution plans shall also include plans for the resolution of the 
companies referred to in points (c) and (d) of Article 1 and plans for the resolution of 
institutions with branches in other Member States in compliance with the provisions 
of Directive 2001/24/EC. 

The group resolution plan shall be drawn up on the basis of the information provided 
pursuant to Article 10. 

The group resolution plan shall: 

(a) 

set out the resolution actions to be taken with regards to the group as a whole 
or part of the group, including individual subsidiaries, both through resolution 
actions  in  respect  to  the  companies  referred  to  in  Article  1(d),  the  parent 
undertaking  and  subsidiary  institutions  and  through  coordinated  resolution 

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actions in respect of subsidiary institutions, in those scenarios provided for in 
Article 9(2); 

(b) 

examine the extent to which the resolution tools and powers could be applied 
and  exercised  in  a  coordinated  way  to  group  entities  located  in  the  Union, 
including measures to facilitate the purchase by a third party of the group as a 
whole, or separate business lines or activities that are delivered by a number of 
group  entities,  or  particular  group  entities,  and  identify  any  potential 
impediments to a coordinated resolution; 

(c)  where  a  group  includes  entities  incorporated  in  third  countries,  identify 
arrangements for cooperation and coordination with the relevant authorities of 
those third countries; 

(d) 

(e) 

identify  measures,  including  the  legal  and  economic  separation  of  particular 
functions  or  business  lines,  that  are  necessary  to  facilitate  group  resolution 
when the conditions for resolution are met; 

identify  how  the  group  resolution  actions  could  be  financed  and,  where 
appropriate,  set  out  principles  for  sharing  responsibility  for  that  financing 
between  sources  of  funding  in  different  Member  States.  The  plan  shall  not 
assume extraordinary public financial support besides the use of the financing 
arrangements established in accordance with Article 91. Those principles shall 
be  set  out  on  the  basis  of  equitable  and  balanced  criteria  and  shall  take  into 
account,  in  particular,  the  economic  impact  of  the  resolution  in  the  Member 
States  affected  and  the  distribution  of  the  supervisory  powers  between  the 
different competent authorities. 

Article 12 

Requirement and procedure for group resolution plans 

1. 

Parent  undertakings  and  institutions  that  are  subject  to  consolidated  supervision 
pursuant  to  Articles  125  and  126  of  Directive  2006/48/EC  shall  submit  the 
information  required  in  accordance  with  Article  11  of  this  Directive  to  the  group 
level resolution authority. That  information shall concern the parent undertaking or 
institution subject to consolidated supervision and all the legal entities that are part of 
the group. Institutions subject to consolidated supervisions pursuant to Articles 125 
and  126  of  Directive  2006/48/EC  shall  also  provide  the  information  required 
pursuant  to  Article  11  of  this  Directive  concerning  the  companies  referred  to  in 
points (c) and (d) of Article 1. 

The  group  level  resolution  authority  shall  transmit  the  information  provided  in 
accordance  with  this  paragraph  to  EBA,  to  the  resolution  authorities  of  the 
subsidiaries institutions, to the relevant competent authorities referred to in Articles 
130  and  131a  of  Directive  2006/48/EC  and  to  the  resolution  authorities  of  the 
Member States where the companies referred to in points (c) and (d) of Article 1 are 
established. 

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2. 

3. 

4. 

5. 

6. 

7. 

Member States shall ensure that group level resolution authorities, acting jointly with 
the  resolution  authorities  referred  to  in  the  second  subparagraph  of  paragraph  1,  in 
resolution colleges and in consultation with the relevant competent authorities, draw 
up  and  maintain  group  resolution  plans.  Group  level  resolution  authorities  may,  at 
their discretion, involve in the drawing up and maintenance of group resolution plans 
third country resolution authorities of jurisdictions in which the group has established 
subsidiaries or financial holding companies or significant branches as referred to in 
Article 42a of Directive 2006/48/EC. 

Member States shall ensure that group resolution plans are updated at least annually, 
and after any change to the legal or organisational structure of the institution or of the 
group, to its business or to its financial situation that could have a material effect on 
or require a change to the plans. 

The group resolution plan shall take the form of a joint decision of the group level 
resolution  authority  and  the  other  relevant  resolution  authorities.  The  resolution 
authorities shall make a joint decision within a period of four months from the date 
of the transmission by the group level resolution authority of the information referred 
to in the second subparagraph of paragraph 1. 

In the absence of such a joint decision between the resolution authorities within four 
months,  the  group  level  resolution  authority  shall  make  its  own  decision.  The 
decision shall be set out in a document containing the fully reasoned decisions and 
shall take into account the views and reservations of the other competent authorities 
expressed  during  the  four-month  period.  The  group  level  resolution  authority  shall 
provide  the  decision  to  the  parent  undertakings  or  institution  which  is  subject  to 
consolidated supervision and to other resolution authorities. 

EBA  may  on  its  own  initiative  assist  the  competent  authorities  in  reaching  an 
agreement in accordance with Article 19 of Regulation (EU) No 1093/2010. 

A resolution authority that  disagrees with any element  of the group  resolution plan 
may refer the matter to EBA in accordance with Article 19 of Regulation (EU) No 
1093/2010. The matter may not be referred to EBA after the end of the four-month 
period or after a joint decision has been reached. 

EBA  shall  take  a  decision  within  one  month,  and  the  four-month  period  shall  be 
treated  as  the  conciliation  period  within  the  meaning  of  that  Regulation.  The 
subsequent  decision  of  the  group  level  resolution  authority  shall  comply  with  the 
decision of EBA. 

Where any of the resolution authorities concerned has referred the matter to EBA in 
accordance  with  paragraph  5,  the  group  level  resolution  authority  shall  defer  its 
decision and await any decision that EBA may take. 

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CHAPTER II 

ASSESSMENT OF RESOLVABILITY AND PREVENTATIVE POWERS 

Article 13 

Assessment of resolvability 

1. 

2. 

3. 

4. 

1. 

Member  States  shall  ensure  that  resolution  authorities,  in  consultation  with 
competent  authorities,  assess  the  extent  to  which  institutions  and  groups  are 
resolvable without the assumption of extraordinary public financial support besides 
the use of the financing arrangements established in accordance with Article 91. An 
institution  or  group  shall  be  deemed  resolvable  if  it  is  feasible  and  credible  for  the 
resolution authority to either liquidate it under normal insolvency proceedings or to 
resolve it by applying the different resolution tools and powers to the institution and 
group  without  giving  rise  to  significant  adverse  consequences  for  the  financial 
systems,  including  in  circumstances  of  broader  financial  instability  or  system  wide 
events, of the Member State in which the institution is situated, having regard to the 
economy or financial stability in that same or other Member State or the Union and 
with a view to ensure the continuity of critical functions carried out by the institution 
or group either because they can be easily separated in a timely manner or by other 
means.  

For  the  purposes  of  the  assessment  of  resolvability  referred  to  in  paragraph  1, 
resolution authorities shall, as a minimum, examine the matters specified in Section 
C of the Annex. 

EBA, in consultation with ESRB, shall develop draft regulatory technical standards 
to  specify  the  matters  to  be  examined  for  the  assessment  of  the  resolvability  of 
institutions  or  groups  provided  for  in  paragraph  2.  EBA  shall  submit  those  draft 
regulatory  technical  standards  to  the  Commission  within  twelve  months  from  the 
date of entry into force of this Directive. 

Power  is  conferred  on  the  Commission  to  adopt  the  draft  regulatory  technical 
standards referred to in the first subparagraph in accordance with the procedure laid 
down in Articles 10 to 14 of Regulation (EU) No 1093/2010. 

Article 14 

Powers to address or remove impediments to resolvability 

Member  States  shall  ensure  that  when,  pursuant  to  an  assessment  of  resolvability 
carried out in accordance with Article 13, a resolution authority determines that there 
are  potential  substantive  impediments  to  the  resolvability  of  an  institution,  the 
resolution authority shall notify in writing that determination to the institution. 

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2. 

3. 

4. 

Within four months of the date of receipt of a notification made in accordance with 
paragraph  1,  the  institution  shall  propose  to  the  resolution  authority  measures  to 
address  or  remove  the  impediments  identified  in  the  notification.  The  resolution 
authority, in consultation with the competent authorities, shall assess whether those 
measures effectively address or remove the impediments in question. 

Where the resolution authority assesses that the measures proposed by an institution 
in accordance with paragraph 2 do not effectively reduce or remove the impediments 
in  question,  it  shall,  in  consultation  with  the  competent  authorities,  identify 
alternative  measures  that  may  achieve  that  objective,  and  notify  in  writing  those 
measures to the institution. 

For the purposes of paragraph 3, measures identified by a resolution authority may, 
where  necessary  and  proportionate  to  reduce  or  remove  the  impediments  to 
resolvability in question, include the following: 

(a) 

(b) 

(c) 

requiring the institution to draw up service agreements (whether intra-group or 
with  third  parties)  to  cover  the  provision  of  critical  economic  functions  or 
services; 

requiring  the  institution  to  limit  its  maximum  individual  and  aggregate 
exposures; 

imposing  specific  or  regular  information  requirements  relevant  for  resolution 
purposes; 

(d) 

requiring the institution to divest specific assets; 

(e) 

(f) 

(g) 

(h) 

(i) 

requiring  the  institution  to  limit  or  cease  specific  existing  or  proposed 
activities; 

restricting  or  preventing  the  development  or  sale  of  new  business  lines  or 
products; 

requiring  changes  to  legal  or  operational  structures  of  the  institution  so  as  to 
reduce complexity in order to ensure that critical functions may be legally and 
economically  separated  from  other  functions  through  the  application  of  the 
resolution tools; 

requiring a parent undertaking to set up a parent financial holding company in 
a Member State or a Union parent financial holding company; 

requiring a parent undertaking, or a company referred to in points (c) and (d) of 
Article 1 to issue the debt instruments or loans referred to in Article 39 (2); 

(j)  where  an  institution  is  the  subsidiary  of  a  mixed-activity  holding  company, 
requiring  that  the  mixed-activity  holding  company  set  up  a  separate  financial 
holding  company  to  control  the  institution,  if  this  is  necessary  in  order  to 
facilitate  the  resolution  of  the  institution  and  to  avoid  the  application  of  the 
resolution  tools  and  powers  specified  in  Title  IV  having  an  adverse  effect  on 
the non-financial part of the group. 

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5. 

6. 

7. 

8. 

1. 

2. 

Resolution authorities shall not base a determination in accordance with paragraph 1 
on impediments resulting from factors beyond the control of the institution, including 
the operational and financial capacity of the resolution authority. 

A  notification  made  pursuant  to  paragraph  1  or  3  shall  meet  the  following 
requirements: 

(a) 

(b) 

it  shall  be  supported  by  reasons  for  the  assessment  or  determination  in 
question; 

it  shall  indicate  how  that  assessment  or  determination  complies  with  the 
requirement for proportionate application set out in Article 9. 

Before  indentifying  any  measure  referred  to  in  paragraph  3,  resolution  authorities 
shall  duly  consider  the  potential  effect  of  those  measures  on  the  stability  of  the 
financial system in other Member States. 

EBA  shall  develop  draft  regulatory  technical  standards  for  specifying  the  measures 
provided  for  in  paragraph  4  and  the  circumstances  in  which  each  measure  may  be 
applied. 

EBA  shall  submit  those  draft  regulatory  technical  standards  to  the  Commission 
within twelve months from the date of entry into force of this Directive. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first subparagraph in accordance with the procedure laid down in 
Articles 10 to 14 of Regulation (EU) No 1093/2010. 

Article 15 

Powers to address or remove impediments to resolvability: group treatment 

The  group  level  resolution  authorities  and  the  resolution  authorities  of  the 
subsidiaries,  in  consultation  with  the  relevant  competent  authorities,  shall  consult 
each other within the resolution college and shall take all reasonable steps to reach a 
joint decision in regards to the application of measures identified in accordance with 
Article 14(3). 

The group level resolution authority, in cooperation with the consolidating supervisor 
and EBA in accordance with Article 25(1) of Regulation (EU) No 1093/2010, shall 
prepare  and  submit  a  report  to  the  parent  undertakings  or  institution  subject  to 
consolidated  supervision  and  to  the  resolution  authorities  of  the  subsidiaries.  The 
report  shall  be  prepared  in  consultation  with  the  competent  authorities,  and  shall 
analyse  the  substantive  impediments  to  the  effective  application  of  the  resolution 
tools and the exercising of the resolution powers in relation to the group. The report 
shall  also  recommend  any  measures  that,  in  the  authorities'  view,  are  necessary  or 
appropriate to remove those impediments. 

3. 

Within  four  months  after  the  date  of  receipt  of  the  notification,  the  parent 
to  consolidated  supervision  may  submit 
undertaking  or 

institution  subject 

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4. 

5. 

6. 

observations and propose to the group level resolution authority alternative measures 
to remedy the impediments identified in the report. 

The group level resolution authority shall communicate any measure proposed by the 
parent  undertakings  or  institution  subject  to  consolidated  supervision  to  the 
consolidating supervisor, EBA and the resolution authorities of the subsidiaries. The 
group level resolution authorities and the resolution authorities of the subsidiaries, in 
consultation with the competent authorities, shall do everything within their power to 
reach a joint decision within the resolution college regarding the identification of the 
material impediments, and if necessary, the assessment of the measures proposed by 
the  parent  undertakings  or  institution  subject  to  consolidated  supervision  and  the 
measures required by the authorities in order to address or remove the impediments. 

The  joint  decision  shall  be  reached  within  four  months  from  the  submission  of  the 
report. It shall be reasoned and set out in a document which shall be provided to the 
parent undertakings or institution which is subject to consolidated supervision by the 
group level resolution authority. 

EBA  may  on  its  own  initiative  assist  the  resolution  authorities  in  reaching  an 
agreement in accordance with Article 19 of Regulation (EU) No 1093/2010. 

In the absence of a joint decision within four months from the date of submission of 
the report referred to in paragraphs 1 or 2, the group level resolution authority shall 
make  its  own  decision  on  the  appropriate  measures  to  be  taken  in  accordance  with 
Article 14(3) in relation to the group as a whole. 

The decision shall be set out in a document containing a full reasoning and shall take 
into account the views and reservations of the other resolution authorities expressed 
during  the  four  months  period.  The  decision  shall  be  provided  to  the  parent 
undertaking or institution which is subject to consolidated supervision by the group 
level resolution authority. 

The decision referred to in the first subparagraph shall be recognised as conclusive 
and applied by the competent authorities in the Member States concerned.  

Where,  at  the  end  of  the  four-month  period,  any  of  the  resolution  authorities 
concerned  has  referred  the  matter  to  EBA  in  accordance  with  Article  19  of 
Regulation  (EU)  No  1093/2010,  the  group  level  resolution  authority  shall  defer  its 
decision and await any decision that EBA may take in accordance with Article 19(3) 
of that Regulation. EBA shall take its decision within one month and the four-month 
period shall be deemed the conciliation period within the meaning of that Regulation. 
The  subsequent  decision  of  the  group  level  resolution  authority  shall  be  in 
conformity with the decision of EBA. The matter shall not be referred to EBA after 
the end of the four month period or after a joint decision has been reached. 

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CHAPTER III 

INTRA GROUP FINANCIAL SUPPORT 

Article 16 

Group financial support agreement 

1. 

Member States shall ensure that a parent institution in a Member State, or a Union 
parent institution, or a company referred to in points (c) and (d) of Article 1and its 
subsidiaries that are institutions or financial institutions covered by the supervision of 
the parent undertaking, may enter into an agreement to provide financial support to 
any other party to the agreement that experiences financial difficulties, provided that 
the conditions laid down in this chapter are satisfied. 

2. 

The agreement may: 

(a) 

cover  one  or  more  subsidiaries  of  the  group,  and  may  provide  for  financial 
support  from  the  parent  undertaking  to  subsidiaries,  from  subsidiaries  to  the 
parent  undertaking,  between  subsidiaries  of  the  group  that  are  party  to  the 
agreement, or any combination of those entities ;  

(b)  provide for financial support in the form of a loan, the provision of guarantees, 
or  the  provision  of  assets  for  use  as  collateral  in  transaction  between  the 
beneficiary  of  the  support  and  a  third  party,  or  any  combination  of  those 
entities. 

Where in accordance with the terms of the agreement, a subsidiary agrees to provide 
financial support to the parent undertaking, the agreement shall include a reciprocal 
agreement by the parent undertaking to provide financial support to that subsidiary. 

The  agreement  shall  specify the  consideration  payable,  or  set  out  principles  for  the 
calculation of the consideration, for any transaction made under it. 

The  agreement  may  only  be  concluded  if,  at  the  time  the  proposed  agreement  is 
made, in the opinion of the supervisory authority, none of the parties is in breach of, 
or  likely  to  be  in  breach  of,  any  requirement  of  Directive  2006/48/EC  relating  to 
capital or liquidity or is at risk of insolvency. 

Member States shall ensure that any right, claim or action arising from the agreement 
may  be  exercised  only  by  the  parties  to  the  agreement,  with  the  exclusion  of  third 
parties. 

3. 

4. 

5. 

6. 

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1. 

2. 

3. 

4. 

5. 

6. 

Article 17 

Review of proposed agreement by supervisors and mediation  

The  parent  undertakings  and  institutions  which  are  subject  to  consolidated 
supervision pursuant to Articles 125 and 126 of Directive 2006/48/EC shall submit to 
the consolidating supervisor an application for authorisation of any proposed group 
financial  support  agreement.  The  application  shall  contain  the  text  of  the  proposed 
agreement and identify the group entities that propose to be parties. 

The  consolidating  supervisor  shall  grant  the  authorisation  if  the  terms  of  the 
proposed agreement are consistent with the conditions for financial support set out in 
Article 19. 

The  consolidating  supervisor  shall  forward  without  delay  the  application  to  the 
competent authorities of each subsidiary that proposes to be a party to the agreement. 

The  competent  authorities  shall  do  everything  within  their  power  to  reach  a  joint 
decision  on  whether  the  terms  of  the  proposed  agreement  are  consistent  with  the 
conditions  for  financial  support  set  out  in  Article  19  within  four  months  from  the 
date of receipt of the application by the consolidating supervisor. The joint decision 
shall be set out in a document containing the fully reasoned decision, which shall be 
provided to the applicant by the consolidating supervisor. 

In  the  absence  of  a  joint  decision  between  the  competent  authorities  within  four 
months, the consolidating supervisor shall make its own decision on the application. 
The  decision  shall  be  set out  in  a  document  containing  the  full  reasoning  and  shall 
take  into  account  the  views  and  reservations  of  the  other  competent  authorities 
expressed during the four-month period. The consolidating supervisor shall notify the 
decision to the applicant and the other competent authorities. 

If, at the end of  the four-month period, any of  the competent  authorities  concerned 
has referred the matter to EBA in accordance with Article 19 of Regulation (EU) No 
1093/2010,  the  consolidating  supervisor  shall  defer  its  decision  and  await  any 
decision that EBA may take in accordance with Article 19(3) of that Regulation, and 
shall  take  its  decision  in  conformity  with  the  decision  of  EBA.  The  four-month 
period shall be deemed the conciliation period within the meaning of that Regulation. 
EBA  shall  take  its  decision  within  one  month.  The  matter  shall  not  be  referred  to 
EBA  after  the  end  of  the  four-month  period  or  after  a  joint  decision  has  been 
reached. 

Article 18 

Approval of proposed agreement by shareholders 

1. 

Member States may require that any proposed agreement that has been authorised by 
the  competent  authorities  be  submitted  for  approval  to  the  shareholders  meeting  of 
every  group  entity  that  proposes  to  enter  into  the  agreement.  In  this  case,  the 

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agreement shall be valid only in respect of those parties whose shareholders' meeting 
has approved the agreement. 

2. 

3. 

Where  Member  States  avail  themselves  of  the  option  provided  for  in  paragraph  1, 
they shall require that in accordance with the group financial support agreement, the 
shareholders of every group entity that will be a party to the agreement authorise the 
respective  management  body  referred  to  in  Article  11  of  Directive  2006/48/EC  to 
make a decision that the entity shall provide financial support in accordance with the 
terms of the agreement and in accordance with the conditions set out in this Chapter. 
No further approval by the shareholders nor any additional meeting for any specific 
transaction undertaken in accordance with the agreement shall be required. 

The management body of each entity that is party to an agreement shall report each 
year  to  the  shareholders  on  the  performance  of  the  agreement,  and  on  the 
implementation of any decision taken pursuant to the agreement. 

Article 19 

Conditions for group financial support 

1. 

Financial support may only be provided in accordance with a group financial support 
agreement if the following conditions are met: 

(a) 

(b) 

there is a reasonable prospect that the support provided redresses the financial 
difficulties of the entity receiving the support; 

the  provision  of  financial  support  has  the  objective  of  preserving  or  restoring 
the financial stability of the group as a whole; 

(c) 

the financial support is provided for consideration; 

(d) 

(e) 

(f) 

it  is  reasonably  certain,  on  the  basis  of  the  information  available  to  the 
management  body  at  the  time  when  the  decision  to  grant  financial  support  is 
taken, that the loan is reimbursed or the consideration for the support is paid at 
an appropriate price by the entity receiving the support; 

the financial support does not jeopardize the liquidity or solvency of the entity 
providing  the  support  nor,  as  a  result,  does  it  create  a  threat  to  financial 
stability; 

the  entity  providing  the  support  complies  at  the  time  the  support  is  provided, 
and shall continue to comply after the support is provided, with the own funds 
requirements  and  any  requirements  imposed  pursuant  to  Article  136(2)  of 
Directive 2006/48/EC. 

2. 

EBA shall develop draft implementing technical standards to specify the conditions 
set out in paragraph 1. 

EBA  shall  submit  those  draft  implementing  technical  standards  to  the  Commission 
within twelve months from the date of entry into force of this Directive. 

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Power is conferred on the Commission to adopt the implementing technical standards 
submitted by EBA in accordance with Article 15 of Regulation (EU) No 1093/2010. 

Article 20 

Decision to provide financial support 

The decision to provide group financial support in accordance with the agreement is taken by 
the  management  body  as  referred  to  in  Article  11  of  Directive  2006/48/EC  of  the  entity 
providing financial support. That decision shall be reasoned and shall indicate the objective of 
the proposed financial support. In particular, the decision shall indicate: 

(a)  how  the  financial  support  preserves  or  restores  the  financial  stability  of  the 

group as a whole; 

(b) 

(c) 

that the financial support does not exceed the financial capacities of the legal 
entity providing the financial support; 

that the entity providing financial support shall continue to meet the own funds 
requirements  and  any  requirements  imposed  pursuant  to  Article  136(2)  of 
Directive 2006/48/EC. 

Article 21 

Right of opposition of competent authorities 

1. 

2. 

3. 

4. 

Before  providing  support  in  accordance  with  a  group  financial  support  agreement, 
the  management  body  of  an  entity  that  intends  to  provide  financial  support  shall 
notify its competent authority and EBA. The notification shall include details of the 
proposed support. 

Within  two  days  from  the  date  of  receipt  of  a  notification,  the  competent  authority 
may prohibit or restrict the provision of financial support set out in Article 19 if the 
conditions  for  group  financial  support  are  not  met.  A  decision  of  the  competent 
authority to prohibit or restrict the financial support shall be reasoned. 

The competent authority shall immediately inform EBA, the consolidating supervisor 
and the competent authorities identified in Article 131a of Directive 2006/48/EC, of 
its decision to prohibit or restrict the financial support. 

Where  the  consolidating  supervisor  or  the  competent  authority  responsible  for  the 
entity  receiving  support has  objections  regarding  the  decision  to  prohibit  or  restrict 
the financial support, they may refer the matter to EBA and request its assistance in 
accordance with Article 19 of Regulation 1093/2010. In that case, EBA may act in 
accordance  with  the  powers  conferred  on  it  by  that  Article.  By  way  of  derogation 
from the time limit provided for by Article 39, paragraph 1 of Regulation 1093/2010, 
EBA  shall  take  any  decision  in  accordance  with  Article  19(3)  of  Regulation 
1093/2010 within 48 hours. 

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5. 

3. 

4. 

5. 

If  the  competent  authority  does  not  prohibit  or  restrict  the  financial  support  within 
the period indicated in paragraph 2, financial support may be provided in accordance 
with the terms submitted to the competent authority. 

Article 22 

Disclosure 

Member States shall ensure that institutions that have entered into a group financial 
support  agreement  pursuant  to  Article  16  to  make  public  a  description  of  the 
agreement  and  the  names  of  the  entities  that  are  party  to  it  and  update  that 
information at least annually. 

Articles 145 to 149 of Directive 2006/48/EC shall apply. 

EBA  shall  develop  draft  regulatory  technical  standards  to  specify  the  form  and 
content of the description provided for in paragraph 1. EBA shall submit those draft 
regulatory  technical  standards  to  the  Commission  within  twelve  months  from  the 
date of entry into force of this Directive. 

Power  is  conferred  on  the  Commission  to  adopt  the  draft  regulatory  technical 
standards referred to in the first subparagraph in accordance with the procedure laid 
down in Articles 10 to 14 of Regulation (EU) No 1093/2010. 

TITLE III 

EARLY INTERVENTION 

Article 23 

Early intervention measures 

1. 

Where  an  institution  does  not  meet  or  is  likely  to  breach  the  requirements  of 
Directive 2006/48/EC, Member States shall ensure that competent authorities, , have 
at their disposal, in addition to the measures referred to in Article 136 of Directive 
2006/48/EC where applicable, in particular, the following measures: 

(a) 

(b) 

require  the  management  of  the  institution  to  implement  one  or  more  of  the 
arrangements and measures set out in the recovery plan; 

require  the  management  of  the  institution  to  examine  the  situation,  identify 
measures to overcome any problems identified and draw up an action program 
to overcome those problems and a timetable for its implementation; 

(c) 

require  the  management  of  the  institution  to  convene,  or  if  the  management 
fails  to  comply  with  this  requirement  convene  directly,  the  shareholders 

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meeting  of  the  institution,  propose  the  agenda  and  the  adoption  of  certain 
decisions; 

require the management of the institution to remove and replace one or more 
board  members  or  managing  directors  if  these  persons  are  found  unfit  to 
perform their duties pursuant to Article 11 of Directive 2006/48/EC; 

require the management of the institution to draw up a plan for negotiation on 
restructuring of debt with some or all of its creditors; 

acquire, including through on-site inspections, all the information necessary in 
order to prepare for the resolution of the institution, including carrying out an 
evaluation of the assets and liabilities of the institution; 

contact  potential  purchasers  in  order  to  prepare  for  the  resolution  of  the 
institution,  subject  to  the  conditions  laid  down  in  article  33(2)  and  the 
confidentiality provisions laid down in Article 77.  

(d) 

(e) 

(f) 

(g) 

2. 

EBA  shall  develop  draft  implementing  technical  standards  in  order  to  ensure 
consistent application of the measures provided for in paragraph 1 of this Article.  

EBA  shall  submit  those  draft  implementing  technical  standards  to  the  Commission 
within twelve months from the date of entry into force of this Directive. 

Power is conferred on the Commission to adopt the implementing technical standards 
referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) 
No 1093/2010. 

Article 24 

Special management 

1. 

2. 

Where there is a significant deterioration in the financial situation of an institution or 
where  there  are  serious  violations  of  law,  regulations  or  bylaws  or  serious 
administrative irregularities, and other measures taken in accordance with Article 23 
are  not  sufficient  to  reverse  that  deterioration,  Member  States  shall  ensure  that 
competent authorities may appoint a special manager to replace the management of 
the institution. Competent authorities shall make public the appointment of a special 
manager.  Member  States  shall  further  ensure  that  the  special  manager  has  the 
qualifications, ability and knowledge required to carry out his or her functions. 

The special manager shall have all the powers of the management of the institution 
under  the  statutes  of  the  institution  and  under  national  law,  including  the  power  to 
exercise  all  the  administrative  functions  of  the  management  of  the  institution. 
However, the special manager may only exercise the power to convene the general 
meeting  of  the  shareholders  of  the  institution  and  to  set  the  agenda  with  the  prior 
consent of the competent authority. 

3. 

The special manager shall have the statutory duty to take all the measures necessary 
and to promote solutions in order to redress the financial situation of the institution 

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and  restore  the  sound  and  prudent  management  of  its  business  and  organization. 
Where  necessary,  that  duty  shall  override  any  other  duty  of  management  in 
accordance  with  the  statutes  of  the  institution  or  national  law,  insofar  as  they  are 
inconsistent. Those solutions may include an increase of capital, reorganisation of the 
ownership structure of the institution or takeovers by institutions that are financially 
and organisationally sound. 

Competent  authorities  may  set  limits  to  the  action  of  a  special  manager  or  require 
that certain acts of the special manager be subject to the competent authority's prior 
consent. The competent authorities may remove the special manager at any time. 

Member  States  shall  require  that  a  special  manager  draw  up  reports  for  the 
appointing  competent  authority  on  the  economic  and  financial  situation  of  the 
institution and on the acts performed in the conduct of his duties, at regular intervals 
set by the competent authority and at the beginning and the end of its mandate. 

Special  management  shall  not  last  more  than  one  year.  This  period  can  be 
exceptionally renewed if the conditions for appointing a special manager continue to 
be  met.  The  competent  authority  shall  be  responsible  for  determining  whether 
conditions  are  appropriate  to  maintain  a  special  manager  and  justifying  any  such 
decision to shareholders. 

Subject to the provisions in paragraphs 1 to 6 the appointment of the special manager 
shall  not  prejudice  the  rights  of  the  shareholders  or  owners  provided  for  in 
accordance Union or national company law. 

The  appointment  of  a  special  manager  shall  not  be  recognised  as  an  enforcement 
event  within the meaning of Directive 2002/47/EC of the  European Parliament and 
of  the  Council36  or  as  insolvency  proceedings  within  the  meaning  of  Directive 
98/26/EC of the European Parliament and of the Council37. 

4. 

5. 

6. 

7. 

8. 

Article 25 

Coordination of early intervention measures and appointment of special manager in relation 
to groups 

1. 

2. 

36 
37 

Where  the  conditions  for  the  imposition  of  requirements  under  Article  23  of  this 
Directive or the appointment of a special manager in accordance with Article 24 of 
this Directive are met in relation to a parent undertaking or an institution subject to 
consolidated supervision pursuant to Articles 125 and 126 of Directive 2006/48/EC 
or any of its subsidiaries, the competent authority that intends to take a measure in 
accordance  with  those  Articles  shall  notify  other  relevant  competent  authorities 
within the supervisory college and EBA of its intention. 

The  consolidating  supervisor  and  the  other  relevant  competent  authorities  shall 
consider  whether  it  is  necessary  to  take  measures  in  accordance  with  Article  23  or 

OJ L 168, 27.6.2002., p. 43. 
OJ L 166, 11.6.1998, p. 45. 

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appoint  a  special  manager  in  accordance  with  Article  24  in  relation  to  other  group 
entities  and  whether  the  coordination  of  the  measures  to  be  taken  is  desirable.  The 
consolidating  supervisor  and  other  relevant  authorities  shall  consider  whether  any 
alternative  measure  would  be  more  likely  to  restore  the  viability  of  the  individual 
entities  and  preserve  the  financial  soundness  of  the  group  as  a  whole.  Where  more 
than one competent authority intends to appoint a special manager in relation to an 
entity affiliated to a group, authorities shall consider whether it is more appropriate 
to  appoint  the  same  special  manager  for  all  the  entities  concerned  or  for  the  whole 
group in order to facilitate solutions redressing the financial soundness of the group 
as a whole. 

The assessment shall take the form of a joint decision of the consolidating supervisor 
and  the  other  relevant  competent  authorities.  The  joint  decision  shall  be  reached 
within five days from the date of the notification referred to in paragraph 1. The joint 
decision shall be reasoned and set out in a document, which shall be provided by the 
consolidating  supervisor  to  the  parent  undertaking  or  institution  that  is  subject  to 
consolidated supervision. 

EBA  may  on  its  own  initiative  assist  the  competent  authorities  in  reaching  an 
agreement in accordance with Article 19 of Regulation (EU) No 1093/2010. 

In the absence of a joint decision within five days the consolidating supervisor and 
the  competent  authorities  responsible  for  supervising  the  subsidiaries  may  take 
individual decisions. 

The decision of each competent authority shall be reasoned. The decision shall take 
into account the views and reservations of the other competent authorities expressed 
during the five day period and the potential impact of  the decision on the financial 
stability  in  other  Member  States.  The  decisions  shall  be  provided  by  the 
consolidating supervisor to the parent undertaking or institution which is subject to 
consolidated  supervision  and  to  the  subsidiaries  by  the  respective  competent 
authorities. 

Where, at the end of the five-day period, any of the competent authorities concerned 
has referred the matter to EBA in accordance with Article 19 of Regulation (EU) No 
1093/2010,  the  consolidating  supervisor  and  the  other  competent  authorities  shall 
defer their decisions and await any decision that EBA may take in accordance with 
Article 19(3) of that Regulation, and shall take their decision in conformity with the 
decision of EBA. The five-day period shall be deemed the conciliation period within 
the  meaning  of  that  Regulation.  EBA  shall  take  its  decision  within  five  days.  The 
matter shall not be referred to EBA after the end of the five-day period or after a joint 
decision has been reached. 

3. 

4. 

5. 

6. 

Before  taking  their  own  decisions  in  accordance  with  paragraph  4,  the  competent 
authorities  shall  consult  EBA.  The  decision  shall  consider  the  advice  of  EBA  and 
explain any significant deviation from that advice. 

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TITLE IV 

RESOLUTION 

CHAPTER I 

OBJECTIVES, CONDITIONS AND GENERAL PRINCIPLES 

Article 26 

Resolution objectives 

1. 

When applying the resolution tools and exercising the resolution powers, resolution 
authorities  shall  have  regard  to  the  resolution  objectives,  and  choose  the  tools  and 
powers that best achieve the objectives that are relevant in the circumstances of the 
case. 

2. 

The resolution objectives referred to in paragraph 1 are: 

(a) 

to ensure the continuity of critical functions; 

(b) 

(c) 

(d) 

(e) 

to  avoid  significant  adverse  effects  on  financial  stability,  including  by 
preventing contagion, and maintaining market discipline; 

to protect public funds by minimising reliance on extraordinary public financial 
support; 

to avoid unnecessary destruction of value and to seek to minimise the cost of 
resolution; 

to protect depositors covered by Directive 94/19/EC and investors covered by 
Directive 97/9/EC; 

(f) 

to protect client funds and client assets. 

3. 

Subject to different provisions of this Directive, the resolution objectives are of equal 
significance,  and  resolution  authorities  shall  balance  them  as  appropriate  to  the 
nature and circumstances of each case.  

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Article 27 

Conditions for resolution 

1. 

Member States shall ensure that resolution authorities shall take a resolution action in 
relation  to  an  institution  referred  to  in  Article  1(a)  only  if  all  of  the  following 
conditions are met: 

(a) 

the competent authority or resolution authority determines that the institution 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  or  supervisory  action, 
other than a resolution action taken in respect of the institution, would prevent 
the failure of the institution within reasonable timeframe; 

(c) 

a resolution action is necessary in the public interest pursuant to paragraph 3. 

2. 

For the purposes of point (a) of paragraph 1, an institution is deemed failing or likely 
to fail in one or more of the following circumstances: 

(a) 

(b) 

(c) 

the  institution  is  in  breach  or  there  are  objective  elements  to  support  a 
determination  that  the  institution  will  be  in  breach,  in  the  near  future,  of  the 
capital  requirements  for  continuing  authorisation  in  a  way  that  would  justify 
the  withdrawal  of  the  authorisation  by  the  competent  authority  because  the 
institution  has  incurred  or  is  likely  to  incur  in  losses  that  will  deplete  all  or 
substantially all of its own funds; 

the  assets  of  the  institution  are  or  there  are  objective  elements  to  support  a 
determination  that the  assets of  the institution will  be,  in  the near future,  less 
than its liabilities; 

the institution is or there are objective elements to support a determination that 
the institution will be, in the near future, unable to pay its obligations as they 
fall due; 

(d) 

the  institution  requires  extraordinary  public  financial  support  except  when,  in 
order to preserve financial stability, it requires any of the following: 

(i) 

a  State  guarantee  to  back  liquidity  facilities  provided  by  central 
banks  according  to  the  banks'  standard  conditions  (the  facility  is 
fully secured by collateral to which haircuts are applied, in function 
of  its  quality  and  market  value,  and  the  central  bank  charges  a 
penal interest rate to the beneficiary); or 

(ii) 

a  State  guarantee  on  newly  issued  liabilities  in  order  to  remedy  a 
serious disturbance in the economy of a Member State. 

In both cases mentioned in points (i) and (ii), the guarantee measures shall be 
confined  to  solvent  financial  institutions,  shall  not  be  part  of  a  larger  aid 

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3. 

4. 

5. 

1. 

2. 

3. 

4. 

package,  shall  be  conditional  to  approval  under  State  aid  rules,  and  shall  be 
used for a maximum duration of three months. 

For the purposes of point (c) of paragraph 1, a resolution action shall be treated as in 
the public interest if it achieves and is proportionate to one or more of the resolution 
objectives  as  specified  in  Article  26  and  winding  up  of  the  institution  or  parent 
undertaking  under  normal  insolvency  proceedings  would  not  meet  those  resolution 
objectives to the same extent. 

EBA  shall  issue  guidelines,  in  accordance  with  Article  16  of  Regulation  (EU)  No 
1093/2010  to  promote  the  convergence  of  supervisory  and  resolution  practices 
regarding  the  interpretation  of  the  different  circumstances  when  an  institution  shall 
be considered as failing  or likely to  fail.  EBA  shall develop these  guidelines  at  the 
latest  by  the  date  provided  for  in  the  first  subparagraph  of  Article  115(1)  of  this 
Directive. 

The Commission, taking into account, where appropriate, the experience acquired in 
the  application  of  EBA  guidelines,  shall  adopt  delegated  acts  in  accordance  with 
Article  103  aimed  at  specifying  the  circumstances  when  an  institution  shall  be 
considered as failing or likely to fail.  

Article 28 

Conditions for resolution with regard to financial institutions and holding companies 

Member States shall ensure that resolution authorities may take a resolution action in 
relation to a financial institution or firm referred to in point (b) of Article 1, when the 
conditions  specified  in  Article  27(1),  are  met  with  regard  to  both  the  financial 
institution  or  firm  and  with  regard  to  the  parent  institution  subject  to  consolidated 
supervision.  

Member States shall ensure that resolution authorities shall take a resolution action in 
relation to a company referred to in points (c) or (d) of Article 1, when the conditions 
specified  in  Article  27(1)  are  met  with  regard  to  both  the  company  referred  to  in 
points (c) or (d) of Article 1 and with regard to one or more subsidiaries which are 
institutions. 

Where  the  subsidiary  institutions  of  a  mixed-activity  holding  company  are  held 
directly or indirectly by an intermediate financial holding company, Member States 
shall ensure that resolution actions for the purposes of group resolution are taken in 
relation to the intermediate financial holding company, and shall not take resolution 
actions for the purposes of group resolution in relation to the mixed-activity holding 
company. 

Subject to paragraph 3 and by way of derogation from the provisions of paragraph 1, 
notwithstanding the fact that a company referred to in point(c) or (d) of Article 1 may 
not meet the conditions established in Article 27 (1) resolution authorities may take 
resolution action with regards to a company referred to in point (c) or (d) of Article 1 
when  one  or  more  of  the  subsidiaries  which  are  institutions  comply  with  the 
conditions  established  in  Article  27  (1),  (2)  and  (3)  and  action  with  regard  to  the 

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company referred to in points (c) or (d) of Article 1 is necessary for the resolution of 
one or more subsidiaries which are institutions or for the resolution of the group as a 
whole. 

Article 29 

General principles governing resolution 

1. 

Member  States shall ensure that, when  applying the resolution tools and exercising 
the resolution powers, resolution authorities take all appropriate measures to ensure 
that the resolution action is taken in accordance with the following principles: 

(a) 

the shareholders of the institution under resolution bear first losses; 

(b) 

creditors of the institution under resolution bear losses after the shareholders in 
accordance with the order of priority of their claims pursuant to this Directive; 

(c) 

senior management of the institution under resolution is replaced; 

(d) 

(e) 

(f) 

senior  managers  of  the  institution  under  resolution  bear  losses  that  are 
commensurate  under  civil  or  criminal  law  with  their  individual  responsibility 
for the failure of the institution; 

except where otherwise provided in this Directive, creditors of the same class 
are treated in an equitable manner; 

no creditor incurs greater losses that would be incurred if the institution would 
have been wound down under normal insolvency proceedings. 

Where  an  institution  is  a  group  entity,  resolution  authorities  shall  apply  resolution 
tools and exercise resolution powers in a way that minimises the impact on affiliated 
institutions  and  on  the  group  as  a  whole  and  minimises  the  adverse  effect  on 
financial  stability  in  the  Union  and,  in  particular,  in  the  countries  where  the  group 
operates. 

When  applying  the  resolution  tools  and  exercising  the  resolution  powers,  Member 
States  shall  ensure  that  they  comply  with  the  Union  State  aid  framework,  where 
applicable. 

2. 

3. 

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CHAPTER II 

VALUATION 

Article 30 

Preliminary valuation 

1. 

2. 

Before taking resolution action and in particular, for the purposes of Articles 31, 34, 
36, 41, 42 and 65, resolution authorities shall ensure that a fair and realistic valuation 
of the assets and liabilities of the institution is carried out by a person independent 
from any public authority, including the resolution authority, and the institution. The 
resolution authority shall endorse that valuation. Where independent valuation is not 
possible  due  to  the  urgency  in  the  circumstances  of  the  case,  resolution  authorities 
may carry out the valuation of the assets and liabilities of the institution. 

Without prejudice to the Union State aid framework, where applicable, the valuation 
required  by  paragraph  1  shall  be  based  on  prudent  and  realistic  assumptions, 
including  as  to  rates  of  default  and  severity  of  losses,  and  its  objective  shall  be  to 
assess the market value of the assets and liabilities of the institution that is failing or 
is likely to fail so that any losses that could be derived are recognised at the moment 
the resolution tools are exercised. However, where the market for a specific asset or 
liability is not functioning properly the valuation may reflect the long term economic 
value  of  those  assets  or  liabilities.  Valuation  shall  not  assume  the  provision  of 
extraordinary  public  support  to  the  institution,  regardless  of  whether  it  is  actually 
provided. 

3. 

The  valuation  shall  be  supplemented  by  the  following  information  as  appearing  in 
the accounting books and records of the institution: 

(a) 

an updated balance sheet and a report on the economic and financial situation 
of the institution; 

(b) 

a note providing an analysis and an estimate of the value of the assets; 

(c) 

the  list  of  outstanding  liabilities  shown  in  the  books  and  records  of  the 
institution, with an indication of the respective credits and priority level under 
the applicable insolvency law; 

(d) 

the  list  of  assets  held  by  the  institution  for  account  of  third  parties  who  have 
ownership rights on those assets. 

4. 

5. 

The valuation shall indicate the subdivision of the creditors in classes in accordance 
with their priority level under the applicable insolvency law and an estimate of the 
treatment that each class could be expected to receive in winding up proceedings. 

Where  due  to  the  urgency  in  the  circumstances  of  the  case,  it  is  not  possible  to 
comply with the requirements laid down in paragraphs 3 and 4, the valuation either 

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6. 

7. 

by  an  independent  person  or  by  a  resolution  authority  shall  be  carried  out  in 
compliance with the requirements laid down in paragraph 2. That valuation shall be 
considered  as  provisional  until  the  resolution  authority  has  carried  out  a  valuation 
that  complies  with  all  the  requirements  under  this  article.  That  definitive  valuation 
may be carried out separately or together with the valuation referred to in Article 66. 

The  valuation  shall  be  integrant  part  of  the  decision  to  apply  a  resolution  tool  or 
exercise  a  resolution  power.  The  valuation  shall  not  be  subject  to  separate  judicial 
review  and  shall  be  subject  to  judicial  review  only  together  with  the  decision  in 
accordance with the provisions of Article 78. 

EBA  shall  develop  draft  regulatory  technical  standards  to  specify  the  following 
criteria for the purposes of paragraphs 1 and 2 of this Article, and for the purposes of 
Article 66: 

(a)  under  which  circumstances  a  person  is  independent  from  both  the  resolution 

authority and the institutions, and 

(b)  under  which  circumstances  a  valuation  by  an  independent  person  may  be 

considered as not possible; 

(c) 

(d) 

(e) 

the methodology for assessing the market value of the assets and liabilities of 
the institution that is failing or likely fail; 

the  circumstances  where  the  market  for  a  specific  asset  or  liability  can  be 
considered as not functioning properly; 

the methodology for assessing the long term economic value of the assets and 
liabilities of the institution that is failing or likely fail 

EBA  shall  submit  those  draft  regulatory  technical  standards  to  the  Commission 
within twelve months from the date of entry into force of this Directive. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred  to  in  the  first  subparagraph  in  accordance  with  Articles  10  to  14  of 
Regulation (EU) No 1093/2010. 

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CHAPTER III 

RESOLUTION TOOLS 

SECTION I 

GENERAL PRINCIPLES 

Article 31 

General principles of resolution tools 

1. 

Member States shall ensure that resolution authorities have the necessary powers to 
apply  the  resolution  tools  to  an  institution,  a  financial  institution  or  a  company 
referred to in points (c) and (d) of Article 1 that meets the applicable conditions for 
resolution. 

2. 

The resolution tools referred to in paragraph 1 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. 

4. 

5. 

6. 

Subject  to  paragraph  4,  resolution  authorities  may  apply  the  resolution  tools  either 
singly or in conjunction. 

Resolution  authorities  may  apply  the  asset separation  tool only  in  conjunction  with 
another resolution tool. 

When  the  resolution  tools  referred  to  in  points  (a),  (b)  or  (c)  of  paragraph  2are 
applied,  and  they  are  used  to  partially  transfer  assets,  rights  or  liabilities  of  the 
institution under resolution, the residual part of the institution from which the assets, 
rights or liabilities have been transferred, shall be wound up under normal insolvency 
proceedings within a time frame that is appropriate having regard to any need for that 
institution to provide services or support pursuant to Article 58 in order to enable the 
transferee to carry on the activities or services acquired by virtue of that transfer. 

Member States shall ensure that rules under national  insolvency  law relating to the 
voidability or unenforceability of legal acts detrimental to creditors do not apply to 
transfers of assets, rights or liabilities from an institution under resolution to another 
entity  by  virtue  of  the  application  of  a  resolution  tool  or  exercise  of  a  resolution 
power. 

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7. 

Member  States  shall  not  be  prevented  from  conferring  upon  resolution  authorities 
additional  powers  exercisable  where  an  institution  meets  the  conditions  for 
resolution,  provided  that  those  additional  powers  do  not  pose  obstacles  to  effective 
group  resolution  and  that  they  are  consistent  with  the  resolution  objectives  and  the 
general principles governing resolution set out in Articles 26 and 29.  

SECTION 2 

THE SALE OF BUSINESS TOOL 

Article 32 

The sale of business tool 

1. 

Member States shall ensure that resolution authorities have the power to transfer to a 
purchaser that is not a bridge institution the following: 

(a) 

shares or other instruments of ownership of an institution under resolution; 

(b) 

all or specified assets, rights or liabilities of an institution under resolution; 

(c) 

any  combination  of  some  or  all  of  the  assets,  rights  and  liabilities  of  an 
institution under resolution, 

The transfer referred to in the first subparagraph  shall take place without obtaining 
the consent of the shareholders of the institution under resolution or any third party 
other  than  the  purchaser,  and  without  complying  with  any  procedural  requirements 
under company or securities law that would otherwise apply. 

A transfer made pursuant to paragraph 1 shall be made on commercial terms, having 
regard to the circumstances, and in accordance with Union State aid rules. 

In  the  case  of  a  partial  transfer  of  assets  of  the  institution,  any  proceeds  received 
from the transfer shall benefit the institution under resolution.  

Where  that  all  of  the  shares  or  other  instruments  of  ownership  are  transferred  or 
where  all  the  assets,  rights  and  liabilities  of  the  institution  are  transferred,  any 
proceeds  received  from  the  transfer  shall  benefit  the  shareholders  of  the  institution 
under resolution, who have been divested of their rights. 

Member States shall calculate the proceeds referred to in paragraph 2 of this Article, 
net  of  the  amount  of  expenses,  administrative  or  of  other  nature,  occurred  in  the 
context  of  the  resolution  process,  including  costs  and  expenses  incurred  by  the 
financing arrangements pursuant to Article 92. 

Resolution authorities shall take all reasonable steps to obtain commercial terms for 
the transfer in accordance with paragraph 2 of this Article that are in conformity with 
the  fair  and  realistic  valuation  conducted  under  Article  30,  having  regard  to  the 
circumstances of the case. 

2. 

3. 

4. 

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5. 

6. 

7. 

8. 

9. 

10. 

When applying the sale of business tool the resolution authorities may exercise the 
transfer power more than once in order to make supplemental transfers of shares or 
other instruments of ownership or, as the case may be, assets, rights or liabilities of 
the institution under resolution. 

Following an application of the sale of business tool, resolution authorities may, with 
the consent of the purchaser, exercise the transfer powers in respect of shares or other 
instruments  of  ownership  or,  as  the  case  may  be,  assets,  rights  or  liabilities 
transferred  to  the  purchaser  in  order  to  transfer  the  property  back  to  the  institution 
under resolution. 

A  purchaser  must  have  the  appropriate  authorisation  to  carry  on  the  activities  or 
services that it acquires by virtue of a transfer made pursuant to paragraph 1. 

By way of  derogation  from  Article 19(1) of  Directive 2006/48,  where  a  transfer of 
shares  or  other  instruments  of  ownership  by  virtue  of  an  application  of  the  sale  of 
business tool would result in the acquisition or increase of a qualifying holding of a 
kind  referred  to  in  Article19(1)  of  Directive  2006/48,  competent  authorities  shall 
carry out the assessment required under that Article in a timely manner that does not 
delay  the  application  of  the  sale  of  business  tool  and  prevent  the  resolution  action 
from achieving the relevant resolution objectives. 

Transfers made by virtue of the sale of business tool which involves the transfer of 
some, but not all, of the assets, rights or liabilities of an institution shall be subject to 
the safeguards for partial property transfers specified in Chapter V. 

For the purposes of exercising the rights to provide services or to establish itself in 
another  Member  State  in  accordance  with  Directive  2006/48/EC  or  Directive 
2004/39/EC, the purchaser shall be considered to be a continuation of the institution 
under resolution, and may continue to exercise any such right that was exercised by 
the institution under resolution in respect of the assets, rights or liabilities transferred, 
including  the  rights  of  membership  and  access  to  payment,  clearing  and  settlement 
systems. 

11. 

Shareholders  or  creditors  of  the  institution  under  resolution  and  other  third  parties 
whose property, rights or liabilities are not transferred shall not have any rights over 
or in relation to the assets, rights or liabilities transferred. 

Article 33 

Sale of business tool: procedural requirements 

1. 

2. 

Subject  to  paragraph  3,  when  applying  the  sale  of  business  tool  to  an  institution  a 
resolution  authority  shall  market,  or  make  arrangements  for  the  marketing  of  that 
institution  or  those  of  its  assets,  rights  or  liabilities  that  the  authority  intends  to 
transfer. Pools of rights, assets, and liabilities may be marketed separately. 

Without prejudice to the Union State aid framework, where applicable, the marketing 
referred  to  in  paragraph  1  shall  be  carried  out  in  accordance  with  the  following 
criteria: 

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(a) 

it shall be as transparent as possible, having regard to the circumstances and in 
particular the need to maintain financial stability; 

(b) 

it shall not favour or discriminate between potential purchasers; 

(c) 

it shall be free from any conflict of interest; 

(d) 

it shall not confer any unfair advantage on a potential purchaser; 

(e) 

it shall take account of the need to effect a rapid resolution action; 

(f) 

it shall aim at maximising, as far as possible, the sale price for the assets and 
liabilities involved. 

The  principles  set  out  in  this  paragraph  shall  not  prevent  the  resolution  authority 
from soliciting particular potential purchasers. 

Any  public  disclosure  of  the  marketing  of  the  institution  that  would  otherwise  be 
required in accordance with Article 6(1) of Directive 2003/6/EC may be delayed in 
accordance with Article 6(2) of this Directive 2003/6/EC. 

Resolution  authorities  may  apply  the  sale  of  business  tool  without  complying  with 
the  marketing  requirements  set  out  in  paragraph  1  when  they  determine  that 
compliance with those requirements would be likely to undermine one or more of the 
resolution objectives and in particular if the following conditions are met: 

(a) 

(b) 

the  resolution  authority  considers  that  there  is  a  material  threat  to  financial 
stability  arising  from  or  aggravated  by  the  failure  of  the  institution  under 
resolution; and 

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 26(2). 

EBA  shall  develop  draft  regulatory  technical  standards  to  specify  the  factual 
circumstances  amounting  to  a  material  threat  and  the  elements  related  to  the 
effectiveness  of  the  sale  of  business  tool  provided  for  in  points  (a)  and  (b)  of 
paragraph 3. 

EBA  shall  submit  those  draft  regulatory  technical  standards  to  the  Commission 
within twelve months from the date of entry into force of this Directive. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred  to  in  the  first  subparagraph  in  accordance  with  Articles  10  to  14  of 
Regulation (EU) No 1093/2010. 

3. 

4. 

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SECTION 3 

THE BRIDGE INSTITUTION TOOL 

Article 34 

Bridge institution tool 

1. 

2. 

3. 

4. 

In order to give effect to the bridge institution tool, Member States shall ensure that 
resolution  authorities  have  the  power  to  transfer  all  or  specified  assets,  rights  or 
liabilities  of  an  institution  under  resolution,  and  any  combination  of  those  assets, 
rights  and  liabilities,  to  a  bridge  institution  without  obtaining  the  consent  of  the 
shareholders  of  the  institution  under  resolution  or  any  third  party,  and  without 
complying  with  any  procedural  requirements  under  company  or  securities  law  that 
would otherwise apply. 

Except  where  the  bail-in  tool  is  applied  for  the  purpose  specified  in  point  (b)  of 
Article 37(2), for the purposes of the bridge institution tool a bridge institution shall 
be a legal entity that is wholly or partially owned by one or more public authorities 
(which  may  include  the  resolution  authority)  and  that  is  created  for  the  purpose  of 
carrying  out  some  or  all  of  the  functions  of  an  institution  under  resolution  and  for 
holding some or all of the assets and liabilities of an institution under resolution. 

The  application  of  the  bail-in  tool  for  the  purpose  specified  in  point  (b)  of  Article 
37(2)  shall  not  interfere  with  the  ability  of  the  resolution  authority  to  control  the 
bridge institution to the extent necessary to effect the resolution and accomplish the 
resolution objectives. 

When applying the bridge institution tool, a resolution authority shall ensure that the 
total value of liabilities transferred 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.  

When  applying  the  bridge  institution  tool,  a  resolution  authority  may  transfer  any 
assets, rights or liabilities of the institution as it considers appropriate in pursuance of 
one or more of the resolution objectives. 

5. 

When applying the bridge institution tool, the resolution authorities may: 

(a) 

(b) 

transfer  rights,  assets  or  liabilities  from  the  institution  under  resolution  to  the 
bridge institution on more than one occasion; and 

transfer  rights,  assets  or  liabilities  back  from  the  bridge  institution  to  the 
institution under resolution provided that the conditions specified in paragraph 
6 are met; 

(c) 

transfer rights, assets or liabilities from the bridge institution to a third party. 

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6. 

Resolution  authorities  shall  only  transfer  rights,  assets  or  liabilities  back  from  the 
bridge  institution  to  the  institution  under  resolution  in  one  of  the  following 
circumstances: 

(a) 

(b) 

the possibility that the specific rights, assets or liabilities might be transferred 
back is stated expressly in the instrument by which the transfer referred to in 
point (a) of paragraph 5 was made; 

the specific rights, assets or liabilities do not in fact fall within the classes of, or 
meet the conditions for, rights, assets or liabilities specified in the instrument 
by which the transfer referred to in point (a) of paragraph 5 was made. 

In either of the cases referred to in points (a) and (b), the transfer back is made within 
any time period, and complies with any other conditions, stated in that instrument for 
the relevant purpose. 

Transfers made by virtue of the bridge institution tool which involves the transfer of 
some, but not all, of the assets, rights or liabilities of an institution shall be subject to 
the safeguards for partial property transfers specified in Chapter IV. 

For the purposes of exercising the rights to provide services or to establish itself in 
another  Member  State  in  accordance  with  Directive  2006/48/EC  or  Directive 
2004/39/EC,  a  bridge  institution  shall  be  considered  to  be  a  continuation  of  the 
institution  under  resolution,  and  may  continue  to  exercise  any  such  right  that  was 
exercised  by  the  institution  under  resolution  in  respect  of  the  assets,  rights  or 
liabilities  transferred,  including  the  rights  of  membership  and  access  to  payment, 
clearing and settlement systems. 

Shareholders  or  creditors  of  the  institution  under  resolution  and  other  third  parties 
whose property, rights or liabilities are not transferred to the bridge institution shall 
not have any rights over or in relation to the bridge institution or its property. 

7. 

8. 

9. 

Article 35 

Operation of a bridge institution  

1. 

Member  States  shall  ensure  that  the  operation  of  a  bridge  institution  respects  the 
following provisions: 

(a) 

(b) 

(c) 

the contents of the bridge institution's its constitutional documents are specified 
by the resolution authority; 

the  resolution  authority  appoints  the  bridge  institution's  board  of  directors, 
approves the relevant salaries and determines the appropriate responsibilities; 

the bridge institution is authorised in accordance with Directive 2006/48/EC or 
Directive 2004/39/EC, as applicable, and has the necessary authorisation under 
the applicable national law to carry on the activities or services that it acquires 
by virtue of a transfer made pursuant to Article 56 of this Directive; 

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2. 

3. 

4. 

5. 

6. 

7. 

(d) 

the  bridge  institution  complies  with  the  requirements  of,  and  be  subject  to 
supervision  in  accordance  with,  Directives  2006/48/EC,  2006/49/EC  and 
2004/39/EC, as applicable. 

Subject to any restrictions imposed in accordance with Union or national competition 
rules,  the  directors  shall  operate  the  bridge  institution  with  a  view  to  selling  the 
institution,  its  assets,  rights  or  liabilities,  to  one  or  more  private  sector  purchasers 
when conditions are appropriate and within the period specified in paragraph 5. 

The resolution authority shall terminate the operation of a bridge institution in any of 
the following cases, whichever occurs first: 

(a) 

the bridge institution merges with another institution; 

(b) 

the acquisition of the majority of the bridge institution's capital by a third party; 

(c) 

(d) 

the  assumption  of  all  or  substantially  all  of  its  assets,  rights  or  liabilities  by 
another person; 

the  expiry  of  the  period  specified  in  paragraph  5  or,  where  applicable, 
paragraph 6. 

When seeking to sell the bridge institution or its assets or liabilities, Member States 
shall  ensure  that  the  institution  or  the  relevant  assets  or  liabilities  are  marketed 
openly and transparently, and that the sale does not favour or discriminate between 
particular potential purchasers. 

Any  such  sale,  shall  be  made  on  commercial  terms,  having  regard  to  the 
circumstances and in accordance with the Union State Aid framework. 

If none of the outcomes referred to in points (a), (b) or (c) of paragraph 3 applies, the 
resolution authority shall terminate the operation of a bridge institution at the end of 
a two- year period following the date on which the last transfer from an institution 
under resolution pursuant to the bridge institution tool was made. 

The resolution authority may extend the period referred to in paragraph 5 for up to 
three additional one-year periods where: 

(a) 

(b) 

such extension is likely to achieve one of the outcomes referred to in points (a), 
(b) or (c) of paragraph 3; or 

such  extension  is  necessary  to  ensure  the  continuity  of  essential  banking  or 
financial services. 

Where  the  operations  of  a  bridge  institution  are  terminated  in  the  circumstances 
referred to in points (c), and (d) of paragraph 3, the institution shall be wound up and 
liquidated. 

Any proceeds generated as a result of the termination of the operation of the bridge 
institutions as specified in paragraph 3 shall benefit the institution under resolution. 

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Member  States  may  calculate  the  proceeds  net  of  the  amount  of  expenses 
administrative or of other nature occurred in the context of the resolution process. 

8. 

Wherea bridge institution is used for the purpose of transferring assets and liabilities 
of more than one institution the obligation referred to in paragraph 7 shall refer to the 
liquidation  of  the  assets  and  liabilities  transferred  from  each  of  the  institutions  and 
not to the bridge institution itself. 

SECTION 4 

THE ASSET SEPARATION TOOL 

Article 36 

Asset separation tool 

1. 

2. 

3. 

4. 

5. 

In order to give effect to the asset separation tool, Member States shall ensure that 
the resolution authorities have the power to transfer assets, rights or liabilities of an 
institution under resolution to an asset management vehicle. 

For the purposes of the asset separation tool, an asset management vehicle shall be a 
legal  entity  that  is  wholly  owned  by  one  or  more  public  authorities,  which  may 
include the resolution authority. 

The  resolution  authority  shall  appoint  asset  managers  to  manage  the  assets 
transferred  to  the  asset  management  vehicle  with  a  view  to  maximising  their  value 
through  eventual  sale  or  otherwise  ensuring  that  the  business  is  wound  down  in  an 
orderly manner. 

Resolution  authorities  may  exercise  the  power  specified  in  paragraph  1  to  transfer 
assets only if the situation of the particular market for those assets is of such a nature 
that the liquidation of those assets under normal insolvency proceedings could have 
an adverse effect on the financial market. 

When  applying  the  asset  separation  tool,  resolution  authorities  shall  determine  the 
consideration  for  which  assets  are  transferred  to  the  asset  management  vehicle  in 
accordance with the principles established in Article 30 and in accordance with the 
Union State aid framework. 

6. 

Resolution authorities may: 

(c) 

transfer  assets,  rights  or  liabilities  from  the  institution  under  resolution  to  the 
asset management vehicle on more than one occasion; transfer assets, rights or 
liabilities  back  from  the  asset  management  vehicle  to  the  institution  under 
resolution provided that the conditions specified in paragraph 7 are met. 

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7. 

Resolution  authorities  shall  only  transfer  rights,  assets  or  liabilities  back  from  the 
asset management vehicle to the institution under resolution in one of the following 
circumstances: 

(a) 

(b) 

the possibility that the specific rights, assets or liabilities might be transferred 
back is stated expressly in the instrument by which the transfer refereed to in 
point (a) of paragraph 6 was made; 

the specific rights, assets or liabilities do not in fact fall within the classes of, or 
meet the conditions for, rights, assets or liabilities specified in the instrument 
by which the transfer referred to in point (a) of paragraph6 was made. 

In either of the cases referred in points (a) and (b), the transfer back is made within 
any time period, and complies with any other conditions, stated in that instrument for 
the relevant purpose. 

Transfers between the institution under resolution and the asset management vehicle 
shall  be  subject  to  the  safeguards  for  partial  property  transfers  specified  in  this 
Directive. 

Shareholders and creditors of the institution under resolution and other third parties 
whose  property,  rights  or  liabilities  are  not  transferred  to  the  asset  management 
vehicle shall not have any rights over or in relation to the asset management vehicle, 
it property or its managers. 

The objectives of the managers appointed in accordance with paragraph 3 shall not 
imply  any  duty  or  responsibility  to  the  shareholders  of  the  institution  under 
resolution, and the managers shall have no liability to those shareholders arising from 
action taken or not taken in discharge or purported discharge of their functions unless 
the  act  or  omission  implies  gross  negligence  or  serious  misconduct  in  accordance 
with national law. 

EBA shall develop guidelines, in accordance with Article 16 of Regulation (EU) No 
1093/2010  to  promote  the  convergence  of  supervisory  and  resolution  practices 
regarding  the  determination  when,  in  accordance  to  paragraph  4  of  this  Article  the 
liquidation of the assets or liabilities under normal insolvency proceeding could have 
an adverse effect on the financial market. EBA shall develop these guidelines at the 
latest  by  the  date  established  in  the  first  subparagraph  of  Article  115(1)  of  this 
Directive. 

The Commission, taking into account, where appropriate, the experience acquired in 
the  application  of  EBA  guidelines,  shall  adopt  delegated  acts  in  accordance  with 
Article 103 aimed at specifying the circumstances when the liquidation of the assets 
or liabilities under normal insolvency proceeding could have an adverse effect on the 
financial market. 

8. 

9. 

10. 

11. 

12. 

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SECTION 5 

THE BAIL-IN TOOL  

SUBSECTION 1 

OBJECTIVE AND SCOPE OF THE BAIL-IN TOOL 

Article 37 

The bail-in tool 

1. 

2. 

3. 

In order to give effect to the bail-in tool, Member States shall ensure that resolution 
authorities have the resolution powers specified in points (f) to (l) of Article 56(1). 

Member States shall ensure that resolution authorities may apply the bail-in tool for 
either of the following purposes: 

(a) 

(b) 

to  recapitalise  an  institution  that  meets  the  conditions  for  resolution  to  the 
extent  sufficient  to  restore  its  ability  to  comply  with  the  conditions  for 
authorisation  and  to  carry  on  the  activities  for  which  is  authorised  under 
Directive 2006/48/EC or Directive 2004/39/EC; 

to  convert  to  equity  or  reduce  the  principal  amount  of  claims  or  debt 
instruments that are transferred to a bridge institution with a view to providing 
capital for that bridge institution. 

Member States shall ensure that resolution authorities may apply the bail-in tool for 
the purpose referred to in point (a) of paragraph 2 only if there is a realistic prospect 
that  the  application  of  that  tool,  in  conjunction  with  measures  implemented  in 
accordance  with  the  business  reorganisation  plan  required  by  Article  47  will,  in 
addition to achieving relevant resolution objectives, restore the institution in question 
to financial soundness and long-term viability. 

If the condition set out in the first subparagraph is not fulfilled, Member States shall 
apply any of the resolution tools referred to in points (a), (b) and (c) of Article 31 (2), 
and  the  bail-in  tool  referred  to  in  point  (b)  of  paragraph  2  of  this  Article,  as 
appropriate. 

Article 38 

Scope of bail-in tool 

1. 

Member States shall ensure that the bail-in tool may be applied to all liabilities of an 
institution that are not excluded from the scope of that tool pursuant to paragraph 2. 

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2. 

Resolution  authorities  shall  not  exercise  the  write  down  and  conversion  powers  in 
relation to the following liabilities: 

(a)  deposits that are guaranteed in accordance with Directive 94/19/EC; 

(b) 

secured liabilities,  

(c) 

any  liability  that  arises  by  virtue  of  the  holding  by  the  institution  of  client 
assets  or  client  money,  or  a  fiduciary  relationship  between  the  institution  (as 
fiduciary) and another person (as beneficiary); 

(d) 

liabilities with an original maturity of less than one month; 

(e) 

a liability to any one of the following: 

(i) 

(ii) 

an employee, in relation to accrued salary, pension benefits or other 
fixed remuneration, except for variable remuneration of any form; 

a  commercial  or  trade  creditor  arising  from  the  provision  to  the 
institution  of  goods  or  services  that  are  essential  to  the  daily 
functioning of its operations, including IT services, utilities and the 
rental, servicing and upkeep of premises; 

(iii) 

tax and social security authorities, provided that those liabilities are 
preferred under the applicable insolvency law. 

Points  (a)  and  (b)  of  paragraph  2  shall  not  prevent  resolution  authorities,  where 
appropriate, from exercising those powers in relation to any part of a secured liability 
or  a  liability  for  which  collateral  has  been  pledged  that  exceeds  the  value  of  the 
assets,  pledge,  lien  or  collateral  against  which  it  is  secured.  Member  States  may 
exempt  from  this  provision  covered  bonds  as  defined  in  Article  22(4)  of  Council 
Directive 86/611/EEC38. 

Point (c) of paragraph 2 shall not prevent resolution authorities, where appropriate, 
from exercising those powers in relation to any amount of a deposit that exceeds the 
coverage under that Directive. 

Where  resolution  authorities  apply  the  bail-in  tool,  they  may  exclude  from  the 
application  of  the  write-down  and  conversion  powers  liabilities  arising  from 
derivatives  that  do  not  fall  within  the  scope  of  point  (d)  of  paragraph  2,  if  that 
exclusion is necessary or appropriate to achieve the objectives specified in points (a) 
and (b) of Article 26(2).  

The Commission shall be empowered to adopt delegated acts adopted in accordance 
with Article 103 in order to specify further: 

(a) 

specific classes of liabilities covered by point (d) of paragraph 2, and.  

Council Directive 85/611/EEC of 20 December 1985 on the coordination of laws, regulations and 
administrative provisions relating to undertakings for collective investment in transferable securities 
(UCITS) (OJ L 375, 31.12.1985, p. 3). Directive as last amended by Directive 2008/18/EC. 

3. 

4. 

38 

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(b) 

the  circumstances  when  exclusion  is  necessary  or  appropriate  to  achieve  the 
objectives specified in points (a) and (b) of Article 26(2), having regard to the 
following factors: 

(i) 

(ii) 

the systemic impact of closing out derivative positions in order to 
apply the debt write-down tool; 

the  effect  on  the  operation  of  a  Central  Counterparty  of  applying 
the debt write-down tool to liabilities arising from derivatives that 
are cleared by the Central Counterparty; and 

(iii) 

the effect of applying the debt write-down tool to liabilities arising 
from derivatives on the risk management of counterparties to those 
derivatives. 

SUBSECTION 2 

MINIMUM REQUIREMENT FOR ELIGIBLE LIABILITIES 

Article 39 

Minimum requirement for liabilities subject to the write-down and conversion powers 

1. 

2. 

Member  States  shall  ensure  that  the  institutions  maintain,  at  all  times,  a  sufficient 
aggregate amount of own funds and eligible liabilities expressed as a percentage of 
the total liabilities of the institution that do not qualify as own funds under Section 1 
of  Chapter  2  of  Title  V  of  Directive  2006/48/EC  or  under  Chapter  IV  of  Directive 
2006/49/EC. 

Subordinated  debt  instruments  and  subordinated  loans  that  do  not  qualify  as 
Additional  Tier  1  or  Tier  2  capital  may  be  included  in  the  aggregate  amount  of 
eligible  liabilities  referred  to  in  paragraph  1  only  if  they  satisfy  the  following 
conditions: 

(a) 

the instruments are issued and fully paid up; 

(b) 

the instruments are not purchased by any of the following: 

(i) 

the institution or its subsidiaries; 

(ii) 

an  undertaking  in  which  the  institution  has  participation  in  the  form  of 
ownership,  direct  or  by  way  of  control,  of  20%  or  more  of  the  voting 
rights or capital of the undertaking; 

(c) 

(d) 

the  purchase  of  the  instrument  is  nor  funded  or  directly  or  indirectly  by  the 
institution; 

the instruments are not secured or guaranteed by any entity which is part of the 
same group as the institution; 

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(e) 

the instruments have an original maturity of at least one year. 

3. 

The minimum aggregate amount pursuant to paragraph 1 shall be determined on the 
basis of the following criteria: 

(a) 

(b) 

the need to ensure that the institution can be resolved by the application of the 
resolution  tools  including,  where  appropriate,  the  bail  in  tool,  in  a  way  that 
meets the resolution objectives;  

the  need  to  ensure,  in  appropriate  cases,  that  the  institution  has  sufficient 
eligible  liabilities  to  ensure  that,  if  the  bail  in  tool  were  to  be  applied  the 
Common  Equity  Tier  1  ratio  of  the  institution  could  be  restored  to  a  level 
necessary to sustain sufficient market confidence in the institution and enable it 
to continue to comply with the conditions for authorisation and to carry on the 
activities  for  which  is  authorised  under  Directive  2006/48/EC  or  Directive 
2006/49/EC; 

(c) 

the size, the business model and the risk profile of the institution;  

(d) 

(e) 

the  extent  to  which  the  Deposit  Guarantee  Scheme  could  contribute  to  the 
financing of resolution in accordance with Article 99; 

the extent to which the failure of the institution would have an adverse effect 
on  financial  stability,  including,  due  to  its  interconnectedness  with  other 
institutions or with the rest of the financial system through contagion to other 
institutions. 

4. 

Subject  to  the  provisions  of  Article  40,  institutions  shall  comply  with  the 
requirements laid down in paragraph 2 of this Article on an individual basis. 

5. 

6. 

7. 

Subject to the provisions of Article 40, liabilities held by other entities that are part 
of the group shall be excluded from the aggregate amount specified in paragraph 1of 
this Article. 

Resolution authorities shall require and verify that institutions maintain the aggregate 
amount provided for in paragraph 1, and take any decision pursuant to paragraph 4 in 
the course of developing and maintaining resolution plans.  

Resolution  authorities  shall  inform  EBA  of  the  minimum  amount  they  have 
determined  for  each  institution  under  their  jurisdiction.  EBA  shall  report  to  the 
Commission  by  1  January  2018  at  the  latest  on  the  implementation  of  the 
requirement  under  paragraph  1.  In  particular  EBA  shall  report  to  the  Commission 
whether there are divergences regarding the implementation at national level of that 
requirement.  

The Commission shall, by means of delegated acts in accordance with Article 103, 
adopt measures to specify the criteria provided for in points (a) to (e) of paragraph 3 
with  possible  references  to  different  categories  of  institutions  and  related  ranges  of 
percentages. 

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Article 40 

Application of minimum requirement to groups 

1. 

Resolution authorities may choose to apply the minimum requirement established in 
Article  39(1)  and  (3)  on  a  consolidated  basis  to  groups  which  are  subject  to 
consolidated supervision, provided that the following conditions are satisfied: 

(a) 

(b) 

(c) 

(d) 

the  percentage  referred  to  in  Article  39(1)  is  calculated  on  the  basis  of  the 
consolidated level of the liabilities and of the own funds held by the group; 

the  debt  instruments  or  loans  referred  to  in  Article  39,  (2),  are  issued  by  the 
parent undertaking, or by a company referred to in points (c) or (d) of Article 1; 

the parent undertaking or the company referred to in points (c) or (d) of Article 
1  distributes  adequately  and  proportionately,  in  the  form  of  credit,  the  funds 
collected  through  the  issuance  of  the  debt  instruments  or  loans  referred  to  in 
Article 39 (2), among the institutions which are subsidiaries; 

each  institution,  which  is  a  subsidiary,  shall  comply  with  the  minimum 
requirement set out in Article 39, paragraph 1. However, by way of exemption 
from  the  second  subparagraph  of  Article  39(4),,  liabilities  which  are  held  by 
the parent undertaking or the company referred to in points (c) or (d) of Article 
1 shall be included in the aggregate amount of own funds and eligible liabilities 
that the subsidiary is required to maintain pursuant to Article 39(1); 

(e)  where  the  group  level  resolution  authority  or  other  competent  resolution 
authority,  as  appropriate,  applies  the  bail-in  tool  to  the  parent  undertaking  or 
the  company  referred  to  in  points  (c)  or  (d)  of  Article  1,  the  resolution 
authorities of the subsidiaries shall apply the bail-in tool, in the first place, to 
the liabilities of the subsidiaries with regards to the parent undertaking or the 
company  referred  to  in  points  (c)  or  (d)  of  Article  1,  as  appropriate,  before 
applying it, if needed, to any other eligible liability of the subsidiary. 

When making a decision in accordance with paragraph 1, resolution authorities shall 
take  into  account  the  way  in  which  the  group  structures  its  operations  and  in 
particular the extent to which funding, liquidity and risk are centrally managed. 

Resolution authorities shall take the decision to apply the minimum requirement on a 
consolidated basis pursuant to paragraph 1 of this Article in the course of developing 
and maintaining resolution plans pursuant to Article 9 of this Directive. For groups 
subject  to  consolidated  supervision  in  accordance  with  Articles  125  and  126  of 
Directive  2006/48/EC,  resolution  authorities  shall  take  the  decision  to  apply  the 
minimum requirement on a consolidated basis in accordance with the procedure laid 
down in Article 12 of this Directive. 

2. 

3. 

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SUBSECTION 3 

IMPLEMENTATION OF THE BAIL-IN TOOL 

Article 41 

Assessment of amount of bail-in 

1. 

2. 

3. 

Member  States  shall  ensure  that,  when  applying  the  bail-in  tool,  resolution 
authorities assess the aggregate amount by which eligible liabilities must be reduced 
or  converted  on  the  basis  of  a  valuation  that  complies  with  the  requirements  of 
Article 30. 

Where resolution authorities apply the bail-in tool for the purpose referred to in point 
(a)  of  Article  37(2),  the  assessment  referred  to  in  paragraph  1  of  this  Article  shall 
establish  the  amount  by  which  eligible  liabilities  need  to  be  reduced  in  order  to 
restore the Common Equity Tier 1 capital ratio of the institution under resolution and 
the  amount  that  the  resolution  authority  considers  necessary  to  sustain  sufficient 
market  confidence  in  the  institution  and  enable  it  to  continue  to  comply  with  the 
conditions  for  authorisation  and  to  carry  on  the  activities  for  which  is  authorised 
under Directive 2006/48/EC or Directive 2004/39/EC. 

Resolution  authorities  shall  establish  and  maintain  arrangements  to  ensure  that  the 
assessment  and valuation is based on information about the assets and liabilities of 
the institution under resolution that is as updated and comprehensive as is reasonably 
possible. 

Article 42 

Treatment of shareholders 

1. 

Member  States  shall  ensure  that,  when  applying  the  bail-in  tool,  resolution 
authorities take in respect of shareholders one or both of the following actions: 

(a) 

cancel existing shares; 

(b) 

exercise the power referred to in point (h) of Article 56(1) to convert eligible 
liabilities into shares of the institution under resolution at a rate of conversion 
that severely dilutes existing shareholdings. 

2. 

The actions provided for in paragraph 1 shall apply in respect of shareholders where 
the shares in question were issued or conferred in the following circumstances: 

(a)  pursuant  to  conversion  of  debt  instruments  to  shares  in  accordance  with 
contractual terms of the original debt instruments on the occurrence of an event 
that preceded or occurred at the same time as the assessment by the resolution 
authority that the institution met the conditions for resolution; 

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3. 

4. 

5. 

6. 

(b)  pursuant to the conversion of relevant capital instruments to  Common  Equity 

Tier 1 instruments pursuant to Article 52. 

When  considering  which  action  to  take  in  accordance  with  paragraph  1,  resolution 
authorities shall have regard to the likely amount of losses relative to assets before 
the  exercise  of  the  bail-in  tool,  with  a  view  to  ensuring  that  the  action  taken  in 
respect of shareholders is consistent with that reduction in equity value; the valuation 
carried out in accordance with Articles 30 and 31 and in particular to the likelihood 
that shareholders would have recovered any value if the institution had been wound 
up on the basis of that valuation. 

When resolution authorities apply the bail-in tool, the provisions of Article 30 and 31 
shall apply.  

EBA shall develop guidelines, in accordance with Article 16 of Regulation (EU) No 
1093/2010,  on  the  circumstances  in  which  each  of  the  actions  referred  to  in 
paragraph 1 would be appropriate, having regard to the factors specified in paragraph 
2 of this article. EBA shall develop these guidelines at the latest by the date provided 
for in the first subparagraph of Article 115(1) of this Directive. 

The Commission, taking into account, where appropriate, the experience acquired in 
the  application  of  EBA  guidelines,  may  adopt  delegated  acts  in  accordance  with 
Article  103  aimed  at  specifying  the  circumstances  in  which  each  of  the  actions 
mentioned  in  paragraph  1  would  be  appropriate,  having  regard  to  the  factors 
specified in paragraph 2 of this Article. 

Article 43 

Hierarchy of claims 

1. 

Member  States  shall  ensure  that,  when  applying  the  bail-in  tool,  resolution 
authorities exercise the write down and conversion powers respecting the following 
requirements: 

(a)  Common Equity Tier 1 instruments are written down first in proportion to the 
losses  and  up  to  their  capacity  and  the  relevant  shares  are  cancelled  in 
accordance with Article 42; 

(b) 

(c) 

if, and only if, the writing down pursuant to point (a) is less than the aggregate 
amount,  authorities  reduce  to  zero  the  principal  amount  of  Additional  Tier  1 
instruments that are liabilities and Tier 2 instruments in accordance with sub-
section 2; 

if, and only if, the total reduction of liabilities pursuant to points (a) and (b) is 
less  than  the  aggregate  amount,  authorities  reduce  the  principal  amount  of 
subordinated  debt  that  is  not  Additional  Tier  1  or  Tier  2  capital  to  the  extent 
required,  in  conjunction  with  the  write  down  pursuant  to  points  (a)and  (b)  to 
produce the aggregate amount; 

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(d) 

if, and only if, the total reduction of liabilities pursuant to points (a), (b) or (c) 
of  this  paragraph  is  less  than  the  aggregate  amount,  authorities  reduce  the 
principal  amount  of,  or  outstanding  amount  payable  in  respect  of,  the  rest  of 
eligible  liabilities,  pursuant  to  Article  38,  that  are  senior  debt  to  the  extent 
required,in conjunction with the write down pursuant to points (a), (b) or (c) of 
this paragraph to produce the aggregate amount. 

When applying the write down and conversion powers in compliance with points (c) 
and (d) of paragraph 1, resolution authorities shall allocate the losses represented by 
the  aggregate  amount  equally  between  liabilities  of  the  same  rank  by  reducing  the 
principal amount of, or outstanding amount payable in respect of, those liabilities to 
the same extent pro rata to their value. 

Resolution authorities shall reduce the principal amount of the instrument or convert 
it in accordance with those terms referred to in points (b) or (c) of paragraph 1 before 
exercising  the  write-down  and  conversion  powers  to  the  liabilities  referred  to  in 
points  (d)  of  paragraph  1  and  when  those  terms  have  not  taken  effect  where  an 
institution  has  issued  instruments,  other  than  those  referred  to  in  point  (b)  of 
paragraph 1, that contain either of the following terms: 

(a) 

terms that provide for the principal amount of the instrument to be reduced on 
the  occurrence  of  any  event  that  refers  to  the  financial  situation,  solvency  or 
levels of own funds of the institution; 

(b) 

terms  that  provide  for  the  conversion  of  the  instruments  to  shares  or  other 
instruments of ownership on the occurrence of any such event. 

Where  the  principal  amount  of  an  instrument  has  been  reduced,  but  not  to  zero,  in 
accordance with terms of the kind referred to in point (a) of paragraph 3 before the 
application of the bail-in or pursuant to paragraph 3, resolution authorities shall apply 
the  write-down  and  conversion  powers  to  the  residual  amount  of  that  principal  in 
accordance with paragraph 1. 

Article 44 

Derivatives 

Member  States  shall  ensure  that  the  provisions  of  this  Article  are  respected  when 
resolution  authorities  apply  the  write-down  and  conversion  powers  to  liabilities 
arising from derivatives. 

Where  transactions  are  subject  to  a  netting  agreement,  resolution  authorities  shall 
determine  the  liability  arising  from  those  transactions  on  a  net  basis  in  accordance 
with the terms of the agreement. 

Resolution authorities shall determine the value of liabilities arising from derivatives 
in accordance with the following:  

(a) 

appropriate methodologies for determining the value of classes of derivatives, 
including transactions that are subject to netting agreements;  

2. 

3. 

4. 

1. 

2. 

3. 

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(b)  principles  for  establishing  the  relevant  point  in  time  at  which  the  value  of  a 

derivative position should be established. 

4. 

EBA shall develop draft regulatory technical standards specifying methodologies and 
the  principles  referred  to  in  points  (a)  and  (b)  of  paragraph  3  on  the  valuation  of 
liabilities arising from derivatives.: 

EBA  shall  submit  those  draft  regulatory  technical  standards  to  the  Commission  by 
within twelve months from the entry into force of this Directive. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred  to  in  the  first  subparagraph  of  this  Directive  in  accordance  with  the 
procedure laid down in Articles 10 to 14 of Regulation (EU) No 1093/2010. 

Article 45 

Rate of conversion of debt to equity 

1. 

2. 

3. 

4. 

Member States shall ensure that, when applying the debt restructuring by exercising 
the power referred to in point (h) of Article 56(1) to convert eligible liabilities into 
ordinary shares or other instruments of ownership, resolution authorities may apply a 
different  conversion  rate  to  different  classes  of  liability  in  accordance  with  one  or 
both of the principles set out in paragraphs 2 and 3 of this Article. 

The conversion rate shall represent appropriate compensation to the affected creditor 
for  the  loss  incurred  by  virtue  of  the  exercise  of  the  write  down  and  conversion 
power. 

The conversion rate applicable to senior liabilities shall be higher than the conversion 
rate  applicable  to  subordinated  liabilities,  where  that  is  appropriate  to  reflect  the 
priority of senior liabilities in winding up under applicable insolvency law. 

EBA shall develop guidelines, in accordance with Article 16 of Regulation (EU) No 
1093/2010, on the setting of conversion rates. EBA shall develop these guidelines at 
the latest by the date provided for in the first subparagraph of Article 115(1) of this 
Directive. 

The  guidelines  shall  indicate,  in  particular,  how  affected  creditors  may  be 
appropriately  compensated  by  means  of  the  conversion  rate,  and  the  relative 
conversion rates that might be appropriate to reflect the priority of senior liabilities 
under applicable insolvency law. 

Article 46 

Recovery and reorganisation measures to accompany bail-in 

1. 

Member  States  shall  ensure  that,  where  resolution  authorities  apply  the  bail-in  tool 
arrangements  are  adopted  to  ensure  that  a  business  reorganisation  plan  for  that 
institution is drawn up and implemented in accordance with Article 47. 

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2. 

1. 

2. 

The  arrangements  referred  to  in  paragraph  1  of  this  Article  shall  include  the 
appointment of an administrator with the objective of drawing up and implementing 
the business reorganisation plan required by Article 47. 

Article 47 

Business reorganisation plan 

Member States shall require that, within [one month] after the application of the bail-
in  tool  to  an  institution  in  accordance  with  point  (a)  of  Article  37(2),  the 
administrator appointed under Article 46 shall draw up and submit to the resolution 
authority, the Commission and EBA a business reorganisation plan that satisfies the 
requirements  of  paragraphs  2  and  3  of  this  Article.  Where  the  Union  State  aid 
framework  is  applicable,  Member  States  shall  ensure  that  such  plan  is  compatible 
with  the  restructuring  plan  that  the  institution  is  required  to  submit  to  the 
Commission under that framework.  

A  business  reorganisation  plan  shall  set  out  measures  aimed  at  restoring  the  long 
term viability of the institution or parts of its business within a reasonable timescale 
no longer than two years. Those measures shall be based on realistic assumptions as 
to  the  economic  and  financial  market  conditions  under  with  the  institution  will 
operate. 

The business reorganisation plan shall take account, inter alia, of the current state and 
future  prospects  of  the  financial  markets,  reflecting  best-case  and  worst-case 
assumptions.  Stress-testing  shall  consider  a  ranged  of  scenarios,  including  a 
combination of events of stress and a protracted global recession. Assumptions shall 
be compared with appropriate sector-wide benchmarks. 

3. 

A business reorganisation plan shall include the following elements: 

(a) 

(b) 

a  detailed  diagnosis  of  the  factors  and  problems  that  caused  the  institution  to 
fail or to be likely to fail, and the circumstances that led to its difficulties; 

a description of the measures aimed at restoring the long-term viability of the 
institution that are to be adopted; 

(c) 

a timetable for the implementation of those measures. 

4. 

Measures aimed at restoring the long-term viability of an institution may include: 

(a) 

 the reorganisation of the activities of the institution; 

(b) 

the withdrawal from loss-making activities; 

(c) 

the restructuring of existing activities that can be made competitive; 

(d) 

the sale of assets or of business lines. 

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5. 

6. 

7. 

8. 

9. 

Within one month from the date of submission of the business reorganisation plan, 
the  resolution  authority  shall  assess  the  likelihood  that  the  plan,  if  implemented, 
restores the long term viability of the institution. 

If  the  resolution  authority  is  satisfied  that  the  plan  would  achieve  that  objective,  it 
shall approve the plan. 

If the resolution authority is not satisfied that the plan would achieve that objective 
the resolution authority shall notify the administrator of its concerns and require the 
administrator to amend the plan in way that addresses those concerns. 

Within  two  weeks  from  the  date  of  receipt of such a notification, the administrator 
shall submit an amended plan to the resolution authority for approval. The resolution 
authority shall assess the amended plan, and shall notify the administrator within one 
week whether it is satisfied that the plan, as amended, addresses the concerns notified 
or whether further amendment is required. 

The administrator shall implement the reorganisation plan as agreed by the resolution 
authority,  and  shall  report  every  six  months  to  the  resolution  authority  on  the 
progress in the implementation of the plan. 

The administrator shall revise the plan if that is necessary to achieve the aim set out 
in  paragraph  2,  and  shall  submit  any  such  revision  to  the  resolution  authority  for 
approval. 

10. 

EBA shall develop draft regulatory technical standards to specify further: 

(a) 

the elements that should be included in a business reorganisation plan pursuant 
to paragraph 3; and 

(b) 

the contents of the reports pursuant to paragraph 8. 

EBA  shall  submit  those  draft  regulatory  technical  standards  to  the  Commission 
within twelve months from the date of entry into force of this Directive. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first subparagraph in accordance with the procedure laid down in 
Articles 10 to 14 of Regulation (EU) No 1093/2010. 

SUBSECTION 4 

BAIL-IN TOOL: ANCILLARY PROVISIONS 

Article 48 

Effect of bail-in 

1. 

Member  States  shall  ensure  that  where  a  resolution  authority  exercises  a  power 
referred  to  in  points  (f)  to  (l)  of  Article  56(1),  the  reduction  of  principal  or 

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2. 

3. 

4. 

1. 

2. 

outstanding amount due, conversion or cancellation takes effect and is immediately 
binding on the institution under resolution and affected creditors and shareholders. 

Member States shall ensure that all the administrative and procedural tasks necessary 
to give effect to the exercise of a power referred to in points (f) to (l) of Article 56(1) 
are completed, including: 

(a) 

the amendment of all relevant registers; 

(b) 

the delisting or removal from trading of shares or debt instruments; 

(c) 

the listing or admission to trading of new shares. 

Where a resolution authority reduces to zero the principal amount of, or outstanding 
amount payable in respect of, a liability by means of the power referred to in pint (g) 
of  Article  56(1),  that  liability  and  any  obligations  or  claims  arising  in  relation  to  it 
that  are  not  accrued  at  the  time  when  the  power  is  exercised  shall  be  treated  as 
discharged for all purposes, and shall not be provable in any subsequent proceedings 
in  relation  to  the  institution  under  resolution  or  any  successor  institution  in  any 
subsequent winding up. 

Where a resolution authority reduces in part, but not in full, the principal amount of, 
or  outstanding  amount  payable  in  respect  of,  a  liability  by  means  of  the  power 
referred to in point (g) of Article 56(1): 

(a) 

the liability shall be discharged to the extent of the amount reduced;  

(b) 

the  relevant  instrument  or  agreement  that  created  the  original  liability  shall 
continue to apply in relation to the residual principal amount of, or outstanding 
amount  payable  in  respect  of  the  liability,  subject  to  any  modification  of  the 
amount of interest payable to reflect the reduction of the principal amount, and 
any further modification of the terms that the resolution authority might make 
by means of the power referred to in point (m) of Article 56(1). 

Article 49 

Removal of procedural obstacles to bail in 

Member States shall, in appropriate cases, require institutions to maintain at all times 
sufficient  authorised  share  capital  so  that,  in  the  event  that  the  resolution  authority 
exercised the powers referred to in points (f), (g) and (h) of Article 56(1) in relation 
to  an  institution  or  its  subsidiaries,  the  institution  is  not  be  prevented  from  issuing 
sufficient  new  shares  or  instruments  of  ownership  to  ensure  that  the  conversion  of 
liabilities into ordinary shares or other instruments of ownership could be carried out 
effectively. 

Resolution  authorities  shall  assess  whether  it  is  appropriate  to  impose  the 
requirement set out in paragraph 1 in the case of a particular institution in the context 
of the development and maintenance of the resolution plan for that institution, having 
regard,  in  particular,  to  the  resolution  actions  contemplated  in  that  plan.  If  the 

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resolution  plan  provides  for  the  possible  application  of  the  bail-in  tool,  authorities 
shall  verify  that  the  authorised  share  capital  is  sufficient  to  cover  the  aggregate 
amount referred to in Article 41. 

Member  States  shall  require  institutions  to  ensure  that  there  are  no  procedural 
impediments to the conversion of liabilities to ordinary shares or other instruments of 
ownership  existing  by  virtue  of  their  instruments  of  incorporation  or  statutes, 
including  pre-emption  rights  for  shareholders  or  requirements  for  the  consent  of 
shareholders to an increase in capital. 

The provisions of this article are without prejudice to the amendments to Directives 
77/91/EEC, 82/891/EEC, 2004/25/EC, 2005/56/EC, 2007/36/EC and 2011/35/EU set 
out in Title VIII of this Directive. 

Article 50 

Contractual recognition of bail-in 

Member  States  shall  require  institutions  to  include  in  the  contractual  provisions 
governing  any  eligible  liability,  Additional  Tier  1  instrument  or  Tier  2  instrument 
that  is  governed  by  the  law  of  a  jurisdiction  that  is  not  a  Member  State  a  term  by 
which the creditor or party to the agreement creating the liability recognises that the 
liability  may  be  subject  to  the  write  down  and  conversion  powers  and  agrees  to  be 
bound  by  any  reduction  of  principal  or  outstanding  amount  due,  conversion  or 
cancellation  that  is  effected  by  the  exercise  of  the  those  powers  by  a  resolution 
authority. 

If  an  institution  fails  to  include  in  the  contractual  provisions  governing  a  relevant 
liability a term required in accordance paragraph 1, that failure shall not prevent the 
resolution  authority  from  exercising  the  write  down  and  conversion  powers  in 
relation to that liability. 

The  Commission  may,  by  means  of  delegated  acts  adopted  in  accordance  with 
Article  103,  adopt  measures  to  specify  further  the  contents  of  the  term  required  by 
paragraph 1 of this Article. 

3. 

4. 

1. 

2. 

3. 

Chapter IV 

Write Down of Capital Instruments 

Article 51 

Requirement to write down capital instruments 

1. 

Member  States  shall  require  that  before  any  resolution  action  is  taken,  resolution 
authorities  exercise  the  write  down  power,  in  accordance  with  the  provisions  of 

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Article 52 and without delay, in relation to relevant capital instruments issued by an 
institution when one or more of the following circumstances apply: 

(a) 

(b) 

(c) 

(d) 

the  appropriate  authority  determines  that  the  institution  meets  the  conditions 
for resolution; 

the  appropriate  authority  determines  that  unless  that  power  is  exercised  in 
relation  to  the  relevant  capital  instruments,  the  institution  will  no  longer  be 
viable; 

a  decision  has  been  made  in  a  Member  State  to  provide  extraordinary  public 
support  to  the  institution  or  parent  undertaking  and  the  appropriate  authority 
makes a determination that without the provision of such support the institution 
would no longer be viable; 

the relevant capital instruments are recognised for the purposes of meeting the 
own  fund  requirements  on  an  individual  and  a  consolidated  basis,  or  on  a 
consolidated  basis,  and  the  appropriate  authority  of  the  Member  State  of  the 
consolidating  supervisor  makes  a  determination  that  unless  the  write  down 
power is exercised in relation to those instruments, the consolidated group will 
no longer be viable. 

Where an appropriate authority makes a determination referred to in paragraph 1, it 
shall  immediately  notify  the  resolution  authority  responsible  for  the  institution  in 
question, if different. 

Before making a determination referred to in point (d) of paragraph 1of this article in 
relation  to  an  institution  that  issues  relevant  capital  instruments  that  are  recognised 
for  the  purposes  of  meeting  the  own  fund  requirements  on  an  individual  and  a 
consolidated  basis,  the  appropriate  authority  shall  comply  with  the  notification  and 
consultation requirements set out in Article 52. 

Resolution  authorities  shall  comply  with  the  requirement  set  out  in  paragraph  1 
irrespective  of  whether  they  also  apply  a  resolution  tool  or  exercise  any  other 
resolution power in relation to that institution. 

Article 52 

2. 

3. 

4. 

Provisions governing the write down of capital instruments 

1. 

When  complying  with  the  requirement  set  out  in  Article  51,  resolution  authorities 
shall exercise the write down power in a way that produces the following results: 

(a)  Common Equity Tier 1 instruments are written down first in proportion to the 

losses and up to their capacity; 

(b) 

the principal amount of relevant capital instruments is reduced to zero; 

(c) 

the reduction to zero of that principal amount is permanent; 

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(d)  no liability to the holder of the relevant capital instrument remains under or in 
connection  with  that  instrument,  except  for  any  liability  already  accrued,  and 
any  liability  for  damages  that  may  arise  as  a  result  of  judicial  review  of  the 
legality of the exercise of the write-down power; 

(e)  no compensation is paid to any holder of the relevant capital instruments other 

than in accordance with paragraph 4. 

Point (d) shall not prevent the provision of Common Equity Tier 1 instruments to a 
holder of relevant capital instruments in accordance with paragraph 2. 

2. 

Resolution  authorities  may  accompany  the  exercise  of  power  referred  to  in  Article 
51(1)  with  the  requirement  for  institutions  to  issue  Common  Equity  Tier  1 
instruments to the holders of the relevant capital instruments that are written down in 
accordance  with  paragraph  1of  this  Article,  provided  that  the  following  conditions 
are met: 

(a) 

(b) 

(c) 

(d) 

those Common Equity Tier 1 instruments are issued by the institution referred 
to in paragraph 1 or by a parent undertaking of the institution; 

those  Common  Equity  Tier  1  instruments  are  issued  prior  to  any  issuance  of 
shares  or  instruments  of  ownership  by  that  institution  for  the  purposes  of 
provision of own funds by the State or a government entity; 

those Common Equity Tier 1 instruments are awarded and transferred without 
delay following the exercise of the write down power; 

the  conversion  rate  that  determines  the  number  of  Common  Equity  Tier  1 
instruments  that  are  provided  in  respect  of  each  relevant  capital  instrument 
complies with the principles set out in Article 45 and any guidelines developed 
by EBA pursuant to Article 45(5). 

For  the  purposes  of  the  provision  of  Common  Equity  Tier  1  instruments  in 
accordance  with  paragraph  2,  resolution  authorities  may  require  institutions  to 
maintain at all times the necessary prior authorisation to issue the relevant number of 
Common Equity Tier 1 instruments. 

Where an institution meets the conditions for resolution and the resolution authority 
decides  to  apply  a  resolution  tool  to  that  institution,  the  resolution  authority  shall 
comply with the requirement set out in Article 51(1) before applying the resolution 
tool. 

Member  States  shall  require  institutions  to  ensure  that  the  exercise  by  resolution 
authorities  of  the  write  down  power  in  compliance  with  Article  51(1)  does  not 
constitute an event of default or credit event under the relevant capital instruments. 

In  order  to  ensure  consistent  application  of  paragraph  5,  EBA  and  ESMA  shall 
jointly develop draft regulatory technical standards to specify the meaning of 'credit 
event' for the purposes of that paragraph. 

EBA  and  ESMA  shall  submit  those  draft  regulatory  technical  standards  to  the 
Commission within twelve months from the date of entry into force of this Directive. 

3. 

4. 

5. 

6. 

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Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first subparagraph of this paragraph in accordance with Articles 10 
to 14 of Regulation (EU) No 1093/2010 and Articles 10 to 14 of Regulation (EU) No 
1095/2010. 

Article 53 

Contractual write down or conversion of capital instruments 

Provided  that  those  contractual  terms  take  effect  when  the  authority  makes  a  determination 
referred to in Article 51(1), the requirement set out in Article 51(1) does not apply in relation 
to  relevant  capital  instruments  where  the  terms  of  those  instruments  satisfy  the  following 
conditions: 

(a) 

(b) 

(c) 

1. 

2. 

3. 

the  contractual  terms  of  the  relevant  capital  instrument  provide  that  the  principal 
amount of the instrument will be reduced to zero, or that the instrument will convert 
into  one  or  more  Common  Equity  Tier  1  instruments,  automatically  when  any 
appropriate authority makes a determination in accordance with Article 51(1); 

the  reduction  of  the  principal  amount  of  the  relevant  capital  instrument  or  the 
conversion of the relevant capital instrument into one or more Common Equity Tier 
1 instruments complies with the conditions set out in Article 52(1); 

where the terms of the relevant capital instrument provides that the instrument will 
convert into one or more Common Equity Tier 1 instruments, the conversion rate is 
set out in those terms and complies with the principles set out in Article 45 and any 
guidelines developed by EBA pursuant to Article 45(5). 

Article 54 

Authorities responsible for determination 

Member  States  shall  ensure  that  the  authorities  responsible  for  making  the 
determinations referred to in Article 51(1) are those set out in this Article. 

Where the relevant capital instruments are recognised for the purposes of meeting the 
own  funds  requirements  on  an  individual  basis  in  accordance  with  Article  52  of 
Directive  2006/48/EC,  the  authority  responsible  for  making  the  determination 
referred  to  in  Article  51(1)  of  this  Directive  shall  be  the  competent  authority  or 
resolution authority of the Member State where the institution has been authorised in 
accordance with Title II of Directive 2006/48/EC. 

Where  relevant  capital  instruments  are  issued  by  an  institution  that  is  a  subsidiary 
and  are  recognised  for  the  purposes  of  meeting  the  own  funds  requirements  on  an 
individual  and  a  consolidated  basis,  the  authorities  responsible  for  making  the 
determinations referred to in Articles 53(1) shall be the following: 

(a) 

the competent authority or resolution authority of the Member State where the 
institution  that  issued  those  instruments  has  been  established  in  accordance 

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with  Title  II  of  Directive  2006/48/EC  shall  be  responsible  for  making  the 
determinations  referred  to  in  points  (a),  (b)  or  (c)  of  Article  51(1)  of  this 
Directive; 

(b) 

the  competent  authority  or  resolution  authority  of  the  Member  State  of  the 
consolidating  supervisor  or  the  competent  authority  that  performs  the  sub-
consolidation shall be responsible for making the determination referred to in 
point (d) of Article 51(1). 

Article 55 

Consolidated application: procedure for determination 

Member States shall ensure that, before making a determination referred to in point 
(a),  (b),  (c)  or  (d)  of  Article  51(1)  in  relation  to  an  institution  that  issues  relevant 
capital  instruments  that  are  recognised  for  the  purposes  of  meeting  the  own  fund 
requirements  on  an  individual  and  a  consolidated  basis,  appropriate  authorities 
comply with the following requirements: 

(a) 

(b) 

an  appropriate  authority  that  is  considering  whether  to  make  a  determination 
referred to in points (a), (b) or (c) of Article 51(1) shall notify the consolidating 
supervisor without delay; 

an  appropriate  authority  that  is  considering  whether  to  make  a  determination 
referred  to  in  points  (a),  (b),  (c)  or  (d)  of  Article  51(1)  shall  without  delay 
notify  the  competent  authority  responsible  for  each  institution  that  has  issued 
the relevant capital instruments in relation to which the write down power must 
be exercised if that determination were made. 

An appropriate authority shall accompany a notification made pursuant to paragraph 
1 with an explanation of the reasons why it is considering making the determination 
in question. 

Where  a  notification  has  been  made  pursuant  to  paragraph  1,  the  appropriate 
authority,  in  consultation  with  the  competent  authorities  notified,  shall  assess  the 
following matters: 

(a)  whether  an  alternative  measure  to  the  exercise  of  the  write  down  power  in 

accordance with Article 51(1) is available; 

(b) 

if such an alternative measure is available, whether it can feasibly be applied; 

(c) 

if  such  an  alternative  measure  could  feasibly  be  applied,  whether  there  is  a 
realistic  prospect  that  it  would  address,  in  an  adequate  timeframe,  the 
circumstances  that  would  otherwise  require  a  determination  referred  to  in 
Article 51(1) to be made. 

1. 

2. 

3. 

4. 

For  the  purposes  of  paragraph  3  of  this  Article,  alternative  measures  mean  early 
intervention measures referred to in Article 23 of this Directive, measures referred to 

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in Article 136(1) of Directive 2006/48/EC or a transfer of funds or capital from the 
parent undertaking. 

Where,  pursuant  to  paragraph  3,  the  appropriate  authority  and  the  competent 
authorities assess that one or more alternative measures are available, can feasibly be 
applied and would deliver the outcome referred to in point (c) of that paragraph, they 
shall ensure that those measures are applied. 

Where,  pursuant  to  paragraph  3  of  this  article,  the  appropriate  authority  and  the 
competent  authorities  assess  that  no  alternative  measures  are  available  that  would 
deliver  the  outcome  referred  to  in  point  (c)  of  that  paragraph,  the  appropriate 
authority  shall  decide  whether  the  determination  referred  to  in  Article  51(1)  under 
consideration is appropriate. 

Resolution authorities shall comply promptly with the requirements of paragraphs 1 
to 6, having proper regard to the urgency of the circumstances. 

5. 

6. 

7. 

Chapter V 

Resolution Powers 

Article 56 

General powers 

1. 

Member  States  shall  ensure  that  the  resolution  authorities  have  all  the  powers 
necessary to apply the resolution tools. In particular, the resolution authorities shall 
have the following resolution powers, which they shall be able to exercise singly or 
in conjunction: 

(a) 

(b) 

(c) 

the power to require any person to provide any information necessary for  the 
resolution  authority  to  decide  upon  and  prepare  a  resolution  action,  including 
updates and supplements of information provided in the resolution plans; 

the power to take control of an institution under resolution and exercise all the 
rights conferred upon the shareholders or owners of the institution; 

the  power  to  transfer  shares  and  other  instruments  of  ownership  issued  by  an 
institution under resolution; 

(d) 

the power to transfer debt instruments issued by an institution under resolution; 

(e) 

(f) 

the power to transfer to another person specified rights, assets or liabilities of 
an institution under resolution; 

the  power  to  write  down  or  convert  the  instruments  referred  to  in  Article  51 
into shares or other instruments of ownership of the institution under resolution 
or of a relevant parent institution under resolution; 

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(g) 

(h) 

(i) 

(j) 

(k) 

the  power  to  reduce,  including  to  reduce  to  zero,  the  principal  amount  of  or 
outstanding amount due in respect of eligible liabilities, of an institution under 
resolution; 

the  power  to  convert  eligible  liabilities  of  an  institution  under  resolution  into 
ordinary shares or other instruments of ownership of that institution, a relevant 
parent institution or a bridge institution to which assets, rights or liabilities of 
the institution are transferred; 

the power to cancel debt instruments issued by an institution under resolution; 

the power to cancel shares or other instruments of ownership of an institution 
under resolution; 

the  power  to  require  an  institution  under  resolution  to  issue  new  shares,  or 
other  instruments  of  ownership,  or  other  capital  instruments,  including 
preference shares and contingent convertible instruments; 

(l) 

the  power  to  require  the  conversion  of  debt  instruments  which  contain  a 
contractual term for conversion in the circumstances provided for in Article 51; 

(m) 

the  power  to  amend  or  alter  the  maturity  of  debt  instruments  issued  by  an 
institution under resolution or amend the amount of interest payable under such 
instruments, including by suspending payment for a temporary period; 

(n) 

the power to remove or replace the senior management of an institution under 
resolution. 

2. 

Member  States  shall  take  all  necessary  measures  to  ensure  that,  when  applying  the 
resolution  tools  and  exercising  the  resolution  powers,  resolution  authorities  are  not 
subject to any of the following requirements that would otherwise apply by virtue of 
national law or contract or otherwise: 

(a) 

requirements  to  obtain  approval  or  consent  from  any  person  either  public  or 
private,  including  the  shareholders  or  creditors  of  the  institution  under 
resolution; 

(b)  procedural requirements to notify any person. 

In particular, Member States shall ensure that resolution authorities can exercise the 
powers  under  this  Article  irrespective  of  any  restriction  on,  or  requirement  for 
consent  for,  transfer  of  the  financial  instruments,  rights,  assets  or  liabilities  in 
question that might otherwise apply. 

Point (b) of this paragraph is without prejudice to the requirements set out in Article 
75 and any notification requirements under the Union State aid framework. 

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Article 57 

Powers ancillary to the transfer power 

1. 

Member  States  shall  ensure  that,  when  exercising  a  transfer  power,  resolution 
authorities have the power to do the following: 

(a)  provide  for  the  relevant  transfer  to  take  effect  free  from  any  liability  or 
encumbrance  affecting  the  financial  instruments,  rights,  assets  or  liabilities 
transferred; 

(b) 

remove rights to acquire further shares or other instruments of ownership; 

(c)  discontinue the admission to trading on a regulated market as defined in Article 
4(14)  of  Directive  2004/39/EC  or  the  official  listing  of  financial  instruments 
pursuant to Directive 2001/34/EC; 

(d)  provide  for  the  recipient  to  be  treated  as  if  it  were  the  institution  under 
resolution for the purposes of any obligations, contracts or arrangements made 
by, or actions taken by, the institution under resolution; 

(e) 

(f) 

(g) 

require the institution under resolution or the recipient to provide the other with 
information and assistance; 

cancel  or  modify  the  terms  of  a  contract  to  which  the  credit  institution  under 
resolution is a party or to substitute a transferee as a party; 

enforce contracts entered into by a subsidiary, the obligations under which are 
guaranteed or otherwise supported by the parent undertaking, notwithstanding 
any  contractual  right  to  cause  the  termination,  liquidation  or  acceleration  of 
such  contracts  based  solely  on  the  insolvency  or  financial  condition  of  the 
parent undertaking, if such guarantee or other support and all the related assets 
and  liabilities  have  been  transferred  to  and  assumed  by  the  recipient,  or  the 
resolution  authority  provides  in  any  other  way  adequate  protection  for  such 
obligations. 

Resolution  authorities  shall  exercise  the  powers  specified  in  points  (a)  to  (g)  of 
paragraph 1 where it is considered by the authority to be appropriate to help to ensure 
that a resolution action is effective or to achieve one or more resolution objectives. 

Member  States  shall  ensure  that,  when  exercising  a  transfer  power  or  the  power  to 
write  down  debt,  resolution  authorities  have  the  power  to  provide  for  continuity 
arrangements  necessary  to  ensure  that  the  resolution  action  is  effective  and  the 
business transferred may be operated by the recipient. Such continuity arrangements 
shall include, in particular: 

(a) 

the  continuity  of  contracts  entered  into  by  the  institution  under  resolution,  so 
that  the  recipient  assumes  the  rights  and  liabilities  of  the  institution  under 
resolution relating to any financial instrument, right, asset or liability that has 
been transferred and is substituted for the institution under resolution (whether 
expressly or impliedly) in all relevant contractual documents; 

2. 

3. 

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(b) 

the substitution of the recipient for the institution under resolution in any legal 
proceedings relating to any financial instrument, right, asset or liability that has 
been transferred. 

4. 

The powers in point (d) of paragraph 1 and point (b) of paragraph 3 shall not affect 
the following: 

(a) 

(b) 

the  right  of  an  employee  of  the  institution  under  resolution  to  terminate  a 
contract of employment;  

any right of a party to a contract to exercise rights under the contract, including 
the right to terminate, where entitled to do so in accordance with the terms of 
the contract by virtue of an act or omission by the institution under resolution 
prior to the relevant transfer, or by recipient after the relevant transfer. 

5. 

Where  a  resolution  authority  determines  that  the  conditions  for  resolution  are  met, 
applies a resolution tool or exercises a resolution power, the resolution action shall in 
itself not make it possible for anyone to: 

(a) 

exercise  any  right  or  power  to  terminate,  accelerate  or  declare  a  default  or 
credit  event  under  any  contract  or  agreement  to  which  the  institution  under 
resolution is a party; 

(b)  obtain possession or exercise control over any property of the institution under 

resolution;  

(c) 

affect any contractual rights of the institution under resolution. 

The first subparagraph does not affect the right of a person to take an action referred 
to in points (a), (b) and (c) of the first subparagraph where that right arises by virtue 
of an event of default or state of affairs that is not the resolution action or the result 
of the exercise of a resolution power under this Article. 

Article 58 

Power to require the provision of services and facilities  

1. 

2. 

3. 

Member States shall ensure that resolution authorities have the power to require an 
institution  under  resolution,  including  where  it  is  subject  to  normal  insolvency 
proceedings,  and  any  entity  which  is  part  of  the  same  group  as  the  institution  to 
provide  any  services  or  facilities  that  are  necessary  to  enable  a  recipient  to  operate 
effectively the business transferred to it. 

Member  States  shall  ensure  that  their  resolution  authorities  have  powers  to  enforce 
obligations  imposed,  pursuant  to  paragraph  1,  on  affiliated  entities  established  in 
their territory by resolution authorities in other Member States. 

The  services  and  facilities  referred  to  in  paragraphs  1  and  2  are  restricted  to 
operational services and facilities and do not include any form of financial support. 

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4. 

The services and facilities provided in accordance with paragraphs 1 and 2 shall be 
on the following terms: 

(a)  where  the  services  and  facilities  were  provided  to  the  institution  under 
resolution  immediately  before  the  resolution  action  was  taken,  on  the  same 
terms; 

(b)  where point (a) does not apply, on commercial terms. 

5. 

EBA  shall  develop  draft  regulatory  technical  standards  to  specify  the  services  or 
facilities  that  are  necessary  to  enable  a  recipient  to  operate  effectively  a  business 
transferred to it.  

EBA  shall  submit  those  draft  regulatory  technical  standards  to  the  Commission 
within twelve months from the date of entry into force of this Directive. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first sub-paragraph of this paragraph in accordance with Articles 10 
to 14 of Regulation (EU) No 1093/2010. 

Article 59 

1. 

2. 

3. 

4. 

Power to enforce resolution actions by other Member States 

Member  States  shall  ensure  that,  where  a  transfer  of  shares,  other  instruments  of 
ownership, or assets, rights or liabilities includes assets that are located in a Member 
State other than the State of the resolution authority or rights or liabilities under the 
law  of  a  Member  State  other  than  the  State  of  the  resolution  authority,  the  transfer 
has effect in or under the law of that other Member State. 

Member  States  shall  provide  the  resolution  authority  that  has  made  or  intends  to 
make  the  transfer  with  all  reasonable  assistance  to  ensure  that  the  shares  or  other 
instruments of ownership or assets, rights or liabilities are transferred to the recipient 
in accordance with any applicable requirements of national law. 

Member  States  shall  ensure  that  creditors  and  third  parties  that  are  affected  by  the 
transfer  of  assets,  rights  or  liabilities  referred  to  in  paragraph  1  are  not  entitled  to 
prevent,  challenge,  or  set  aside  the  transfer  under  any  provision  of  law  of  the 
Member  State  where  the  assets  are  located  or  of  the  law  governing  the  rights  or 
liabilities. 

Where  a  resolution  authority  of  a  Member  State  (Member  State  A)  exercises  the 
write-down  or  conversion  powers,  including  in  relation  to  capital  instruments  in 
accordance with Article 51, and the eligible liabilities or relevant capital instruments 
of the institution under resolution include the following: 

(a) 

instruments or liabilities that are governed by the law of a Member State other 
than  the  State  of  the  resolution  authority  that  exercised  the  write  down  or 
conversion powers (Member State B); 

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5. 

6. 

(b) 

liabilities owed to creditors located in Member State B. 

Member  State  B  shall  ensure  that  the  principal  amount  of  those  liabilities  or 
instruments is reduced, or liabilities or instruments are converted, in accordance with 
the  exercise  of  the  write-down  or  conversion  power  by  the  resolution  authority  of 
Member State A. 

Member States shall ensure that creditors that are affected by the exercise of write-
down  or  conversion  powers  referred  to  in  paragraph  4  are  not  entitled  to  challenge 
the reduction of the principal amount of the instrument or liability or its conversion, 
as the case may be, under any provision of law of Member State B. 

Each  Member  State  shall  ensure  that  the  following  are  determined  in  accordance 
with the law of the Member State of the resolution authority: 

(a) 

(b) 

(c) 

the right for creditors and third parties to challenge by judicial review, pursuant 
to Article 78, a transfer of assets, rights or liabilities referred to in paragraph 1 
of  this  article  that  are  located  in  its  territory  or  governed  by  the  law  of  its 
territory; 

the  right  for  creditors  to  challenge  by  judicial  review,  pursuant  to  Article  78, 
the  reduction  of  the  principal  amount,  or  the  conversion,  of  an  instrument  or 
liability covered by points (a) or (b) of paragraph 4 of this Article; 

the  safeguards  for  partial  transfers,  as  referred  to  in  Chapter  V,  in  relation  to 
assets,  rights  or  liabilities  referred  to  in  paragraph  1  that  are  located  in  its 
territory or governed by the law of its territory. 

Article 60 

Power to request transfer of property located in third countries 

Member States shall provide that, in cases in which resolution action involves action taken in 
respect of property located in a third country or rights and liabilities under the law of a third 
country, resolution authorities may require that: 

(a) 

(b) 

(c) 

the administrator, receiver or other person exercising control of the institution under 
resolution and the recipient are required to take all necessary steps to ensure that the 
transfer becomes effective; 

the administrator, receiver or other person exercising control of the institution under 
resolution is required to hold the assets or rights or discharge the liability on behalf 
of the recipient until the transfer becomes effective;  

the expenses of recipient in carrying out any action required under points (a) and (b) 
are met from the assets of the institution under resolution. 

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1. 

2. 

1. 

2. 

3. 

4. 

1. 

Article 61 

Power to suspend certain obligations 

Member States shall ensure that resolution authorities have the power to suspend any 
payment or delivery obligations pursuant to any contract to which an institution is a 
party from  the publication  of  a notice  of the suspension in accordance with Article 
75(7) until 5 pm on the business day following that publication. 

Any  suspension  under  paragraph  1  shall  not  apply  to  eligible  deposits  within  the 
meaning of Directive 94/19/EC. 

Article 62 

Power to restrict the enforcement of security interests 

Member  States  shall  ensure  that  resolution  authorities  have  the  power  to  restrict 
secured creditors of an institution under resolution from enforcing security interests 
in  relation  to  any  assets  of  that  institution  for  a  limited  period  that  the  authority 
determines necessary to achieve the resolution objectives. 

Resolution authorities shall not exercise the power set out in paragraph 1 in relation 
to  any  security  interest  of  a  central  counterparty  over  assets  pledged  by  way  of 
margin or collateral by the institution under resolution. 

Where  Article  72  applies,  resolution  authorities  shall  ensure  that  any  restrictions 
imposed pursuant to the power set out in paragraph 1 are consistent for all affiliated 
entities in relation to which a resolution action is taken. 

The  Commission  shall,  by  means  of  delegated  acts  adopted  in  accordance  with 
Article 103, adopt measures specifying the time period for which a restriction on the 
enforcement of specified classes of security interest should apply. 

Article 63 

Power to temporarily suspend termination rights 

Subject to Article 77, Member States shall ensure that resolution authorities have the 
power to suspend the termination rights of any party under a financial contract with a 
failing institution that arise solely by reason of an action by the resolution authority, 
from the notification of the notice pursuant to Article 74 (5) and (6) util no later than 
5 pm on the business day following that notification. 

For the purposes this paragraph, the relevant time is that in the home Member State 
of the institution under resolution. 

2. 

Where a resolution authority exercises the power set out in paragraph 1 to suspend 
termination  rights,  it  shall  make  all  reasonable  efforts  to  ensure  that  all  margin, 

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3. 

4. 

5. 

6. 

collateral  and  settlement  obligations  of  the  failing  institution  that  arise  under 
financial contracts during the period of suspension are met. 

A person may exercise a termination right under a financial contract before the end 
of  the  period  referred  to  in  paragraph  1  if  that  person  receives  notice  from  the 
resolution authority that the rights and liabilities covered by the netting arrangement 
shall not be transferred to another entity. 

Where a resolution authority exercises the power specified in paragraph 1 to suspend 
termination  rights,  those  rights  may  be  exercised  on  the  expiry  of  the  period  of 
suspension as follows: 

(a) 

if  the  rights  and  liabilities  covered  by  the  financial  contract  have  been 
transferred  to  another  entity,  or  the  bail-in  tool  has  been  applied  to  the 
institution  under  resolution  for  the  purpose  referred  to  in  point  (b)  of  Article 
37(2): 

(i)  A  person  may  not  exercise  termination  rights  as  a  result  of  the 

resolution action in any case covered by Article 77(1); 

(ii)  A  person  may  exercise  termination  rights  in  accordance  with  the 
terms of that contract on the occurrence of any subsequent default 
by the recipient where the contract has been transferred to another 
entity, or by the institution where the bail-in tool has been applied; 

(b) 

if  the  rights  and  liabilities  covered  by  the  financial  contract  remain  with  the 
institution under resolution, and the resolution authority is not applying the bail 
in  tool  in  accordance  with  Article  37(2)  (a)  with  regards  to  that  institution,  a 
person  may  immediately  exercise  termination  rights  in  accordance  with  the 
terms of that contract. 

Competent authorities or resolution authorities may require an institution to maintain 
detailed  records  of  financial  contracts  when  they  consider  that  there  is  a  material 
possibility that the institution meets the conditions for resolution. 

For  the  purposes  of  paragraph  1,  financial  contracts  shall  include  the  following 
contracts and agreements: 

(a) 

securities contracts, including: 

(i) 

contracts  for  the  purchase,  sale  or  loan  of  a  security,  a  group  or 
index of securities, 

(ii) 

an option on a security or group or index of securities, 

(iii)  a repurchase or reverse repurchase transaction on any such security, 

group or index; 

(b) 

commodities contracts, including: 

(i) 

contracts  for  the  purchase  or  sale  of  a  commodity  for  future 
delivery,  

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(ii) 

an option on a commodity; 

(c) 

futures  and forwards contracts, including contracts (other than a commodities 
contract) for the purchase, sale or transfer of a commodity or property of any 
other description, service, right or interest for a specified price at a future date, 

(d) 

repurchase agreements relating to securities; 

(e) 

swap agreements, including: 

(i) 

swaps,  options,  futures  or  forward  agreements  relating  to  interest 
rates;  spot  or  other  foreign  exchange,  precious  metals  or 
commodity agreements; currency; an equity index or equity; a debt 
index  or  debt;  commodity  indexes  or  commodities;  weather; 
emissions or inflation, 

(ii) 

total return, credit spread or credit swaps, 

(iii)  any  agreement  or  transaction  that  is  similar  to  an  agreement 
referred to in points (i) or (ii) of this point which is the subject of 
recurrent dealing in the swaps or derivatives markets; 

(f)  master agreements for any of the contracts or agreements referred to in points 

(a) to (e). 

7. 

EBA  shall  develop  draft  regulatory  technical  standards  specifying  the  following 
elements for the purposes of paragraph 6: 

(a) 

the information on financial contracts that should be contained in the detailed 
records; 

(b) 

the circumstances in which the requirement should be imposed. 

EBA  shall  submit  those  draft  regulatory  technical  standards  to  the  Commission 
within twelve months from the date of entry into force of this Directive. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first subparagraph in accordance with the procedure laid down in 
Articles 10 to 14 of Regulation (EU) No 1093/2010. 

Article 64 

Exercise of the resolution powers 

1. 

Member  States  shall  ensure  that,  in  order  to  take  a  resolution  action,  resolution 
authorities are able to exercise control over the institution under resolution, so as to: 

(a)  operate the institution under resolution with all the powers of the members or 
shareholders, directors and officers of institution and conduct its activities and 
services;  

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(b)  manage  and  dispose  of  the  assets  and  property  of  the  institution  under 

resolution. 

The control provided for in the first subparagraph may be exercised directly by the 
resolution authority or indirectly by a person appointed by the authority, including an 
administrator or a special administrator. 

2. 

3. 

Member  States  shall  also  ensure  that  resolution  authorities  are  able  to  take  a 
resolution action through executive order in accordance with national administrative 
competences and procedures, without exercising control over the institution. 

Resolution authorities shall decide in each particular case whether it is appropriate to 
carry  out  the  resolution  action  through  the  means  specified  in  paragraph  1  or  in 
paragraph  2,  having  regard  to  the  resolution  objectives  and  the  general  principles 
governing resolution, the specific circumstances of the institution in question and the 
need to facilitate the effective resolution of cross border groups. 

Chapter VI 

Safeguards 

Article 65 

Treatment of shareholders and creditors in case of partial transfers and application of the 
bail-in tool  

1. 

After  the  resolution  tools  have  been  applied  and,  in  particular  for  the  purposes  of 
Article 67, Member States shall ensure that: 

(a)  where  resolution  authorities  transfer  only  parts  of  the  rights,  assets  and 
liabilities  of  the  institution,  the  shareholders  and  the  creditors  whose  claims 
have not been transferred, receive in payment of their claims at least as much 
as what they would have received if the institution had been wound up under 
normal insolvency proceedings immediately before the transfer, 

(b)  where  resolution  authorities  apply  the  bail-in  tool,  the  shareholders  and 
creditors whose claims have been written down or converted to equity receive 
in payment of their claims at least as much as what they would have received if 
the  institution  had  been  wound  up  under  normal  insolvency  proceedings 
immediately before the writing down or conversion.  

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Article 66 

Valuation  

For the purposes of Article 65, Member States shall ensure that a valuation is carried 
out by an independent person after the partial transfers or write down or conversion 
has  been  effected.  That  valuation  shall  be  distinct  from  the  valuation  carried  out 
under Article 30 unless it replaces a provisional valuation carried out under Article 
30(5). The valuation may be carried out by the authority responsible for the normal 
insolvency  proceedings  under  which  the  institution  is  wound  up,  within  those 
proceedings or through separate proceedings in accordance with national law.  

2. 

The valuation shall determine: 

(a) 

(b) 

(c) 

the  treatment  that  shareholders  and  creditors  would  have  received  if  the 
institution in connection to which the partial transfer, write down or conversion 
has been made, had entered normal insolvency proceedings immediately before 
the transfer, write down or conversion was effected; 

the actual treatment that shareholders and creditors have received, are receiving 
or are likely to receive in the winding up of the institution; 

if there is any difference between the treatment referred to in point (a) and the 
treatment referred to in point (b). 

3. 

The  valuation  shall  be  in  accordance  with  the  provisions  and  the  methodology  laid 
down in Article 30(1) to (5), and shall: 

(a) 

assume  that  the  institution  in  connection  to  which  the  partial  transfer,  write 
down  or  conversion  has  been  made  would  have  entered  normal  insolvency 
proceedings immediately after the transfer, write down or conversion has been 
effected; 

(b) 

assume that the partial transfer, or transfers, of rights, assets or liabilities, or the 
write down or the conversion had not been made; 

(c)  disregard any provision of extraordinary public support to the institution. 

Article 67 

Safeguard for shareholders and creditors  

1. 

2. 

Member  States  shall  ensure  that  if  the  evaluation  carried  out  under  Article  66 
determines  that  the  shareholders  and  creditors  referred  to  in  Article  65(2)  have 
received  less,  in  payment  of  their  credits, than  what  they  would  have  received  in  a 
winding up under normal insolvency proceedings, they are entitled to the payment of 
the difference from the resolution authority.  

Member  States  may  choose  the  mechanisms  and  arrangements  through  which  the 
payment is to be made.  

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Article 68 

Safeguard for counterparties in partial transfers 

1. 

Member States shall ensure that the protections specified in this Chapter apply in the 
following circumstances: 

(a) 

a  resolution  authority  transfers  some  but  not  all  of  the  property,  rights  or 
liabilities of an institution to another entity or from a bridge institution or asset 
management vehicle to another person;  

(b) 

a  resolution  authority  exercises  the  powers  specified  in  point  (f)  of  Article 
57(1). 

2. 

Member States shall ensure appropriate protection of the following arrangements and 
of the counterparties to the following arrangements: 

(a) 

(b) 

security arrangements, under which a person has by way of security an actual 
or  contingent  interest  in  the  property  or  rights  that  are  subject  to  transfer, 
irrespective of whether that interest is secured by specific property or rights or 
by way or a floating charge or similar arrangement; 

title transfer financial collateral arrangements under which collateral to secure 
or cover the performance of specified obligations is provided by a transfer of 
full ownership of assets from the collateral provider to the collateral taker, on 
terms  providing  for  the  collateral  taker  to  transfer  assets  if  those  specified 
obligations are performed; 

(c) 

set-off  arrangements  under  which  two  or  more  claims  or  obligations  owed 
between the bank and a counterparty can be set off against each other; 

(d)  netting  arrangements  under  which  a  number  of  claims  or  obligations  can  be 
converted  into  a  single  net  claim,  including  close-out  netting  arrangements 
under which, on the occurrence of an enforcement event (however or wherever 
defined)  the  obligations  of  the  parties  are  accelerated  so  as  to  become 
immediately  due  or  are  terminated,  and  in  either  case  are  converted  into  or 
replaced by a single net claim; 

(e) 

structured  finance  arrangements,  including  securitisations  and  covered  bonds, 
which  involve  the  granting  and  holding  of  security  by  a  party  to  the 
arrangement or a trustee, agent or nominee. 

The form of protection that is appropriate, for the classes of arrangements specified 
in points (a) to (e) of this paragraph is further specified in Articles 70 to 73, and shall 
be subject to the restrictions specified in Articles 61, 62 and 77. 

3. 

The  requirement  under  paragraph  2  applies  irrespective  of  the  number  of  parties 
involved in the arrangements and of whether the arrangements: 

(a) 

are  created  by  contract,  trusts  or  other  means,  or  arise  automatically  by 
operation of law;  

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(b) 

arise  under  or  are  governed  in  whole  or  in  part  by  the  law  of  another 
jurisdiction. 

4. 

The  Commission  shall,  by  means  of  delegated  acts  adopted  in  accordance  with 
Article  103,  adopt  measures  further  specifying  the  classes  of  arrangement  that  fall 
within the scope of points (a) to (e) of paragraph 2 of this Article. 

Article 69 

Protection for financial collateral, set off and netting agreements 

Member  States  shall  ensure  that  there  is  appropriate  protection  for  title  transfer  financial 
collateral arrangements and set-off and netting arrangements so as to prevent the transfer of 
some, but not all, of the rights and liabilities that are protected under a title transfer financial 
collateral arrangement, a set-off arrangement or a netting arrangement between the institution 
and  another  person  and  the  modification  or  termination  of  rights  and  liabilities  that  are 
protected under such a title transfer financial collateral arrangement, a set-off arrangement or 
a netting arrangement through the use of ancillary powers. 

For the purposes of the first subparagraph, rights and liabilities are to be treated as protected 
under such an arrangement if the parties to the arrangement are entitled to set-off or net those 
rights and liabilities. 

Article 70 

Protection for security arrangements 

Member States shall ensure that there is appropriate protection for liabilities secured under a 
security arrangement so as to prevent one of the following: 

(a) 

(b) 

(c) 

(d) 

the  transfer  of  assets  against  which  the  liability  is  secured  unless  that  liability  and 
benefit of the security are also transferred; 

the  transfer  of  a  secured  liability  unless  the  benefit  of  the  security  are  also 
transferred; 

the transfer of the benefit unless the secured liability is also transferred; 

the  modification  or  termination  a  security  arrangement  through  the  use  of  ancillary 
powers, if the effect of that modification or termination is that the liability ceases to 
be secured. 

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Article 71 

Protection for structured finance arrangements 

1. 

Member States shall ensure that there is appropriate protection for structured finance 
arrangements so as to prevent either of the following: 

2. 

1. 

2. 

(a) 

(b) 

the  transfer  of  some,  but  not  all,  of  the  property,  rights  and  liabilities  which 
constitute or form part of a structured finance arrangement to which the credit 
institution under resolution is a party;  

the  termination  or  modification  through  the  use  of  ancillary  powers  of  the 
property,  rights  and  liabilities  which  constitute  or  form  part  of  a  structured 
finance arrangement to which the institution under resolution is a party. 

The protections specified in paragraph 1 shall not apply where only property, rights 
and liabilities that relate to deposits are transferred or not transferred, terminated or 
modified. 

Article 72 

Partial transfers: protection of trading, clearing and settlement systems 

Member States shall ensure that transfer, cancellation or modification shall not affect 
the operation of systems and rules of systems covered by Directive 98/26/EC, where 
resolution authority: 

(a) 

transfers some but not all of the property, rights or liabilities of an institution to 
another entity;  

(b)  uses  powers  under  Article  57  to  cancel  or  amend  the  terms  of  a  contract  to 
which the institution under resolution is a party or to substitute a recipient as a 
party. 

In  particular, such a transfer,  cancellation  or  amendment  may  not  revoke  a  transfer 
order  in  contravention  of  Article  5  of  Directive  98/26/EC;  and  may  not  modify  or 
negate the enforceability of transfer orders and netting as required by Articles 3 and 
5 of Directive 98/26/EC, the use of funds, securities or credit facilities as required by 
Article  4  of  Directive98/26/EC  or  protection  of  collateral  security  as  required  by 
Article 9 of Directive 98/26/EC. 

Article 73 

Property, rights and liabilities governed by the law of a territory outside the Union 

Where  a  resolution  authority  purports  to  transfer  or  transfers  all  of  the  property,  rights  and 
liabilities  of  an  institution  to  another  entity,  but  the  transfer  is  or  may  not  be  effective  in 
relation  to  certain  property  because  it  is  outside  the  Union,  or  to  certain  rights  or  liabilities 

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because they are under the law of a territory outside the Union, the resolution authority shall 
not proceed to the transfer or, if it has already ordered the transfer, that transfer shall be void, 
and all property, rights and liabilities covered by the relevant arrangement specified in Article 
69(2) are not transferred from, or revert to, the institution under resolution. 

Chapter VII 

Procedural Obligations  

Article 74 

Notification requirements 

1. 

2. 

3. 

4. 

5. 

Member  States  shall  require  the  management  body  of  an  institution  to  notify  the 
competent authority where they consider that the institution is failing or likely to fail, 
within the meaning specified in Article 27(2). 

Competent  authorities  shall  inform  the  relevant  resolution  authorities  of  any 
measures  they  require  an  institution  to  take  under  Article  22  of  this  Directive  or 
Article 136(1) of Directive 2006/48/EC. 

Where a competent authority assesses that the conditions referred to in points (a) and 
(b)  of  Article  27(1)  are  met  in  relation  to  an  institution,  it  shall  communicate  that 
assessment without delay to the following authorities: 

(a) 

the resolution authority for that institution, if different; 

(b) 

the central bank, if different; 

(c)  where applicable, the group level resolution authority; 

(d) 

competent ministries; 

(e)  where  the  institution  is  subject  to  supervision  on  consolidated  basis  under 
section  1  of  Chapter  4,  Title  V  of  Directive  2006/48/EC,  the  consolidating 
supervisor. 

On receiving a communication from the competent authority pursuant to paragraph 3 
of  this  Article,  the  resolution  authority  shall  assess  whether  the  conditions 
established in Article 27 are met in respect of the institution in question. 

A decision that the conditions for resolution are met in relation to an institution shall 
be set out in a notice, which shall contain the following information: 

(a) 

the reasons for that decision;  

(b) 

the action that the resolution authority intends to take. 

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The action referred to in point (b) may include a resolution action, or an application 
for  winding  up,  the  appointment  of  an  administrator  or  any  other  measure  under 
applicable national insolvency law. 

The authority or authorities responsible for that decision shall notify the institution in 
question. A notification pursuant to this paragraph may take  the form  of the public 
notification referred to in paragraph 6. 

6. 

7. 

Where  the  resolution  authority  takes  a  resolution  action,  it  shall  make  that  action 
public and shall take reasonable steps to notify all known shareholders and creditors, 
in  particular  retail  investors,  affected  by  the  exercise  of  the  resolution  power.  The 
measures specified in Article 75(4) shall be deemed reasonable steps for the purposes 
of this paragraph. 

A resolution authority shall publish a notice specifying the terms and period of that 
suspension  in  accordance  with  the  procedure  specified  in  Article  75(4)  where  it 
exercises resolution powers, and in particular: 

(a) 

the power under Article 61 to suspend payment or delivery obligations; 

(b) 

the power under Articles 63 to suspend termination rights. 

8. 

EBA  shall  develop  draft  regulatory  technical  standards  in  order  to  specify  the 
procedures, contents and conditions related to the following requirements: 

(a) 

the notifications referred to in paragraphs 1 to 5, 

(b) 

the notice of a suspension referred to in paragraph 7. 

EBA  shall  submit  those  draft  regulatory  technical  standards  to  the  Commission 
within twelve months from the date of entry into force of this Directive. 

Power  is  delegated  to  the  Commission  to  adopt  the  regulatory  technical  standards 
referred to in the first subparagraph in accordance with the procedure laid down in 
Articles 10 to 14 of Regulation (EU) No 1093/2010. 

Article 75 

Procedural obligations of resolution authorities 

1. 

2. 

Member  States  shall  ensure  that,  as  soon  as  reasonably  practicable  after  taking  a 
resolution  action,  resolution  authorities  comply  with  the  requirements  set  out  in 
paragraphs 2, 3 and 4. 

The resolution authority shall notify the institution under resolution and EBA of the 
resolution action. 

A  notification  according  to  this  paragraph  shall  include  a  copy  of  any  order  or 
instrument  by  which  the  relevant  powers  are  exercised  and  shall  indicate  the  date 
from which the resolution actions are effective. 

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3. 

4. 

The  notification  referred  to  in  paragraph  2  shall  include  a  copy  of  any  order  or 
instrument  by  which  the  relevant  powers  are  exercised  and  indicate  the  date  from 
which the tool is or powers are effective. 

The resolution authority shall publish or ensure the publication of either a copy of the 
order or instrument by which the resolution action is taken, or a notice summarising 
the effects of the resolution action, and in particular the effects on retail investors, by 
the following means: 

(a)  on its official website; 

(b)  on  the  website  of  the  competent  authority,  if  different  from  the  resolution 

authority, or on the website of EBA; 

(c)  on the website of the institution under resolution;  

(d)  where  the  shares  or  other  instruments  of  ownership  of  the  institution  under 
resolution are admitted to trading on a regulated market, the means used for the 
disclosure  of  regulated  information  concerning  that  institution  in  accordance 
with Article 21(1) of Directive 2004/109/EC of the European Parliament and of 
the Council.39 

5. 

The  resolution  authority  shall  ensure  that  the  documents  providing  proof  of  the 
instruments  referred  to  in  paragraph  4  are  sent  to  the  known  shareholders  and 
creditors of the institution under resolution. 

Article 76 

Confidentiality 

1. 

The requirements of professional secrecy shall be binding in respect of the following 
persons: 

(a) 

resolution authorities; 

(b) 

competent authorities and EBA; 

(c) 

competent ministries; 

(d) 

employees or former employees of the authorities referred to in points (a) and 
(b); 

(e) 

special managers appointed under Article 24; 

(f) 

potential acquirers that are contacted by the competent authorities or solicited 
by the resolution authorities, irrespective of whether that contact or solicitation 
was  made  as  preparation  for  the  use  of  the  sale  of  business  tool,  and 
irrespective of whether the solicitation resulted in an acquisition; 

39 

OJ L 390, 31.12.2004, p. 38. 

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2. 

3. 

4. 

5. 

(g) 

auditors, accountants, legal and professional advisors, valuers and other experts 
engaged by the resolution authorities or by the potential acquirers referred to in 
point (f); 

(h)  bodies which administer the deposit guarantee schemes; 

(i) 

(j) 

central banks and other authorities involved in the resolution process; 

any  other  persons  who  provide  or  have  provided  services  to  the  resolution 
authorities. 

Without  prejudice  to  the  generality  of  the  requirements  under  paragraph  1,  the 
persons referred to in that paragraph shall be prohibited from divulging confidential 
information  received  during  the  course  of  their  professional  activities,  or  from  a 
resolution  authority  in  connection  with  its  functions,  to  any  person  or  authority 
unless it is in summary or collective form such that individual institutions cannot be 
identified or with the express and prior consent of the resolution authority. 

The  confidentiality  requirements  set  out  in  paragraphs  1  and  2  of  this  Article  shall 
not  prevent  resolution  authorities, 
their  employees,  from  sharing 
information  with  other  Union  resolution  authorities,  competent  authorities,  central 
banks,  EBA,  or,  subject  to  Article  90,  third  country  authorities  that  carry  out 
equivalent functions to resolution authorities for the purposes of planning or carrying 
out a resolution action.  

including 

The provisions of this Article are without prejudice to cases covered by criminal law. 

EBA  shall  develop  draft  implementing  technical  standards  to  specify  how 
information  should  be  provided  in  summary  or  collective  form  for  the  purposes  of 
paragraph 2. 

EBA  shall  submit  those  draft  implementing  technical  standards  to  the  Commission 
within twelve months from the date of entry into force of this Directive. 

Power is delegated to the Commission to adopt the implementing technical standards 
referred to in the first sub-paragraph of this paragraph in accordance with Article 15 
of Regulation (EU) No 1093/2010. 

Chapter VIII 

Right of Appeal and Exclusion of Other Actions 

Article 77 

Exclusion of termination and set-off rights in resolution 

1. 

Member States shall ensure that counterparties under a financial contract as defined 
in  Article  63  entered  into  originally  with  the  institution  under  resolution  cannot 

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2. 

1. 

2. 

exercise  termination  rights  under  that  contract  or  rights  under  a  walk-away  clause 
unless the resolution action is the sale of business tool or the bridge institution tool 
and the rights and liabilities covered by the financial contract are not transferred to a 
third party or bridge institution, as the case may be. 

For  the  purposes  of  this  paragraph,  a  walk-away  clause  includes  a  provision  in  a 
financial  contract  that  suspends,  modifies  or  extinguishes  an  obligation  of  the  non-
defaulting party to make a payment, or prevents such an obligation from arising that 
would otherwise arise. 

Member States shall ensure that creditors of the institution under resolution are not 
entitled to exercise statutory rights to set-off unless the resolution action is the sale of 
business tool or the bridge institution tool and the rights and liabilities covered by the 
financial contract are not transferred to a third party or bridge institution, as the case 
may be. 

Article 78 

Rights to challenge resolution 

Member  States  shall  ensure  that  all  persons  affected  by  the  decision  to  open 
resolution  proceedings  provided  in  Article  74(5)  or  by  a  decision  of  the  resolution 
authorities to take a resolution action, have the right to apply for a judicial review of 
that decision. 

The right to judicial review required by paragraph 1 shall be subject to the following 
restrictions: 

(a) 

the  lodging  of  the  application  for  judicial  review  or  for  any  interim  measure 
shall  not  entail  any  automatic  suspension  of  the  effects  of  the  challenged 
decision;  

(b) 

the  decision  of  the  resolution  authority  shall  be  immediately  enforceable  and 
shall not be subject to a suspension order issued by a court;  

(c) 

the review shall be restricted to one or more of the following matters: 

– 

– 

to the legality of the decision referred to in paragraph 1, including a 
review of whether the conditions for resolution were met, 

the  legality  of  the  way  in  which  that  decision  was  implemented, 
and 

– 

the adequacy of any compensation granted; 

(d)  The  annulment  of  a  decision  of  a  resolution  authority  shall  not  affect  any 
subsequent  administrative  acts  or  transactions  concluded  by  the  resolution 
authority  concerned  which  were  based  on  the  annulled  decision  of  the 
resolution  authority  where  this  is  necessary  to  protect  the  interest  of  third 
parties  acting  in  good  faith  having  bought  assets,  rights  and  liabilities  of  the 

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institution  under  resolution  by  virtue  of  the  exercise  of  the  resolution  powers 
by the resolution authorities. Remedies for a wrongful decision or action by the 
resolution authorities shall be limited to compensation for the loss suffered by 
the applicant as a result of the decision or act. 

Article 79 

Restrictions on other judicial proceedings 

1. 

Member  States  shall  ensure  that  normal  insolvency  proceedings  under  national  law 
may  not  be  commenced  with  respect  to  an  institution  under  resolution  or  an 
institution in relation to which the conditions for resolution have been determined to 
be met. 

2. 

For the purposes of paragraph 1, Member States shall ensure that: 

(a) 

(b) 

competent authorities and resolution authorities are notified of any application 
for the opening of normal insolvency proceedings in relation to an institution, 
irrespective of whether the institution is under resolution or a decision has been 
made public in accordance with Article 74(6);  

the  application  may  not  be  determined  unless  the  court  has  received 
confirmation that the notifications referred to in point (a) have been made and 
either of the following occur: 

(i) 

the resolution authority has notified the court that it does not intend 
to take any resolution action in relation to the institution;  

(ii) 

a  period  of  14  days  beginning  with  the  date  on  which  the 
notifications referred to in point (a) were made has expired. 

3. 

Without prejudice to any restriction on the enforcement of security interests imposed 
pursuant to Article 63 or to paragraph 1 of this Article, Member States shall ensure 
that,  if  necessary  for  the  effective  application  of  the  resolution  tools  and  powers, 
resolution authorities can request the court to apply a stay for an appropriate period 
of  time  in  accordance  with  the  objective  pursued,  on  any  judicial  action  or 
proceeding in which an institution under resolution is or becomes a party. 

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TITLE V 

GROUP RESOLUTION 

Article 80 

Resolution colleges 

1. 

Group level resolution authorities shall establish resolution colleges to carry out the 
tasks  referred  to  in  Articles  11,  15  and  83,  and,  where  appropriate,  to  ensure 
cooperation and coordination with third countries resolution authorities. 

In  particular,  resolution  colleges  shall  provide  a  framework  for  the  group  level 
resolution  authority,  the  other  resolution  authorities  and,  where  appropriate, 
competent  authorities  and  consolidating  supervisors  concerned  to  perform  the 
following tasks: 

(a) 

exchanging information relevant for the development of group resolution plans, 
for  the  application  to  groups  of  preparatory  and  preventative  powers  and  for 
group resolution; 

(b)  developing group resolution plans pursuant to Article 11; 

(c) 

assessing the resolvability of groups pursuant to Article 13; 

(d) 

exercising  powers  to  address  or  remove  impediments  to  the  resolvability  of 
groups pursuant to Article 15; 

(e)  deciding on the need to establish a group resolution scheme as provided for in 

Article 83; 

(f) 

securing  the  agreement  on  group  resolution  schemes  proposed  in  accordance 
with Article 83; 

(g) 

coordinating public communication of group resolution strategies and schemes; 

(h) 

coordinating the use of financing arrangements established under Title VII. 

2. 

The group level resolution authority, the resolution authorities of each Member State 
in  which  a  subsidiary  covered  by  consolidated  supervision  is  established  and  EBA 
shall be members of the resolution college. 

Where the parent undertaking of one or more institutions is a company referred to in 
Article  1(d),  the  resolution  authority  of  the  Member  State  where  that  company  is 
established shall be member of the resolution college. 

Where the resolution authorities which are members of the resolution college are not 
the competent ministries, the competent ministries shall be members, in addition to 
the resolution authorities, of the resolution colleges and may attend meetings of the 

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resolution  colleges,  in  particular,  where  the  issues  to  be  discussed  concern  matters 
which may have implications for public funds. 

Where a parent undertaking or an institution established in the Union has subsidiary 
institutions  situated  in  third  countries,  the  resolution  authorities  of  those  third 
countries  may  also  be  invited  to  participate,  as  observers,  in  the  resolution  college, 
on  request  of  the  group  level  resolution  authority, provided that they are subject to 
confidentiality requirements equivalent to those established by Article 76. 

The  public  bodies  participating  in  the  colleges  shall  cooperate  closely.  The  group 
level  resolution  authority  shall  coordinate  all  activities  of  resolution  colleges  and 
convene and chair all its meetings. The group level resolution authority shall keep all 
members  of  the  college  and  EBA  fully  informed  in  advance  of  the  organisation  of 
such  meetings,  of  the  main  issues  to  be  discussed  and  of  the  activities  to  be 
considered.  The  group  level  resolution  authority  shall  decide  which  authorities  and 
ministries should participate in particular meetings or activities of the college, on the 
basis of the specific needs. The group level resolution authority shall also keep all the 
members  of  the  college  informed  in  a  timely  manner,  of  the  actions  and  decisions 
taken in those meetings or the measures carried out. 

The  decision  of  the  group  level  resolution  authority  shall  take  account  of  the 
relevance of the issue to the discussed, the activity to be planned or coordinated and 
the  decisions  to  be  taken  for  those  resolution  authorities,  in  particular  the  potential 
impact on the stability of the financial system in the Member States concerned. 

EBA  shall  contribute  to  promoting  and  monitoring  the  efficient,  effective  and 
consistent  functioning  of  resolution  colleges.  To  that  end,  EBA  may  participate  in 
particular  meetings  or  particular  activities  as  it  deems  appropriate,  but  it  shall  not 
have voting rights. 

The group level resolution authority, after consulting the other resolution authorities, 
shall  establish  written  arrangements  and  procedures  for  the  functioning  of  the 
resolution college. 

Notwithstanding paragraph 2, for the purposes of performing the tasks referred to in 
point  (e)  of  the  second  subparagraph  of  paragraph  1  the  resolution  authority  or 
authorities  of  each  Member  State  in  which  a  subsidiary  is  established  shall 
participate at the meetings or activities of the resolution college. 

Notwithstanding paragraph 2, for the purposes of performing the tasks referred to in 
points (f) and (h) of the second subparagraph of paragraph 1 the resolution authority 
or authorities of each Member State in which a subsidiary that meets the conditions 
for resolution shall participate at the meetings or activities of the resolution colleges. 

Group  level  resolution  authorities  may  not  establish  resolution  colleges  if  other 
groups or colleges perform the same functions and carry out the same tasks specified 
in this Article and comply with all the conditions and procedures established in this 
Section. In this case all references to resolution colleges in this Directive shall also 
be understood as reference to those other groups or colleges. 

3. 

4. 

5. 

6. 

7. 

8. 

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9. 

EBA  shall  develop  draft  regulatory  standards  in  order  to  specify  the  operational 
functioning of the resolution colleges for the performance of the tasks provided for in 
paragraphs 1, 3, 5, 6 and 7. 

EBA  shall  submit  those  draft  regulatory  technical  standards  to  the  Commission 
within twelve months from the date of entry into force of this Directive. 

Power is delegated to the Commission to adopt the regulatory standards referred to in 
the first subparagraph in accordance with the procedure laid down in Articles 10 to 
14 of Regulation (EU) No 1093/2010. 

Article 81 

European resolution colleges 

1. 

2. 

3. 

Where a third country institution or third country parent undertaking has two or more 
subsidiary institutions established in the Union, the resolution authorities of Member 
States where those domestic subsidiary institutions in the Union are established shall 
establish  a  European  resolution  college  if  no  arrangements  as  the  ones  foreseen  in 
Article 89 have been established. 

The European resolution college shall perform the functions and carry out the tasks 
specified in Article 80 with respect to the domestic subsidiary institutions. 

Where the domestic subsidiaries are held by a financial holding company established 
within  the  Union  in  accordance  with  the  third  subparagraph  of  Article  143(3)  of 
Directive  2006/48/EC,  the  European  resolution  college  shall  be  chaired  by  the 
resolution  authority  of  the  Member  State  where  the  consolidating  supervisor  is 
located for the purposes of consolidated supervision under that Directive. 

Where  the  first  sub-paragraph  does  not  apply,  the  members  of  the  European 
resolution college shall nominate and agree the chair. 

4. 

Subject  to  paragraph  3  of  this  Article,  the  European  resolution  college  shall 
otherwise function in accordance with Article 81. 

Article 82 

Information exchange 

The resolution authorities shall provide one another with all the information relevant for the 
exercise of the other authorities' tasks under this Directive.  

The resolution authorities shall communicate on request all relevant information. In particular, 
the group level resolution authority shall provide the resolution authorities in other Member 
States with all the relevant information in a timely manner in view of facilitating the exercise 
of the tasks referred to in points (b) to (h ) of the second subparagraph of Article 80(1). 

Information shared pursuant to this Article may also be shared with competent ministries. 

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Article 83 

Group resolution 

1. 

2. 

3. 

4. 

Where a resolution authority decides, or is notified pursuant to Article 74(3), that an 
institution that is a subsidiary in a group is failing or likely to fail, that authority shall 
notify  the  following  information  without  delay  to  the  group  level  resolution 
authority,  if  different,  and  to  the  resolution  authorities  that  are  members  of  the 
resolution college for the group in question: 

(a) 

the decision that the institution is failing or likely to fail; 

(b) 

the resolution actions or other insolvency measures that the resolution authority 
considers appropriate for that institution. 

On receiving a notification under paragraph 1, the group level resolution authority, in 
consultation  with  the  other  members  of  the  relevant  resolution  college,  shall  assess 
the likely impact of the failure of the institution in question, or the resolution action 
or other measures notified in accordance with point (b) of paragraph 1, on the group 
or on affiliated institutions in other Member States. 

If  the  group  level  resolution  authority,  after  consultation  with  the  other  resolution 
authorities in accordance with paragraph 2, assesses that the failure of the institution 
in  question,  or  the  resolution  action  or  other  measures  notified  in  accordance  with 
point  (b)  of  paragraph  1,  would  not  have  a  detrimental  impact  on  the  group  or  on 
affiliated institutions in other Member States, the resolution authority responsible for 
that  institution  may  take  the  resolution  action  or  other  measures  that  it  notified  in 
accordance in accordance with point (b) of paragraph 1. 

If  the  group  level  resolution  authority,  after  consultation  with  the  other  resolution 
authorities in accordance with paragraph 2, assesses that the failure of the institution 
in  question,  or  the  resolution  action  or  other  measures  notified  in  accordance  with 
point  (b)  of  paragraph  1,  would  have  a  detrimental  impact  on  the  group  or  on 
affiliated  institutions  in  other  Member  States,  the  group  level  resolution  authority 
shall,  no  later  than  24  hours  after  receiving  the  notification  under  paragraph  1, 
propose a group resolution scheme and submit it to the resolution college. 

5. 

A group resolution scheme required under paragraph 4 shall: 

(a)  outline  the  resolution  actions  that  should  be  taken  by  the  relevant  resolution 
authorities  in  relation  to  the  Union  parent  undertaking  or  particular  group 
entities  with  the  objective  of  preserving  the  value  of  the  group  as  a  whole, 
minimising the impact on financial stability in the Member States in which the 
group  operates  and  minimising  the  use  of  extraordinary  public  financial 
support; 

(b) 

specify how those resolution actions should be coordinated; 

(c) 

establish  a  financing  plan.  The  financing  plan  shall  take  into  account  the 
principles for sharing responsibility as established in accordance with point (e) 
of Article 11(3). 

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6. 

7. 

8. 

9. 

10. 

11. 

If any member of the resolution college disagrees with the group resolution scheme 
proposed by the group level resolution authority and considers that it needs to take 
independent resolution actions or measures other than those proposed in the scheme 
in  relation  to  an  institution  or  group  entity  for  reasons  of  financial  stability,  it  may 
refer within 24 hours the matter to EBA in accordance with Article 19 of Regulation 
(EU) No 1093/2010. 

By way of derogation from Article 19 (2) of Regulation (EU) No 1093/2010, EBA 
shall  take  a  decision  within  24  hours.  The  subsequent  action  or  measure  of  the 
resolution authority shall be in conformity with the decision of EBA. 

Where  a  group  level  resolution  authority  decides,  or  is  notified  pursuant  to  Article 
74(3), that a Union parent undertaking for which it is responsible is failing or likely 
to fail, it shall notify the information referred to in points (a) and (b) of paragraph 1 
of this article to resolution authorities that are members of the resolution college of 
the  group  in  question.  The  resolution  actions  for  the  purposes  of  point  (b)  of 
paragraph  1  of  this  Article  may  include  a  group  resolution  scheme  drawn  up  in 
accordance with paragraph 5 of this Article. 

Authorities shall perform all actions under paragraphs 2 to 8 without delay, and with 
due regard to the urgency of the situation. 

In  any  case  where  a  group  resolution  scheme  is  not  implemented  and  resolution 
authorities  take  resolution  actions  in  relation  to  affiliated  institutions,  those 
authorities  shall  cooperate  closely  within  the  resolution  colleges  with  a  view  to 
achieving a coordinated resolution strategy for all the institutions that are failing or 
likely to fail. 

Resolution  authorities  that  take  any  resolution  action  in  relation  to  group  entities 
shall  inform  the  resolution  college  regularly  and  fully  about  those  actions  or 
measures and their on-going progress. 

TITLE VI 

RELATIONS WITH THIRD COUNTRIES 

Article 84 

Agreements with third countries 

1. 

The  Commission  may  submit  proposals  to  the  Council,  either  at  the  request  of  a 
Member State or on its own initiative, for the negotiation of agreements with one or 
more  third  countries  regarding  the  means  of  cooperation  between  resolution 
authorities  in  the  resolution  planning  and  process  of  institutions  and  parent 
undertakings, in particular with regard to the following situations: 

(a) 

in cases where a domestic subsidiary institution is established in the Member 
States;  

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2. 

1. 

2. 

3. 

4. 

(b) 

(c) 

in  cases  where  a  third  country  institution  operates  a  significant  branch  in  the 
Member States;  

in cases where a parent institution and, or a company referred to in points (c) 
and  (d)  of  Article  1  established  in  the  Member  States  has  one  or  more  third 
country subsidiary institutions;  

(d) 

in cases where an institution established in the Member States has one or more 
significant branches in one or more third countries. 

The  agreements  referred  to  in  paragraph  1  shall,  in  particular,  seek  to  ensure  the 
establishment  of  processes  and  arrangements  between  resolution  authorities  for 
cooperation in carrying out some or all of the tasks and exercising some or all of the 
powers indicated in Article 89. 

Article 85 

Recognition of third country resolution proceedings  

Until an international agreement provided for under Article 84 with a third country is 
concluded and to the extent that the subject matter is not governed by that agreement 
the following provisions shall apply. 

EBA  shall  recognise,  except  as  provided  for  in  Article  86,  third  country  resolution 
proceedings relating to a third country institution that: 

(a)  has a domestic branch;  

(b)  otherwise has assets, rights or liabilities located in or governed by the law of a 

Member State. 

The  recognition  by  EBA  of  third  country  resolution  proceedings  as  referred  in 
paragraph  2  shall  imply  the  obligation  for  national  resolution  authorities  to  give 
effect to such resolution proceedings in their territory.  

The  implementation  of  EBA's  decision  to  recognise  third  country  resolution 
proceedings shall be effected by the resolution authorities. For this purpose, Member 
States  shall  ensure  that  resolution  authorities  are,  as  a  minimum,  empowered  to  do 
the  following,  without  the  appointment  of  an  administrator  or  of  any  official  under 
national insolvency law, an order, approval or consent from the court, or any other 
form of judicial procedure: 

(a) 

exercise the transfer powers in relation to the following: 

– 

– 

assets of a third country institution that are located in their Member 
State or governed by the law of their Member State; 

rights or liabilities of a third country institution that are booked by 
the domestic branch in their Member State or governed by the law 
of  their  Member  State,  or  where  claims  in  relation  to  such  rights 
and liabilities are enforceable in their Member State. 

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(b)  perfect, including to require another person to take action to perfect, a transfer 
of  shares  or  instruments  of  ownership  in  a  domestic  subsidiary  institution 
established in the designating Member State. 

Article 86 

Right to refuse recognition of third country resolution proceedings 

1. 

EBA  shall  refuse,  after  consulting  the  national  resolution  authorities  concerned,  to 
recognise  pursuant  to  Article  85(2)  third  country  resolution  proceedings  if  it 
considers : 

(a) 

(b) 

(c) 

that  the  third  country  resolution  proceeding  would  have  an  adverse  effect  on 
financial  stability  in  the  Member  State  in  which  the  resolution  authority  is 
based  or  considers  that  the  proceeding  may  have  an  adverse  effect  on  the 
financial stability of another Member State; 

that  independent  resolution  action  under  Article  87  in  relation  to  a  domestic 
branch is necessary to achieve one or more of the resolution objectives; 

that  creditors,  including  in  particular  depositors  located  or  payable  in  a 
Member State, would not receive equal treatment with third country creditors 
under the third country resolution proceedings. 

The Commission shall, by means of delegated acts adopted in accordance to Article 
103, shall specify the circumstances referred to in points (a) and (b) of paragraph 1 of 
this Article. 

Article 87 

Resolution of Union branches of third country institutions 

Member States shall ensure that resolution authorities have the powers necessary to 
take  a  resolution  action  in  relation  to  a  domestic  branch  that  is  independent  of  any 
third  country  resolution  procedure  in  relation  to  the  third  country  institution  in 
question. 

Member States shall ensure that the powers required in paragraph 1 may be exercised 
by  resolution  authorities  where  the  resolution  authority  considers  that  resolution 
action is necessary in the public interest and one or more of the following conditions 
is met: 

(a) 

the branch no longer meets, or is likely not to meet, the conditions imposed by 
national law for its authorisation and operation within that Member State and 
there  is  no  prospect  that  any  private  sector,  supervisory  or  relevant  third 
country  action  would  restore  the  branch  to  compliance  or  prevent  failure  in 
reasonable timeframe; 

2. 

1. 

2. 

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(b) 

(c) 

the  third  country  institution  is  unable,  or  is  unlikely  to  be  unable,  to  pay  its 
obligations  to  domestic  creditors,  or  obligations  that  have  been  created  or 
booked  through  the  branch,  as  they  fall  due  and  the  resolution  authority  is 
satisfied that no third country resolution proceeding or insolvency proceeding 
has been or will be initiated in relation to that institution; 

the  relevant  third  country  authority  has  initiated  a  resolution  proceeding  in 
relation  to  the  third  country  institution,  or  has  notified  to  the  resolution 
authority  its  intention  to  initiate  such  a  proceeding,  and  one  of  the 
circumstances specified in Article 86 applies. 

3. 

Where a resolution authority takes an independent resolution action in relation to a 
domestic  branch,  it  shall  have  regard  to  the  resolution  objectives  and  take  the 
resolution  action  in  accordance  with  the  following  principles  and  requirements, 
insofar as they are relevant: 

(a) 

the principles set out in Article 29; 

(b) 

the requirements relating to the application of the resolution tools in Chapter II 
of Title IV. 

Article 88 

Cooperation with third country authorities 

1. 

2. 

Until an international agreement provided for under Article 84 with third countries is 
concluded and to the extent that the subject matter is not governed by that agreement 
the following provisions shall apply. 

EBA  shall  conclude  non-binding  framework  cooperation  arrangements  with  the 
following relevant third country authorities: 

(a) 

(b) 

(c) 

(d) 

in cases where a domestic subsidiary institution is established in the Union, the 
relevant  authorities  of  the  third  country  where  the  parent  undertaking  or  a 
company referred to in points (c) and (d) of Article 1 are established; 

in  cases  where  a  third  country  institution  operates  a  significant  branch  in  the 
Union,  the  relevant  authority  of  the  third  country  where  that  institution  is 
established; 

in cases where a parent institution and, or a company referred to in points (c) 
and  (d)  of  Article  1  established  in  the  Union  has  one  or  more  third  country 
subsidiary  institutions,  the  relevant  authorities  of  the  third  countries  where 
those subsidiary institutions are established; 

in  cases  where  an  institution  established  in  the  Union  has  one  or  more 
significant branches in one or more third countries, the relevant authorities of 
the third countries where those branches are established. 

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Cooperation arrangements under this paragraph may relate to single institutions or to 
groups that include institutions.  

3. 

The  framework  cooperation  agreements  referred  to  in  paragraph  1  shall  establish 
processes and arrangements between the participating authorities for cooperation in 
carrying  out  some  or  all  or  the  following  tasks  and  exercising  some  or  all  of  the 
following  powers  in  relation  to  institutions  referred  to  in  points  (a)  to  (d)  of 
paragraph 1 or groups including such institutions: 

4. 

5. 

(a) 

(b) 

(c) 

(d) 

(e) 

the development of resolution plans in accordance with Articles 9 and 12 and 
similar requirements under the law of the relevant third countries; 

the  assessment  of  the  resolvability  of  such  institutions  and  groups,  in 
accordance  with  Article  13  and  similar  requirements  under  the  law  of  the 
relevant third countries; 

the  application  of  powers  to  address  or  remove  impediments  to  resolvability 
pursuant  to  Articles  14  and  15  and  any  similar  powers  under  the  law  of  the 
relevant third countries; 

the  application  of  early  intervention  measures  pursuant  to  Article  23  and 
similar powers under the law of the relevant third countries;  

the application of resolution tools and exercise of resolution powers and similar 
powers exercisable by the relevant third country authorities. 

Competent  authorities  or  resolution  authorities,  where  appropriate,  shall  conclude 
non-binding  cooperation  arrangements  in  line  with  EBA  framework  arrangement 
with the relevant third country authorities indicated in paragraph 2. 

Cooperation  arrangements  concluded  between  resolution  authorities  of  Member 
States and third countries in accordance with this paragraph shall include provisions 
on the following matters: 

(a) 

(b) 

(c) 

(d) 

the exchange of information necessary for the preparation and maintenance of 
resolution plans; 

consultation and cooperation in the development of resolution plans, including 
principles  for  the  exercise  of  powers  under  Articles  87  and  88  and  similar 
powers under the law of the relevant third countries; 

the  exchange  of  information  necessary  for  the  application  of  resolution  tools 
and  exercise  of  resolution  powers  and  similar  powers  under  the  law  of  the 
relevant third countries; 

early  warning  to  or  consultation  of  parties  to  the  cooperation  arrangement 
before  taking  any  significant  action  under  this  Directive  or  relevant  third 
country law affecting the institution or group to which the arrangement relates; 

(e) 

the coordination of public communication in case of joint resolution actions; 

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(f) 

procedures and arrangements for the exchange of information and cooperation 
under points (a) to (e), including, where appropriate, through the establishment 
and operation of crisis management groups. 

6. 

Member  States  shall  notify  to  EBA  any  cooperation  arrangements  that  resolution 
authorities and competent authorities have concluded in accordance with this article. 

Article 89 

Confidentiality 

1. 

Member  States  shall  ensure  that  resolution  authorities,  competent  authorities  and 
competent  ministries  exchange  confidential  information  with  relevant  third  country 
authorities only if the following conditions are met: 

(a) 

(b) 

those  third  country  authorities  are  subject  to  requirements  and  standards  of 
professional secrecy at least equivalent to those imposed by Article 76; 

the information is necessary for the performance by the relevant third country 
authorities  of  their  functions  under  national  law  that  are  comparable  to  those 
under this Directive. 

2. 

Where  confidential  information  originates  in  another  Member  State,  resolution 
authorities  or  competent  authorities  may  not  disclose  that  information  to  relevant 
third country authorities unless the following conditions are met: 

(a) 

(b) 

the  relevant  authority  of  the  Member  State  where  the  information  originated 
(the originating authority) agrees to that disclosure; 

the information is disclosed only for the purposes permitted by the originating 
authority. 

3. 

For the purposes of this Article, information is deemed confidential if it is subject to 
confidentiality requirements under Union law. 

TITLE VII 

EUROPEAN SYSTEM OF FINANCING ARRANGEMENTS 

Article 90 

European System of Financing Arrangements 

The European System of Financing Arrangements shall consist of: 

(a)  national financing arrangements established in accordance with Article 91; 

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(b) 

(c) 

the borrowing between national financing arrangements as specified in Article 
97,  

the  mutualisation  of  national  financing  arrangements  in  the  case  of  a  group 
resolution as referred to in Article 98. 

Article 91 

1. 

2. 

3. 

Requirement to establish resolution financing arrangements 

Member States shall establish financing arrangements for the purpose of ensuring the 
effective  application  by  the  resolution  authority  of  the  resolution  tools  and  powers. 
The  financing  arrangements  shall  be  used  only  in  accordance  with  the  resolution 
objectives and the principles set out in Articles 26 and 29. 

Member States shall ensure that the financing arrangements have adequate financial 
resources. 

For  the  purpose  provided  for  in  paragraph  2,  financing  arrangements  shall  in 
particular have: 

(a) 

(b) 

(c) 

the power to raise ex ante contributions as specified in Article 94 with a view 
to reaching the target level specified in Article 93;  

the  power  to  raise  ex  post  extraordinary  contributions  as  specified  in  Article 
95, and  

the  power  to  contract  borrowings  and  other  forms  of  support  as  specified  in 
Article 96. 

Article 92 

Use of the resolution financing arrangements 

1. 

The financing arrangements established in accordance with Article 91 may be used 
by  the  resolution  authority  when  applying  the  resolution  tools,  for  the  following 
purposes: 

(a) 

(b) 

to  guarantee  the  assets  or  the  liabilities  of  the  institution  under  resolution,  its 
subsidiaries, a bridge institution or an asset management vehicle; 

to  make  loans  to  the  institution  under  resolution,  its  subsidiaries,  a  bridge 
institution or an asset management vehicle; 

(c) 

to purchase assets of the institution under resolution; 

(d) 

to make contributions to a bridge institution; 

(e) 

to take any combination of the actions referred to in points (a) to (e). 

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2. 

1. 

2. 

3. 

The financing arrangements may be used to take the actions referred to in points (a) 
to (e) also with respect to the purchaser in the context of the sale of business tool.  

Member  States  shall  ensure  that  any  losses,  costs  or  other  expenses  incurred  in 
connection with the use of the resolution tools shall be first borne by the shareholders 
and  the  creditors  of  the  institution  under  resolution.  Only  if  the  resources  from 
shareholders and creditors are exhausted, the losses, costs or other expenses incurred 
in  connection  with  the  use  of  the  resolution  tools  shall  be  borne  by  the  financing 
arrangements. 

Article 93 

Target funding level 

Member States shall ensure that, in a period no longer than 10 years after the entry 
into  force  of  this  directive,  the  available  financial  means  of  their  financing 
arrangements reach at least 1% of the amount of deposits of all the credit institutions 
authorised in their territory which are guaranteed under Directive 94/19/EC. 

During  the  initial  period  of  time  referred  to  in  paragraph  1,  contributions  to  the 
financing  arrangements  raised  in  accordance  with  Article  94  shall  be  spread  out  in 
time as evenly as possible until the target level is reached. 

Member States may extend the initial period of time for a maximum of four years in 
case the financing arrangements make cumulated disbursements superior to 0.5% of 
covered deposits. 

If,  after  the  initial  period  of  time  referred  to  in  paragraph  1,  the  available  financial 
means diminish below the target level specified in paragraph 2, contributions raised 
in  accordance  with  Article  94  shall  resume  until  the  target  level  is  reached.  Where 
the available financial means amount to less than half of the target level, the annual 
contributions shall not be less than 0.25% of covered deposits. 

Article 94 

Ex ante contributions 

1. 

In order to reach the target level specified in Article 93, Member States shall ensure 
that contributions are raised at least annually from the institutions authorised in their 
territory. 

2. 

Contributions shall be calculated in accordance with the following rules: 

(a) 

if a Member State has availed itself of the option provided for in Article 99(5) 
of  this  Directive  to  use  the  funds  of  Deposit  Guarantee  Scheme  for  the 
purposes of Article 92 of this Directive, the contribution from each institution 
shall  be  pro-rata  to  the  amount  of  its  liabilities  excluding  own  funds  and 
deposits  guaranteed  under  Directive  94/19/EC  with  respect  to  the  total 

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liabilities,  excluding  own  funds  and  deposits  guaranteed  under  Directive 
94/19/EC, of all the institutions authorised in the territory of the Member State. 

(b) 

if  a  Member  State  has  not  availed  itself  of  the  option  provided  for  in  Article 
99(5)  to  use  the  funds  of  the  Deposit  Guarantee  Scheme  for  the  purposes  of 
Article 92, the contribution from each institution shall be pro-rata to the total 
amount  of  its  liabilities,  excluding  own  funds,  with  respect  to  the  total 
liabilities, excluding own funds, of all the institutions authorised in the territory 
of the Member State. 

(c) 

the contributions calculated under (a) and (b) shall be adjusted in proportion to 
the  risk  profile  of  institutions,  in  accordance  with  the  criteria  adopted  under 
paragraph 7 of this Article. 

The  available  financial  means  to  be  taken  into  account  in  order  to  reach  the  target 
level  specified  in  Article  93  may  include  payment  commitments  which  are  fully 
backed by collateral of low risk assets unencumbered by any third party rights, at the 
free disposal and earmarked for the exclusive use by the resolution authorities for the 
purposes  specified  in  the  first  paragraph  of  Article  92.  The  share  of  irrevocable 
payment  commitments  shall  not  exceed  30%  of  the  total  amount  of  contributions 
raised in accordance with this Article. 

Member States shall ensure that the obligation to pay the contributions specified in 
this  Article  is  enforceable  under  national  law,  and  that  due  contributions  are  fully 
paid. 

Member  States  shall  set  up  appropriate  regulatory,  accounting;  reporting  and  other 
obligations  to  ensure  that  due  contribution  are  fully  paid.  Member  States  shall  also 
ensure measures for the proper verification of whether the contribution has been paid 
correctly.  Member  States  shall  ensure  measures  to  prevent  evasion,  avoidance  and 
abuse. 

The  amounts  raised  in  accordance  with  this  Article  shall  only  be  used  for  the 
purposes  specified  in  Article  92  of  this  Directive,  and,  where  Member  States  have 
availed themselves of the option provided for under Article 99(5) of this Directive, 
for  the  purposes  specified  in  Article  92  of  this  Directive  or  for  the  repayment  of 
deposits guaranteed under Directive 94/19/EC. 

The amounts received from the institution under resolution or the bridge institution, 
the  interest  and  other  earnings  on  investments  and  any  other  earnings  shall  benefit 
the financing arrangements. 

The  Commission  shall  be  empowered  to  adopt  delegated  acts  in  accordance  with 
Article 103 in order specify the notion of adjusting contributions in proportion to the 
risk profile of institutions as referred to in paragraph 2 (c) of this Article, taking into 
account the following: 

(a) 

the  risk  exposure  of  the  institution,  including  the  importance  of  its  trading 
activities, its off-balance sheet exposures and its degree of leverage; 

(b) 

the stability and variety of the company's sources of funding; 

3. 

4. 

5. 

6. 

7. 

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(c) 

the financial condition of the institution; 

(d) 

the probability that the institution enters into resolution; 

(e) 

the extent to which the institution has previously benefited from State support; 

(f) 

the  complexity  of  the  structure  of  the  institution  and  the  resolvability  of  the 
institution, and 

(g) 

its systemic importance for the market in question. 

8. 

The  Commission  shall  be  empowered  to  adopt  delegated  acts  in  accordance  with 
Article 103 in order to: 

(a) 

(b) 

(c) 

specify the registration, accounting, reporting obligations and other obligations 
referred  to  in  paragraph  4  intended  to  ensure  that  the  contributions  are 
effectively paid; 

specify the measures referred to in paragraph 4 to ensure proper verification of 
whether the contribution has been paid correctly; 

specify the measures referred to in paragraph 4 to prevent evasion, avoidance 
and abuse. 

Article 95 

Extraordinary ex post contributions 

1. 

Where  the  available  financial  means  are  not  sufficient  to  cover  the  losses,  costs  or 
other  expenses  incurred  by  the  use  of  the  financing  arrangements,  Member  States 
shall ensure that extraordinary ex post contributions are raised from the institutions 
authorised  in  their  territory,  in  order  to  cover  the  additional  amounts.  These 
extraordinary contributions shall be allocated between institutions in accordance with 
the rules set out in Article 94(2). 

2. 

The provisions of Article 94(4) to (8) shall be applicable to the contributions raised 
under this article. 

Article 96 

Alternative funding means 

Member States shall ensure that financing arrangements under their jurisdiction are enabled to 
contract borrowings or other forms of support from financial institutions, the central bank, or 
other third parties, in the event that the amounts raised in accordance with Article 94 are not 
sufficient  to  cover  the  losses,  costs  or  other  expenses  incurred  by  the  use  of  the  financing 
arrangements,  and  the  extraordinary  contributions  provided  for  in  Article  95  are  not 
immediately accessible. 

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1. 

2. 

3. 

1. 

2. 

Article 97 

Borrowing between financing arrangements 

Member States shall ensure that financing arrangements under their jurisdiction shall 
have the right to borrow from all other financing arrangements within the Union, in 
the  event  that  the  amounts  raised  under  Article  94  are  not  sufficient  to  cover  the 
losses, costs or other expense incurred by the use of the financing arrangements, and 
the extraordinary contributions foreseen in Article 95 are not immediately accessible. 

Member States shall ensure that financing arrangements under their jurisdiction are 
obliged  to  lend  to  other  financing  arrangements  within  the  Union  in  the 
circumstances specified under paragraph 1. 

Subject  to  the  first  subparagraph,  national  financing  arrangements  shall  not  be 
obliged  to  lend  to  another  national  financing  arrangement  in  those  circonstances 
when  the  resolution  authority  of  the  Member  State  of  the  financing  arrangement 
considers that it would not have sufficient funds to finance any foreseeable resolution 
in the near future. In any case they should not be obliged to lend more than half of 
the funds that the national financing arrangement has available at the moment when 
the borrowing request is formalised. 

The  Commission  shall  be  empowered  to  adopt  delegated  acts  in  accordance  with 
Article  103  in  order  to  specify  the  conditions  that  have  to  be  met  in  order  for  a 
financing  arrangement  to  be  able  to  borrow  from  other  financing  arrangements  as 
well as the conditions applicable to the borrowing and in particular the criteria for the 
assessment  of  whether  there  will  be  sufficient  funds  for  financing  a  foreseeable 
resolution in the near future, the repayment period and the interest rate applicable. 

Article 98 

Mutualisation of national financing arrangements in the case of a group resolution 

Member States shall ensure that, in the case of a group resolution as established in 
Article  83,  each  national  financial  arrangement  of  each  of  the  institutions  that  are 
part  of  a  group  contributes  to  the  financing  of  the  group  resolution  in  accordance 
with this Article. 

For the purposes of paragraph 1, the group level resolution authority, in consultation 
to  the  resolution  authorities  of  the  institutions  that  are  part  of  the  group,  shall 
establish,  if  necessary  before  taking  any  resolution  action,  a  financing  plan 
determining the total financial needs for the financing of the group resolution as well 
as the modalities for that financing.  

3. 

The modalities referred to in paragraph 2 may include: 

(a) 

contributions from the national financing arrangements of the institutions that 
are part of the group, 

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4. 

5. 

6. 

7. 

8. 

(b)  borrowings or other forms of support from financial institutions or the Central 

Bank. 

The financing plan shall be part of the group resolution scheme as specified in 
Article  83.  The  financing  plan  shall  establish  the  contribution  from  each 
national financing arrangement. 

Provided  that  the  requirements  under  paragraph  2  of  this  article  and  Article  83  are 
fulfilled,  Member  States  shall  establish  rules  and  procedures  to  ensure  that  each 
national financing arrangement under their jurisdiction effects its contribution to the 
financing  plan  immediately  after  their  resolution  authorities  receive  a  request  from 
the group level resolution authority. 

For the purpose of this Article, Member States shall ensure that the group financing 
arrangements  are  allowed,  under  the  conditions  laid  down  in  article  96,  to  contract 
borrowings or other forms of support, from financial institutions, the Central Bank or 
other third parties, for the total amount needed to finance the resolution of the group 
in accordance with the financing plan referred to in paragraph 2 of this Article. 

Member  States  shall  ensure  that  each  national  financing  arrangement  under  its 
jurisdiction guarantees any borrowing contracted by the group financing arrangement 
in  accordance  with  paragraph  4.  The  guarantee  by  each  national  financing 
arrangement  shall  not  exceed  the  part  of  its  participation  to  the  financing  plan 
established in accordance to paragraph 2. 

Member States shall ensure that any proceeds or benefits that arise from the use of 
the  financing  arrangements  shall  benefit  all  national  financing  arrangements  in 
accordance  to  their  contribution  to  the  financing  of  the  resolution  as  established  in 
paragraph 2. 

The  Commission  shall  be  empowered  to  adopt  delegated  acts  in  accordance  with 
Article 103 in order to specify further: 

(a) 

the form and content of the financing plan specified in paragraph 2; 

(b) 

the  modalities  for  the  disbursement  of  the  contributions  to  the  financing  plan 
referred to in paragraph 3; 

(c) 

the modalities of the guarantees referred to in paragraph 5; 

(d) 

the criteria for determining when all resolution actions have finalised; 

Article 99 

Use of deposit guarantee schemes in the context of resolution 

1. 

Member  States  shall  ensure  that,  where  the  resolution  authorities  take  resolution 
action, and provided that this action ensures that depositors continue having access to 
their  deposits,  the  deposit  guarantee  scheme  to  which  the  institution  is  affiliated  is 
liable, up to the amount of covered deposits, for the amount of losses that it would 

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2. 

3. 

4. 

5. 

6. 

7. 

8. 

9. 

have  had  to  bear  if  the  institution  had  been  wound  up  under  normal  insolvency 
proceedings. 

Member States shall ensure that, under the national law governing normal insolvency 
proceedings,  the  deposit  guarantee  schemes  rank  pari  passu  with  unsecured  non- 
preferred claims. 

Member  States  shall  ensure  that  the  determination  of  the  amount  by  which  the 
deposit  guarantee  scheme  is  liable  in  accordance  with  paragraph  1  of  this  Article 
complies with the conditions established in Article 30 (2). 

The contribution from the deposit guarantee scheme for the purpose of paragraph 1 
shall be made in cash. 

Member  States  may  also  provide  that  the  available  financial  means  of  deposit 
guarantee  schemes  established  in  their  territory  may  be  used  for  the  purposes  of 
Article 92(1), provided that the deposit guarantee schemes comply, where applicable, 
with the provisions laid down in Articles 93 to 98. 

Member  States  shall  ensure  that  the  deposit  guarantee  scheme  has  arrangements  in 
place to ensure that, following a contribution made by the deposit guarantee scheme 
under paragraphs 1 or 5 and where the depositors of the institution under resolution 
need  to  be  reimbursed,  the  members  of  the  scheme  can  immediately  provide  the 
scheme with the amounts that have to be paid. 

Where Member States avail themselves of the option provided for under paragraph 5 
of  this  Article,  the  deposit  guarantee  schemes  shall  be  considered  as  financing 
arrangements for the purpose of Article 91. In that case Member States may abstain 
from establishing separate funding arrangements. 

Where  a  Member  State  avails  itself  of  the  option  provided  for  in  paragraph  5,  the 
following  priority  rule  shall  apply  to  the  use  of  available  financial  means  of  the 
deposit guarantee scheme. 

If  the  deposit  guarantee  scheme  is,  at  the  same  time,  requested  to  use  its  available 
financial means for the purposes specified in Article 92 or for the purpose of the first 
paragraph  of  this  Article,  and  for  the  repayment  of  depositors  under  Directive 
94/19/EC,  and  the  available  financial  means  are  insufficient  to  satisfy  all  these 
requests,  priority  shall  be  given  to  the  repayment  of  depositors  under  Directive 
94/19/EC  and  to  the  actions  specified  under  paragraph  1  of  this  Article,  over  the 
payments for the purposes provided for in Article 92 of this Directive. 

Where eligible deposits with an institution under resolution are transferred to another 
entity through the sale of business tool or the bridge institution tool, the depositors 
have  no  claim  under  Directive  94/19/EC  against  the  deposit  guarantee  scheme  in 
relation to any part of their deposits with the institution under resolution that are not 
transferred, provided that the amount of funds transferred is equal to or more than the 
aggregate coverage level laid down in Article 7 of Directive 94/19/EC. 

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TITLE VIII 

SANCTIONS 

Article 100 

Administrative sanctions and measures 

1. 

2. 

3. 

Member  States  shall  ensure  that  appropriate  administrative  sanctions  and  measures 
are  taken  where  the  national  provisions  adopted  in  the  implementation  of  this 
Directive  have  not  been  complied  with,  and  shall  ensure  that  they  are  applied.  The 
sanctions and measures shall be effective, proportionate and dissuasive. 

Member States shall ensure that where obligations apply to financial institutions and 
Union  parent  undertakings,  in  case  of  a  breach  sanctions  can  be  applied  to  the 
members  of  the  management,  and  to  any  other  individuals  who  under  national  law 
are responsible for the breach. 

Resolution  authorities  and  competent  authorities  shall  be  given  all  investigatory 
powers that are necessary for the exercise of their functions. In the exercise of their 
sanctioning powers, resolution authorities and competent authorities shall cooperate 
closely  to  ensure  that  sanctions  or  measures  produce  the  desired  results  and 
coordinate their action when dealing with cross border cases. 

Article 101 

Specific provisions  

1. 

This Article shall apply in all the following circumstances: 

(a) 

(b) 

(c) 

(d) 

an  institution  or  parent  undertaking  fails  to  draw  up,  maintain  and  update 
recovery plans and group recovery plans, in breach of Articles 5 or 7; 

an  entity  fails  to  notify  an  intention  to  provide  group  financial  support  to  its 
competent authorities in breach of Article 22; 

an  institution  or  parent  undertaking  fails  to  provide  all  the  information 
necessary for the development of resolution plans in breach of Article 10;  

the management of an institution fails to notify the competent authority when 
the institution is failing or likely to fail in breach of Article 73(1). 

2. 

Without prejudice to the powers of competent authorities or resolution authorities in 
accordance with other provisions of this Directive, Member States shall ensure that 
in the cases referred to in paragraph 1, the administrative sanctions and measures that 
can be applied include at least the following: 

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(a) 

(b) 

(c) 

a public statement, which indicates the natural or legal person responsible and 
the nature of the breach; 

a temporary ban against any member of the institution's or parent undertaking's 
management or any other natural person, who is held responsible, to exercise 
functions in institutions; 

in case of a legal person, administrative pecuniary sanctions of up to 10 % of 
the  total  annual  turnover  of  that  legal  person  in  the  preceding  business  year; 
where the legal person is a subsidiary of a parent undertaking, the relevant total 
annual  turnover  shall  be  the  total  annual  turnover  resulting  from  the 
consolidated  account  of  the  ultimate  parent  undertaking  in  the  preceding 
business year; 

(d) 

in  case  of  a  natural  person,  administrative  pecuniary  sanctions  of  up  to  EUR 
5 000 000, or in the Member States where the Euro is not the official currency, 
the corresponding value in the national currency on the date of entry into force 
of this Directive; 

(e) 

administrative  pecuniary  sanctions  of  up  to  twice  the  amount  of  the  profits 
gained or losses avoided because of the breach where those can be determined. 

Article 102 

Effective application of sanctions and exercise of sanctioning powers by competent 
authorities  

Member  States  shall  ensure  that  when  determining  the  type  of  administrative  sanctions  or 
measures and the level of administrative pecuniary sanctions, the competent authorities shall 
take into account all relevant circumstances, including: 

(e) 

(f) 

(g) 

(h) 

(i) 

(j) 

the gravity and the duration of the breach; 

the degree of responsibility of the responsible natural or legal person; 

the financial strength of the responsible natural or legal person, as indicated by the 
total turnover of the responsible legal person or the annual income of the responsible 
natural person; 

the importance of profits gained or losses avoided by the responsible natural or legal 
person, insofar as they can be determined; 

the losses for third parties caused by the breach, insofar as they can be determined; 

the level of cooperation of the responsible natural or legal person with the competent 
authority; 

(k) 

previous breaches by the responsible natural or legal person. 

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TITLE IX 

POWERS OF EXECUTION 

Article 103 

Exercise of the delegation 

1. 

2. 

3. 

4. 

5. 

The  power  to  adopt  delegated  acts  is  conferred  on  the  Commission  subject  to  the 
conditions laid down in this Article. 

The delegation of powers shall be conferred for an indeterminate period of time from 
the date referred to in Article 116. 

The delegation of powers referred to in Articles 2, 4, 28, 37, 39, 43, 86, 94, 97 and 
98  may  be  revoked  at  any  time  by  the  European  Parliament  or  by  the  Council.  A 
decision  of  revocation  shall  put  an  end  to  the  delegation  of  the  power  specified  in 
that decision. It shall take effect the day following the publication of the decision in 
the Official Journal of the European Union or at a later date specified therein. It shall 
not affect the validity of any delegated acts already in force. 

As soon as it adopts a delegated act, the Commission shall notify it simultaneously to 
the European Parliament and to the Council. 

A delegated act adopted pursuant to Articles 2, 4, 28, 37, 39, 43, 86, 94, 97 and 98 
shall enter into force only if no objection has been expressed either by the European 
Parliament or the Council within a period of two months of notification of that act to 
the European Parliament and the Council or if, before the expiry of that period, the 
European Parliament and the Council have both informed the Commission that they 
will not object. That period shall be extended by two months at the initiative of the 
European Parliament or the Council. 

TITLE X 

AMENDMENTS TO DIRECTIVES 77/91/EEC, 82/891/EEC, 2001/24/EC, 
2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU AND TO 
REGULATION (EU) NO 1093/2010 

Article 104 

Amendment to Directive 77/91/EEC 

In Article 41 of Directive 77/91/EEC, the following paragraph 3 is added: 

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"3. Member States shall ensure that Articles 17(1), 25(1), 25(3), 27(2) first paragraph, 29, 30, 
31  and  32  of  this  Directive  do  not  apply  in  case  of  use  of  the  resolution  tools,  powers  and 
mechanisms provided in Title IV of Directive XX/XX/EU of the European Parliament and of 
the Council(*)[Directive on Recovery and Resolution] provided that the resolution objectives 
laid down in Article 27 of Directive XX/XX/EU and the conditions for resolution laid down 
in Article 28 of that Directive are met. 

_______ 

(*) O L….. …. p.." 

Article 105 

Amendment to Directive 82/891/EEC 

Article 1(4) of Directive of 82/891/EEC is replaced by the following: 

"4. Article 1(2), (3) and (4) of Directive 2011/35/EU of the European Parliament and of the 
Council (*) shall apply. 

________ 

(*) OJ L 110, 29.4.2011, p. 1." 

Article 106 

Amendments to Directive 2001/24/EC 

Directive 2001/24/EC is amended as follows: 

1. 

In Article 1 the following paragraphs 3 and 4 are added: 

"3.  This  Directive  shall  also  apply  to  investment  firms  as  defined  in  point  (b)  of 
Article 3(1) of Directive 2006/49/EC of the European Parliament and of the Council 
(*) and their branches set up in Member States other than those in which they have 
their head offices. 

4.  In  the  event  of  application  of  the  resolution  tools  and  exercise  of  the  resolution 
powers provided for by Directive XX/XX/EU of the European Parliament and of the 
Council(**),  the  provisions  of  this  Directive  shall  also  apply  to  the  financial 
institutions,  firms  and  parent  undertakings  falling  within  the  scope  of  Directive 
XX/XX/EU.  

__________ 

(*) OJ L 177, 30.6.2006, p.201 

(**) OJ L….,…p." 

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2. 

In Article 2, the seventh indent is replaced by the following: 

"- ‘reorganisation measures’ shall mean measures which are intended to preserve or 
restore  the  financial  situation  of  a  credit  institution  and  which  could  affect  third 
parties'  pre-existing  rights,  including  measures  involving  the  possibility  of  a 
suspension of payments, suspension of enforcement measures or reduction of claims; 
these  measures  include  the  application  of  the  resolution  tools  and  the  exercise  of 
resolution powers provided for by Directive XX/XX/EU;" 

Article 107 

Amendment to Directive 2002/47/EC 

In Article 7 of Directive 2002/47/EC, the following paragraph 1a is added: 

"1a. Paragraph 1 does not apply to any restriction on the effect of a close out netting provision 
that  is  imposed  by  virtue  of  Article  77  of  Directive  XX/XX/EU  or  by  the  exercise  by  the 
resolution authority of the power to impose a temporary stay in accordance with Article 63 of 
that Directive. 

__________ 

(*) OJ L …… …. p. …" 

Article 108 

Amendment to Directive 2004/25/EC 

In Article 4(5) of Directive 2004/25/EC, the following third subparagraph is added: 

"Member States shall ensure that Article 5(1) of this Directive does not apply in case of use of 
resolution tools, powers and mechanisms provided in Title IV of Directive XX/XX/EU of the 
European Parliament and of the Council (*)[Directive on Recovery and Resolution. 

_________ 

(*) OJ L …. p. … " 

Article 109 

Amendment to Directive 2005/56/EC 

In Article 3 of Directive 2005/56/EEC, the following paragraph 4 is added: 

"(4)  Member  States  shall  ensure  that  this  Directive  does  not  apply  to  the  company  or 
companies that are the subject of the use of resolution tools, powers and mechanisms provided 
in Title IV of Directive XX/XX/EU [Directive on Recovery and Resolution], of the European 
Parliament and of the Council (*). 

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_________ 

(*) OJ L …… …. p. …" 

Article 110 

Amendments to Directive 2007/36/EC 

Directive 2007/36/EC is amended as follows: 

1. 

In Article 1, the following paragraph 4 is added: 

"4. Member States shall ensure that this Directive does not apply in case of the use of 
resolution  tools,  powers  and  mechanisms  provided  in  Title  IV  of  Directive 
XX/XX/EU [Directive on Recovery and Resolution], of the European Parliament and 
of the Council (*) . 

___________ 

(*) OJ L …… …. p. …" 

2. 

In Article 5, the following paragraphs 5 and 6 are added: 

"5.  Member  States  shall  ensure  that  for  the  purposes  of  Directive  XX/XX/EU 
[Directive  on  Recovery  and  Resolution]the  general  meeting  may  decide  by  a 
majority  of  two-thirds  of  the  votes  validly  cast  that  a  convocation  to  a  general 
meeting to decide on a capital increase may be called at shorter notice than provided 
in paragraph 1 of this Article, provided that this meeting does not take place within 
ten  calendar days of the  convocation  and that  the conditions of  Article  23 or  24 of 
Directive  XX/XX/EU  (early  intervention  triggers)are  met  and  that  the  capital 
increase is necessary to avoid the conditions for resolution laid down in Article 27 of 
that Directive. 

6.  For  the  purposes  of  paragraph  5,  Article  6  (3)  and  (4)  and  Article  7(3)  shall  not 
apply." 

Article 111 

Amendment to Directive 2011/35/EU 

In Article 1 of Directive 2011/35/EU, the following paragraph 4 is added: 

"4.  Member  States  shall  ensure  that  this  Directive  does  not  apply  to  the  company  or 
companies  which  are  the  subject  of  the  use  of  resolution  tools,  powers  and  mechanisms 
provided  in  Title  IV  of  Directive  XX/XX/EU  of  the  European  Parliament  and  of  the 
Council (*) [Directive on Recovery and Resolution]. 

________ 

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(*) OJ L …… …. p. …" 

Article 112 

Amendment to Regulation (EU) No 1093/2010 

Regulation (EU) No 1093/2010 is amended as follows: 

6. 

In Article 4 point (2) is replaced by the following: 

"(2) ‘competent authorities’ means: 

(i) 

competent  authorities  as  defined  in  Directives  2006/48/EC,  2006/49/EC  and 
2007/64/EC and as referred to in Directive 2009/110/EC; 

(ii)  with  regard  to  Directives  2002/65/EC  and  2005/60/EC,  the  authorities 
competent  for  ensuring  compliance  with  the  requirements  of  those  Directives 
by credit and financial institutions; 

(iii)  with  regard  to  deposit  guarantee  schemes,  bodies  which  administer  deposit-
guarantee schemes pursuant to Directive 94/19/EC, or, where the operation of 
the deposit-guarantee scheme is administered by a private company, the public 
authority supervising those schemes pursuant to that Directive; and 

(iv)  with  regard  to  Directive  …/…  [Directive  on  Recovery  and  Resolution] 

resolution authorities as defined in that Directive. 

_________ 

(*) OJ L …… …. p. …" 

7. 

In Article 40(6), the following second subparagraph is added: 

"For the purpose of acting within the scope of Directive XX/XX/EU of the European 
Parliament and the council(*)[Directive on Recovery and Resolution], the member of 
the  Board  of  Supervisors  referred  to  in  point  (b)  of  paragraph  1  may,  where 
appropriate, be accompanied by a representative from the resolution authority in each 
Member State, who shall be non-voting." 

_________ 

(*) OJ L …… …. p. …" 

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TITLE XI 

FINAL PROVISIONS  

Article 113 

EBA Resolution Committee 

EBA shall create a permanent internal committee pursuant to Article 41 of Regulation (EU) 
No 1093/2010 for the purpose of preparing the EBA decisions provided for in this Directive. 
That internal committee shall be at least composed of the resolution authorities referred to in 
Article 3 of this Directive.  

For the purposes of this Directive, EBA shall cooperate with ESMA and EIOPA within the 
framework  of  the  Joint  Committee  of  the  European  Supervisory  Authorities  established  in 
Article 54 of Regulation (EU) No 1093/2010. 

Article 114 

Review 

By  1  June  2018,  the  Commission  shall  review  the  general  application  of  this  Directive  and 
assess the need for amendments in particular:  

(a)  on the basis of the report from EBA provided for in Article 39(6), the need for 
amendments  with  regard  to  minimising  divergences  at  national  level.  This 
report and any accompanying proposals, as appropriate, shall be forwarded to 
the European Parliament and to the Council; 

(b)  on the basis of the report from EBA provided for in Article 4(3), the need for 
amendments  with  regard  to  minimising  divergences  at  national  level.  That 
report and any accompanying proposals, as appropriate, shall be forwarded to 
the European Parliament and to the Council. 

Article 115 

Transposition 

1. 

Member States shall adopt and publish by 31 December 2014 at the latest the laws, 
regulations  and  administrative  provisions  necessary  to  comply  with  this  Directive. 
They shall forthwith communicate to the Commission the text of those provisions. 

Member States shall apply those provisions from 1 January 2015. 

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2. 

3. 

However,  Member  States  shall  apply  provisions  adopted  in  order  to  comply  with 
Section 5 of Chapter III of Title IV from 1 January 2018 at the latest. 

When  Member  States  adopt  those  provisions,  they  shall  contain  a  reference  to  this 
Directive  or  be  accompanied  by  such  a  reference  on  the  occasion  of  their  official 
publication. Member States shall determine how such reference is to be made. 

Member  States  shall  communicate  to  the  Commission  and  to  EBA  the  text  of  the 
main  provisions  of  national  law  which  they  adopt  in  the  field  covered  by  this 
Directive. 

Article 116 

Entry into force 

This Directive shall enter into force on the twentieth day following that of its publication in 
the Official Journal of the European Union. 

Article 117 

Addressees 

This Directive is addressed to the Member States. 

Done at Brussels,  

For the European Parliament 
The President 

For the Council 
The President 

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ANNEX 

SECTION A 

INFORMATION TO BE INCLUDED IN RECOVERY PLANS 

The recovery plan shall include the following information: 

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

(7) 

(8) 

(9) 

A  summary  of  the  key  elements  of  the  plan,  strategic  analysis,  and  summary  of 
overall recovery capacity;  

a  summary  of  the  material  changes  to  the  institution  since  the  most  recently  filed 
recovery plan; 

a communication and disclosure plan outlining how the firm intends to manage any 
potentially negative market reactions; 

a  range  of  capital  and  liquidity  actions  required  to  maintain  operations  of,  and 
funding for, the institution's critical functions and business lines; 

an estimation of the timeframe for executing each material aspect of the plan; 

a  detailed  description  of  any  material  impediment  to  the  effective  and  timely 
execution  of  the  plan,  including  consideration  of  impact  on  the  rest  of  the  group, 
customers and counterparties; 

identification of critical functions; 

a detailed description of the processes for determining the value and marketability of 
the core business lines, operations and assets of the institution; 

a  detailed  description  of  how  recovery  planning  is  integrated  into  the  corporate 
governance  structure  of  the  institution  as  well  as  the  policies  and  procedures 
governing the approval of the recovery plan and identification of the persons in the 
organisation responsible for preparing and implementing the plan; 

(10) 

arrangements and measures to conserve or restore the institution's own funds; 

(11) 

arrangements  and  measures  to  ensure  that  the  institution  has  adequate  access  to 
contingency funding sources, including potential liquidity sources, an assessment of 
available  collateral  and  an  assessment  of  the  possibility  to  transfer  liquidity  across 
group  entities  and  business  lines,  to  ensure  that  it  can  carry  on  its  operations  and 
meet its obligations as they fall due; 

(12) 

arrangements and measures to reduce risk and leverage; 

(13) 

arrangements and measures to restructure liabilities; 

(14) 

arrangements and measures to restructure business lines; 

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(15) 

(16) 

(17) 

(18) 

(19) 

arrangements  and  measures  necessary  to  maintain  continuous  access  to  financial 
markets infrastructures; 

arrangements and measures necessary to maintain the continuous functioning of the 
institution's operational processes, including infrastructure and IT services; 

preparatory  arrangements  to  facilitate  the  sale  of  assets  or  business  lines  in  a 
timeframe appropriate for the restoration of financial soundness; 

other  management  actions  or  strategies  to  restore  financial  soundness  and  the 
anticipated financial effect of those actions or strategies; 

preparatory  measures  that  the  institution  has  taken  or  plans  to  take  in  order  to 
facilitate  the  implementation  of  the  recovery  plan,  including  those  necessary  to 
enable the timely recapitalisation of the institution. 

SECTION B 

INFORMATION THAT RESOLUTION AUTHORITIES MAY REQUEST INSTITUTIONS 
TO PROVIDE FOR THE PURPOSES OF DRAWING UP AND MAINTAINING 
RESOLUTION PLANS 

Resolution authorities may request institutions to provide for the purposes of drawing up and 
maintaining resolution plans the following information: 

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

(7) 

(8) 

A detailed description of the institution's organisational structure including a list of 
all legal entities;  

identification of the direct holder and the percentage of voting and non-voting rights 
of each legal entity; 

the location, jurisdiction of incorporation, licensing and key management associated 
with each legal entity; 

a  mapping  of  the  institution's  critical  operations  and  core  business  lines  including 
material  asset  holdings  and  liabilities  related  to  such  operations  and  business  lines, 
by reference to legal entities; 

a detailed description of the components of the institution's and all its legal entities' 
liabilities,  separating,  at  a  minimum  by  types  and  amounts  of  short  term  and  long 
term debt, secured, unsecured and subordinated liabilities; 

a detail of those liabilities of the institution that are eligible liabilities; 

an  identification  of  the  processes  needed  to  determine  to  whom  the  institution  has 
pledged collateral, the person that holds the collateral and the jurisdiction in which 
the collateral is located; 

a  description  of  the  off  balance  sheet  exposures  of  the  institution  and  its  legal 
entities, including a mapping to its critical operations and core business lines; 

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(9) 

the material hedges of the institution including a mapping to legal entity; 

(10) 

(11) 

(12) 

(13) 

(14) 

identification of the major or most critical counterparties of the institution as well as 
an  analysis  of  the  impact  of  the  failure  of  major  counterparties  in  the  institution's 
financial situation; 

each system on which the institution conducts a material number or value amount of 
trades, including a mapping to the institution's legal entities, critical operations and 
core business lines; 

each  payment,  clearing  or  settlement  system  of  which  the  institution  is  directly  or 
indirectly  a  member,  including  a  mapping  to  the  institution's  legal  entities,  critical 
operations and core business lines; 

a  detailed  inventory  and  description  of  the  key  management  information  systems, 
including  those  for  risk  management,  accounting  and  financial  and  regulatory 
reporting used by the institution including a mapping to the institution's legal entities, 
critical operations and core business lines; 

an  identification  of  the  owners  of  the  systems  identified  in  (m),  service  level 
agreements  related  thereto,  and  any  software  and  systems  or  licenses,  including  a 
mapping to its legal entities, critical operations and core business lines; 

(15) 

an  identification  and  mapping  of  the  legal  entities  and  the  interconnections  and 
interdependencies among the different legal entities such as: 

– 

– 

– 

– 

– 

common or shared personnel, facilities and systems; 

capital, funding or liquidity arrangements; 

existing or contingent credit exposures; 

cross  guarantee  agreements,  cross-collateral  arrangements,  cross-default 
provisions and cross-affiliate netting arrangements; 

transfers  and  back 

risks 
agreements; 

to  back 

trading  arrangements;  service 

level 

(16) 

the supervisory and resolution authority for each legal entity; 

(17) 

(18) 

the senior management official responsible for the resolution  plan  of the institution 
as  well  as  those  responsible,  if  different,  for  the  different  legal  entities,  critical 
operations and core business lines; 

a description of the arrangements that the institution has in place to ensure that, in the 
event of resolution, the resolution authority will have all the necessary information, 
as  determined  by  the  resolution  authority,  for  applying  the  resolution  tools  and 
powers; 

(19) 

all  the  agreements  entered  into  by  the  institutions  and  its  legal  entities  with  third 
parties whose termination may be triggered by a decision of the authorities to apply a 

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resolution  tool  and  whether  the  consequences  of  termination  may  affect  the 
application of the resolution tool; 

(20) 

A description of possible liquidity sources for supporting resolution; 

(21) 

Information on asset encumbrance, liquid assets, off-balance sheet activities, hedging 
strategies and booking practices. 

SECTION C 

MATTERS THAT THE RESOLUTION AUTHORITY MUST ASSESS WHEN ASSESSING 
THE RESOLVABILITY OF AN INSTITUTION 

When assessing the resolvability of an institution, the resolution authority shall consider the 
following: 

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

(7) 

(8) 

(9) 

The extent to which the institution or the group are able to map core business lines 
and critical operations to legal entities. 

The extent to which legal and corporate structures with respect to the core business 
lines and critical operations are aligned. 

The  extent  to  which  there  are  arrangements  in  place  to  provide  for  essential  staff, 
infrastructure,  funding,  liquidity  and  capital  to  support  and  maintain  the  core 
business lines and the critical operations. 

The extent to which the service agreements that the institution or the group maintains 
are fully enforceable in the event of resolution of the institution or the group. 

The  extent  to  which  the  governance  structure  of  the  institution  or  the  group  is 
adequate  for  managing  and  ensuring  compliance  with  the  institution  or  group's 
internal policies with respect to its service level agreements. 

The  extent  to  which  the  institution  or  the  group  has  a  process  for  transitioning  the 
services provided under service level agreements to third parties in the event of the 
separation of critical functions or of core business lines. 

The  extent  to  which  there  are  contingency  plans  in  place  to  ensure  continuity  in 
access to payment and settlement systems. 

The adequacy of the management information systems in ensuring that the resolution 
authorities  are  able  to  gather  accurate  and  complete  information  regarding  the  core 
business lines and critical operations so as to facilitate rapid decision making. 

The  capacity  of  the  management  information  systems  to  provide  the  information 
essential for the effective resolution of the institution or the group at all times even 
under rapidly changing conditions. 

(10) 

The  extent  to  which  the  institution  or  the  group  has  tested  its  management 
information systems under stress scenarios defined by the resolution authority. 

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(11) 

(12) 

The  extent  to  which  the  institution  or  the  group  can  ensure  the  continuity  of  its 
management  information  systems  both  for  the  affected  institution  and  the  new 
institution in the case that the critical operations and core business lines are separated 
from the rest of the operations and business lines. 

The  extent  to  which  the  institution  or  group  has  established  adequate  processes  to 
ensure that it provides the resolution authorities the information necessary to identify 
depositors and the amounts covered by the deposit guarantee schemes; 

(13)  Where  the  group  uses  intra-group  guarantees,  the  extent  to  which  those  guarantees 
are provided at market conditions and the risk management systems concerning those 
guarantees are robust. 

(14)  Where  the  group  engages  in  back  to  back  transactions,  the  extent  to  which  those 
transactions  are  performed  at  market  conditions  and  the  risk  management  systems 
concerning those transactions practices are robust. 

(15) 

(16) 

The  extent  to  which  the  use  of  intra-group  guarantees  or  back  to  back  booking 
transactions increases contagion across the group. 

The  extent  to  which  the  legal  structure  of  the  group  inhibits  the  application  of  the 
resolution  tools  as  a  result  of  the  number  of  legal  entities,  the  complexity  of  the 
group structure or the difficulty in aligning business lines to group entities. 

(17) 

The amount or proportion of eligible liabilities of the institution. 

(18)  Where  the  assessment  involves  a  mixed  activity  holding  company,  the  extent  to 
which  the  resolution  of  group  entities  that  are  institutions  or  financial  institutions 
could have a negative impact on the non-financial part of the group. 

(19) 

The existence and robustness of service level agreements. 

(20)  Whether  third  country  authorities  have  the  resolution  tools  necessary  to  support 
resolution  actions  by  Union  resolution  authorities,  and  the  scope  for  co-ordinated 
action between Union and third country authorities. 

(21) 

(22) 

(23) 

(24) 

The  feasibility  of  using  resolution  tools  in  such  a  way  which  meets  the  resolution 
objectives, given the tools available and the institution’s structure. 

The extent to which the group structure allows the resolution authority to resolve the 
whole  group  or  any  or  more  of  its  entities  without  causing  a  significant  direct  or 
indirect adverse impact on the financial system, market confidence or the economy 
and with a view to maximising the value of the group as a whole; 

The  arrangements  and  means  through  which  resolution  could  be  facilitated  in  the 
cases of groups that have subsidiaries established in different jurisdictions. 

The  credibility  of  using  resolution  tools  in  such  a  way  which  meets  the  resolution 
objectives,  given  possible  impacts  on  creditors,  counterparties,  customers  and 
employees and possible actions that third country authorities may take. 

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(25) 

(26) 

(27) 

(28) 

The  impact  of  the  institution's  resolution  on  the  financial  system  and  on  financial 
market's confidence can be adequately evaluated. 

The  resolution  of  the  institution  could  have  a  significant  direct  or  indirect  adverse 
impact on the financial system, market confidence or the economy. 

Contagion to other financial institutions or to the financial markets can be contained 
through the application of the resolution tools and powers. 

The  resolution  of  the  institution  could  have  a  significant  effect  in  the  operation  of 
payment and settlement systems. 

EN 

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LEGISLATIVE FINANCIAL STATEMENT 

1. 

FRAMEWORK OF THE PROPOSAL 

1.1.  Title of the proposal 

1.2.  Policy area(s) concerned in the ABM/ABB structure 

1.3.  Nature of the proposal 

1.4.  Objective(s) 

1.5.  Grounds for the proposal 

1.6.  Duration and financial impact 

1.7.  Management method(s) envisaged 

2. 

MANAGEMENT MEASURES 

2.1.  Monitoring and reporting rules 

2.2.  Management and control system 

2.3.  Measures to prevent fraud and irregularities 

3. 

ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL 

3.1.  Heading(s)  of  the  multiannual  financial  framework  and  expenditure  budget  line(s) 
affected 

3.2.  Estimated impact on expenditure 

3.2.1. Summary of estimated impact on expenditure 

3.2.2. Estimated impact on operational appropriations 

3.2.3. Estimated impact on appropriations of an administrative nature 

3.2.4. Compatibility with the current multiannual financial framework 

3.2.5. Third-party participation in financing 

3.3.  Estimated impact on revenue

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LEGISLATIVE FINANCIAL STATEMENT 

1. 

FRAMEWORK OF THE PROPOSAL  

1.1. 

Title of the proposal  

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing a 
framework  for  the  recovery  and  resolution  of  credit  institutions  and  investment  firms  and 
amending Council Directives 77/91/EEC, 82/891/EC, 2001/24/EC, 2002/47/EC, 2004/25/EC, 
2005/56/EC, 2007/36/EC and 2011/35/EC and Regulation (EU) No 1093/2011 

1.2. 

Policy area(s) concerned in the ABM/ABB structure40  

Internal Market – Financial markets 

1.3. 

Nature of the proposal  

(cid:58) The proposal relates to a new action 

(cid:133) The proposal/initiative relates to a new action following a pilot project/preparatory action41 

(cid:133) The proposal/initiative relates to the extension of an existing action 

(cid:133) The proposal/initiative relates to an action redirected towards a new action 

1.4. 

Objectives 

1.4.1.  The Commission's multiannual strategic objective(s) targeted by the proposal/initiative  

•  Maintain  financial  stability  and  confidence  in  banks,  ensure  the  continuity  of  essential 

financial services, avoid contagion of problems; 

•  Minimise losses for society as a whole and in particular for taxpayers, protect depositors, 

and reduce moral hazard; 

• 

Strengthen  the  internal  market  for  banking  services  while  maintaining  a  level  playing 
field (i.e. same conditions for all players to compete in the financial markets of the EU). 

1.4.2. 

Specific objective(s) and ABM/ABB activity(ies) concerned  

Specific objectives: 

In the light of the general objectives above, the following specific objectives are sought: 

Preparation and prevention: 

40 
41 

ABM: Activity-Based Management – ABB: Activity-Based Budgeting. 
As referred to in Article 49(6)(a) or (b) of the Financial Regulation. 

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155 

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• 

• 

increase preparedness of supervisors and banks for crisis situations and 

enable resolvability of all banks 

Early intervention: 

• 

improve early intervention arrangements for supervisors 

Bank resolution: 

• 

• 

ensure resolution of banks in a timely and robust manner 

ensure legal certainty for bank resolution 

Cross border crisis management: 

• 

foster efficient cooperation of authorities in cross border resolution 

Financing 

• 

ensure that funds from private source are available to finance resolution of failing banks 

1.4.3.  Expected result(s) and impact 

Specify the effects which the proposal/initiative should have on the beneficiaries/groups targeted. 

The proposed crisis management framework at Union level intends to further enable financial 
stability, reduce moral hazard, and protect depositors, crucial banking services and taxpayers' 
money.  In  addition  it  aims  to  protect  and  further  develop  the  internal  market  for  financial 
institutions. 

Benefits  of  the  framework  arise  firstly  from  the  expected  reduction  in  the  probability  of  a 
systemic  banking  crisis  and  the  avoidance  of  the  fall  in  GDP  that  follows  a  banking  crisis. 
Secondly, the bank resolution framework aims to reduce the possibility that taxpayers' money 
being  used  again  in  a  potential  future  crisis  to  bail  out  banks.  The  cost  of  banking  crises,  if 
they  happen,  should  be  borne  by  banks'  equity  and  debt  holders  in  the  first  instance.  As  a 
result funding cost of Member States' debt should also decrease reflecting the removal of the 
implicit state guarantee of banks' debt. 

1.4.4. 

Indicators of results and impact  

Specify the indicators for monitoring implementation of the proposal/initiative. 

Since  bank  failures  are  unpredictable  and  hopefully  avoided,  the  functioning  of  bank 
resolution cannot be regularly monitored on the basis of how real bank failures are handled. 
However, some of the measures could be monitored using the following possible indicators: 

• 

Number of resolution colleges set up. 

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• 

• 

• 

• 

• 

• 

• 

• 

Number  of  recovery  and  resolution  plans  submitted  and  approved  by  resolution 
authorities and resolution colleges. 

Number of cases where adjustments in the operation of banks (and banking groups) has 
been demanded by resolution authorities. 

Number of intra-group financing agreements concluded. 

Number of banks where minimum loss absorbing capacity (capital + bail-inable debt) is 
required. 

Overall level of loss absorbing capacities of banks in Member states and the UNION. 

Number of banks undergoing resolution. 

Number  of  application  of  different  resolution  tools  and  powers  (e.g.sale  of  business, 
bridge bank, bail-in). 

Cost  of  bank  resolution  on  an  individual  MS  and  EU  aggregated  level  (EUR  million) 
(cost includes bail-in cost, recapitalisation, contribution of DGS/RF, other costs). 

The  involvement  of  EBA  in  all  phases  of  the  bank  recovery  and  resolution  framework  is 
proposed and supported by the stakeholders, even if EBA regulation presently does not give 
competence to EBA in a resolution process. Based on its involvement, EBA could carry out 
related  monitoring  tasks.  The  transposition  of  any  new  Union  legislation  will  be  monitored 
under the Treaty on the functioning of the Union 

1.5. 

Grounds for the proposal 

1.5.1.  Requirement(s) to be met in the short or long term  

The  financial  crisis  severely  tested  the  ability  of  authorities  to  manage  problems  in  banking 
institutions. Union Financial markets have become integrated to such an extent that domestic 
shocks may be rapidly transmitted to firms and markets in other Member States. 

At  international  level,  G20-Leaders  have  called  for  a  “review  of  resolution  regimes  and 
bankruptcy laws in light of recent experience to ensure that they permit an orderly wind-down 
of large complex cross-border institutions.”42 At the Pittsburgh summit on 25 September 2009, 
they committed to act together to "...create more powerful tools to hold large global firms to 
account  for  the  risks  they  take"  and,  more  specifically,  to  "develop  resolution  tools  and 
frameworks  for  the  effective  resolution  of  financial  groups  to  help  mitigate  the  disruption  of 
financial institution failures and reduce moral hazard in the future." 

In  Seoul  in  November  2010,  the  G20  endorsed  the  FSB  SIFI  Report43  which  recommended 
that “all jurisdictions should undertake the necessary legal reforms to ensure that they have in 

42 
43 

G20 Leaders' declaration of the Summit on financial markets and the world economy, April 2009. 
'Reducing the moral hazard posed by systemically important financial institutions' 
http://www.financialstabilityboard.org/press/pr_101111a.pd 

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place a resolution regime which would make feasible the resolution of any financial institution 
without  taxpayer  exposure  to  loss  from  solvency  support  while  protecting  vital  economic 
functions  through  mechanisms  which  make  it  possible  for  shareholders  and  unsecured  and 
uninsured creditors to absorb losses in their order of seniority”. 

In October 2011, the Financial Stability Board adopted Key Attributes of Effective Resolution 
Regimes  for  Financial  Institutions  ('Key  Attributes)44  that  set  out  the  core  elements  that  the 
FSB considers to be necessary for an effective resolution regime. Their implementation should 
allow  authorities  to  resolve  financial  institutions  in  an  orderly  manner  without  taxpayer 
exposure to loss from solvency support, while maintaining continuity of their vital economic 
functions. 

1.5.2.  Added value of Union involvement 

Under the principle of subsidiarity set out in Article 5.3 of the TFEU, in areas which do not 
fall  within  its  exclusive  competence,  the  Union  should  act  only  if  and  in  so  far  as  the 
objectives of the proposed action cannot be sufficiently achieved by the Member States, either 
at central level or at regional and local level, but can rather, by reason of the scale or effects of 
the proposed action, be better achieved at Union level. 

Only  action  at  Union  level  can  ensure  that  Member  States  use  compatible  measures  to  deal 
with  failing  banks.  Although  the  Union  banking  sector  is  highly  integrated,  systems  to  deal 
with bank crises are nationally based. Many national legal systems do not currently confer the 
powers  necessary  for  authorities  to  wind  down  financial  institutions  in  an  orderly  manner 
while  preserving  those  services  essential  for  financial  stability  without  relying  on  taxpayers' 
money. Divergent national legislation is ill-suited to dealing adequately with the cross-border 
dimension of crises and arrangements for home-host cooperation are insufficient. 

Limited resolution options increase the risk of moral hazard and generate an expectation that 
large, complex and interconnected banks would again need public financial assistance in the 
event of problems. It is therefore clear that an effective framework for recovery and resolution 
in an integrated market cannot be achieved by Member States and needs to be set out at Union 
level. 

Under the principle of proportionality, the content and form of Union action should not exceed 
what is necessary to achieve the objectives of the Treaties. 

The  present  proposal  aims  at  maintaining  financial  stability  and  confidence  in  banks, 
minimising  losses  for  taxpayers  and  strengthening  the  internal  market  for  banking  services 
while  maintaining  a  level  playing  field.  This  requires  the  convergence  of  national  laws  to 
provide authorities with a consistent set of crisis management and resolution tools. Only Union 
action can deliver this objective. 

The provisions are proportionate to what is necessary to achieve the objectives. The limitations 
to the right to property that the exercise of the powers proposed may entail are consistent with 
the  Charter  of  Fundamental  Rights  as  interpreted  by  the  European  Court  of  Human  Rights. 

44 

http://www.financialstabilityboard.org/publications/r_111104cc.pdf 

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These restrictions are limited to the extent necessary in order to meet an objective of general 
interest, namely preserving financial stability in the Union. 

Resolution is closely linked to non-harmonised areas of national law, such as insolvency and 
property law. A directive is, therefore, the appropriate legal instrument since transposition is 
necessary  to  ensure  that  the  framework  is  implemented  in  a  way  that  achieves  the  intended 
effect, within the specificities of relevant national law. 

1.5.3.  Lessons learned from similar experiences in the past 

N.A. 

1.5.4.  Coherence and possible synergy with other relevant instruments 

The crisis management framework is in strong relation with the deposit guarantee scheme system in 
the Union. The modification of the relevant Directive 94/19/EC is currently discussed in the Council 
and  the  Parliament.  Synergies  between  DGS  funds  and  bank  resolution  measures  are  significant, 
especially when it relates to financing issues. When a resolution framework that stops contagion is in 
place, the DGS fund will only finance a few banks that default initially. In contrast, when no resolution 
measures are available and contagion spreads through the financial system, the amount of money that 
the DGS needs to pay out in a MS is considerably higher. 

The  proposal  also  relates  to  the  Capital  Requirements  Directive  (CRD),  which  sets  prudential 
requirements  for  banks  and  investment  firms.  Recent  amendments  to  the  CRD  aim  to  increase  the 
quantity and quality of capital that banks hold, so that they could actually absorb potential losses. New 
liquidity  requirements intend to make sure  that banks remain  liquid even in a stressed market period 
and develop a liability structure that provides further stability. All these measure will make the banking 
sector safer and decrease the chances of bank failure and the need for public interventions. Despite all 
these measures, the failure of banks in the future cannot be excluded. Hence there is a need to develop 
a complementary legal framework (bank recovery and resolution) that ensures that financial stability is 
maintained even in the negative scenarios. 

1.6. 

Duration and financial impact 

(cid:133) Proposal/initiative of limited duration 

–  (cid:133)  Proposal/initiative in effect from [DD/MM]YYYY to [DD/MM]YYYY  

–  (cid:133)  Financial impact from YYYY to YYYY  

(cid:58) Proposal of unlimited duration 

–  Implementation with a start-up period from 2013 to 2015, 

–  followed by full-scale operation. 

EN 

159 

   EN 

1.7.  Management mode(s) envisaged45  

(cid:133) Centralised direct management by the Commission  

(cid:133) Centralised indirect management with the delegation of implementation tasks to: 

–  (cid:133)  executive agencies  

–  (cid:58)  bodies set up by the Communities46 

–  (cid:133)  national public-sector bodies/bodies with public-service mission  

–  (cid:133)  persons entrusted with the implementation of specific actions pursuant to Title V of the 
Treaty  on  European  Union  and  identified  in  the  relevant  basic  act  within  the  meaning  of 
Article 49 of the Financial Regulation  

(cid:133) Shared management with the Member States  

(cid:133) Decentralised management with third countries  

(cid:133) Joint management with international organisations (to be specified) 

If more than one management mode is indicated, please provide details in the "Comments" section. 

Comments  

- 

45 

46 

Details of management modes and references to the Financial Regulation may be found on the BudgWeb site: 
http://www.cc.cec/budg/man/budgmanag/budgmanag_en.html 
As referred to in Article 185 of the Financial Regulation. 

EN 

160 

   EN 

                                                 
2. 

MANAGEMENT MEASURES 

2.1.  Monitoring and reporting rules 

Specify frequency and conditions. 

Article 81 of the Regulation establishing the European Banking Authority (EBA) requires the 
Commission by 2 January 2014, and every 3 years thereafter, to publish a general report on the 
experience  acquired  as  a  result  of  the  operation  of  EBA.  To  this  end,  the  Commission  will 
publish a general report that will be forwarded to the European Parliament and to the Council. 

2.2.  Management and control system 

2.2.1.  Risk(s) identified  

In  relation  to  the  legal,  economical,  efficient  and  effective  use  of  appropriations  resulting 
from the proposal it is expected that the proposal would not bring about new risks that would 
not be currently covered by an EBA existing internal control framework. 

2.2.2. Control method(s) envisaged 

- 

2.3.  Measures to prevent fraud and irregularities  

Specify existing or envisaged prevention and protection measures. 

For the purposes of combating fraud, corruption and any other illegal activity, the provisions 
of Regulation (EC) No 1073/1999 of the European Parliament and of the Council of 25 May 
1999  concerning  investigations  conducted  by  the  European  Anti-Fraud  Office  (OLAF)  shall 
apply to EBA without any restriction. 

EBA shall accede to the Interinstitutional Agreement of 25 May 1999 between the European 
Parliament,  the  Council  of  the  European  Union  and  the  Commission  of  the  European 
Communities  concerning  internal  investigations  by  the  European  Anti-Fraud  Office  (OLAF) 
and shall immediately adopt appropriate provisions for all EBA staff. 

The  funding  decisions  and  the  agreements  and  the  implementing  instruments  resulting  from 
them shall explicitly stipulate that the Court of Auditors and OLAF may, if need be, carry out 
on-the-spot  checks  on  the  beneficiaries  of  monies  disbursed  by  EBA  as  well  as  on  the  staff 
responsible for allocating these monies. 

Articles 64 and 65 of the Regulation establishing the European Banking Authority (EBA) set 
out  the  provisions  on  implementation  and  control  of  EBA  budget  and  applicable  financial 
rules. 

EN 

161 

   EN 

3. 

ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL 

3.1. 

Heading(s)  of  the  multiannual  financial  framework  and  expenditure  budget  line(s) 
affected  

Heading of 
multiannual 
financial 
framework 

Heading of 
multiannual 
financial 
framework 

•  Existing expenditure budget lines 

In order of multiannual financial framework headings and budget lines. 

Budget line 

Type of  
expenditure

Contribution  

Number  
[Description………………………...……….] 

Diff./non-
diff. 
(47) 

from 
EFTA48 
countries 

from 
candidate 
countries49 

from third 
countries 

within the 
meaning of 
Article 18(1)(aa) 
of the Financial 
Regulation  

12.0402.01 

EBA – Subsidy under Titles 1, 2 and 3 

•  New budget lines requested 

Diff 

Yes 

NO 

NO 

NO 

In order of multiannual financial framework headings and budget lines. 

Budget line 

Type of 
expenditure

Contribution  

Number  
[Heading……………………………………..] 

Diff./non-
diff. 

from 
EFTA 
countries 

from 
candidate 
countries 

from third 
countries 

within the 
meaning of Article 
18(1)(aa) of the 
Financial 
Regulation  

[XX.YY.YY.YY] 

YES/N
O 

YES/N
O 

YES/N
O 

YES/NO 

47 
48 
49 

Diff. = Differentiated appropriations / Non-diff. = Non-Differentiated Appropriations 
EFTA: European Free Trade Association.  
Candidate countries and, where applicable, potential candidate countries from the Western Balkans. 

EN 

162 

   EN 

 
 
 
 
                                                 
3.2. 

Estimated impact on expenditure  

3.2.1. 

Summary of estimated impact on expenditure 

Heading of multiannual financial framework:  

1A 

Competitiveness for Growth and Employment 

EUR million (to 3 decimal places) 

DG: MARKT 

(cid:121) Operational appropriations  

12.0402.01 

of 

Appropriations 
 from the revenues from fees  
Number of budget line 

an 

Commitments 

Payments 

(1) 

(2) 

administrative 

nature 

financed 

TOTAL appropriations 
for DG MARKT 

(cid:121) TOTAL operational appropriations  

Commitments 

Payments 

Commitments 

Payments 

(cid:121)  TOTAL  appropriations  of  an  administrative  nature 
financed from revenues from fees 

(3) 

=1+1a 
+3 

=2+2a
+3 

(4) 

(5) 

(6) 

TOTAL appropriations  

Commitments 

=4+ 6 

Year 
201350 

Year 
2014 

Year 
2015 

0 

0 

0 

0 

0 

0 

0 

1,080 

1,080 

1,080 

1,080 

1,080 

1,080 

999 

999 

999 

999 

999 

999 

1,080 

999 

TOTAL 

2,079 

2,079 

2,079 

2,079 

2,079 

2,079 

2,079 

50 

Year N is the year in which implementation of the proposal/initiative starts. 

EN 

163 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
under HEADING 1A 
of the multiannual financial 
framework 

Comments: 

Payments 

=5+ 6 

1,080 

999 

2,079 

TOTAL appropriations  
under HEADINGS 1 to 5 
of the multiannual financial 
framework  

Commitments 

Payments 

Year 
201351 

Year 
2014 

Year 
2015 

0 

0 

1,080 

999 

1,080 

999 

EUR million (to 3 decimal places) 

TOTAL 

2,079 

2,079 

51 

Year N is the year in which implementation of the proposal/initiative starts. 

EN 

164 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
3.2.2.  Estimated impact on operational appropriations  

–  (cid:133)  The proposal/initiative does not require the use of operational appropriations  

–  (cid:58)  The proposal/initiative requires the use of operational appropriations, as explained below: 

Indicate 

objectives and outputs 

(cid:216) 

Year 
2012  

Year 
2013 

Year 
2014 

Year 
2015 

TOTAL 

Type52 

Average cost 

Output   Total 
Cost 

Output 

Total 
Cost 

Output 

Total 
Cost  Output 

Total 
Cost 

Output  

Total 
Cost 

1. Objectives for preparation and prevention: 

– 

– 

increase preparedness of supervisors and banks for crisis situations and 

enable resolvability of all banks 

Number of Technical Standards and Guidelines  

numerical 

0 

0 

0 

0 

11 

517 

1 

200 

12 

717 

Sub-total for specific objective No 1 

2. Objective for Early intervention: 

– 

improve early intervention arrangements for supervisors  

0 

0 

0 

0 

11 

517 

1 

200 

12 

717 

52 

Outputs are products and services to be supplied (e.g.: number of student exchanges financed, number of km of roads built, etc.). 

EN 

165 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
Indicate 

objectives and outputs 

(cid:216) 

Year 
2012  

Year 
2013 

Year 
2014 

Year 
2015 

TOTAL 

Type52 

Average cost 

Output   Total 
Cost 

Output 

Total 
Cost 

Output 

Total 
Cost  Output 

Total 
Cost 

Output  

Total 
Cost 

Number of Technical Standards and Guidelines  

numerical 

Sub-total for specific objective No 2 

3. Objectives for Bank resolution: 

– 

– 

ensure resolution of banks in a timely and robust manner 

ensure legal certainty for bank resolution 

Number of Technical Standards and Guidelines  

numerical 

Sub-total for specific objective No 3 

4. Objective for cross  border crisis  management:  - foster efficient  cooperation 

of authorities in cross border resolution 

Number of Technical Standards and Guidelines  

Sub-total for specific objective No 4 

TOTAL COST53 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

1 

1 

47 

47 

10 

10 

1 

1 

470 

470 

47 

47 

0 

23 

1,081

0 

0 

4 

4 

0 

0 

5 

0 

0 

1 

1 

47 

47 

799 

799 

14 

14 

1,269 

1,269 

0 

0 

1 

1 

47 

47 

999 

28 

2,080 

53 

Appropriations allocated to different objectives also include overhead costs, which are proportionate to direct HR costs. 

EN 

166 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
3.3. 

Heading(s) of the multiannual financial framework and expenditure budget line(s) affected  

•  Existing expenditure budget lines  

NA 

•  New budget lines requested  

NA 

Estimated impact on appropriations of an administrative nature 

3.3.1.1.  Summary  

–  (cid:58)  The proposal/initiative does not require the use of administrative appropriations  

–  (cid:133)  The proposal/initiative requires the use of administrative appropriations, as explained below: 

3.3.1.2.  Estimated requirements of human resources 

–  (cid:58)  The proposal does not require the use of human resources  

–  (cid:133)  The proposal/initiative requires the use of human resources, as explained below: 

Comment: 

No additional human and administrative resources will be needed in DG MARKT as a result of the proposal. 

3.3.2.  Compatibility with the current multiannual financial framework  

–  (cid:58)  Proposal is compatible the current multiannual financial framework. 

EN 

167 

EN 

 
  
 
–  (cid:133)  Proposal/initiative will entail reprogramming of the relevant heading in the multiannual financial framework. 

–  (cid:133)  Proposal/initiative requires application of the flexibility instrument or revision of the multiannual financial framework54. 

3.3.3.  Third-party contributions  

–  (cid:133)  The proposal/initiative does not provide for co-financing by third parties  

–  (cid:58)  The proposal provides for the co-financing estimated below: 

Appropriations in EUR million (to 3 decimal places) 

Year 
2013 

Year 
2014 

Year 
2015 

Member 
State' 
Contribution  (60%  of 
overall costs) 

0 

1,620 

1,498 

3.4. 

Estimated impact on revenue  

–  (cid:58)  Proposal has no financial impact on revenue. 

–  (cid:133)  Proposal/initiative has the following financial impact: 

– 

– 

(cid:133) 

(cid:133) 

on own resources  

on miscellaneous revenue  

Total 

3,119 

54 

See points 19 and 24 of the Interinstitutional Agreement. 

EN 

168 

EN 

 
  
 
 
 
 
 
 
 
                                                 
Annex  to  the  Legislative  Financial  Statement  for  a  proposal  for  Directive  of  the  European  Parliament  and  of  the  Council  establishing  a 
framework  for  the  recovery  and  resolution  of  credit  institutions  and  investment  firms  and  amending  Council  Directives  77/91/EEC, 
82/891/EC, 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC and 2011/35/EC and Regulation (EU) No 1093/2010. 

The costs related to tasks to be carried out by EBA have been estimated for staff expenditure (Title 1), but also Title 2. 

Regarding the timing of the proposal, it is assumed that the Directive will enter into force between June and December 2013. EBA shall draft technical 
standards 12 months from the date of entry into force, therefore it is expected that the work would start as early as January 2014. Additional staff has 
been  estimated  for  the  23  technical  standards  and  5  guidelines,  including  related  actions  reserved  for  the  recognition  of  third  country  resolution 
proceedings, for the completion of non-binding framework cooperation arrangements with third countries as well as for on-going monitoring work, 
participation in colleges and the exercise of binding mediation of EBA. The proposal of the Commission includes long-term tasks for EBA that will 
require the establishment of 5 additional posts (temporary agents) as from 2014. In addition, 11 seconded national experts "SNE" are foreseen to carry 
out temporary tasks limited to 2014 and 2015 years. 

Other assumptions: 

•  Salary weighting coefficient for London of 1.28; 

•  Due to complexity of the technical standards, guidelines and the workload for related tasks as explained above, it is assumed that on average one 
technical  standard/  guideline will  require  1.15  man  years.  Thus,  23  technical  standards  and  5  guidelines  will  require  32  man  years  for  2014  and 
2015. 

•  Training costs assumed at €1,000 per FTE per year; 

•  Mission costs of €10,000, estimated based on 201 2 draft budget for missions per headcount; 

•  Recruiting-related costs (travel, hotel, medical examinations, installation and other allowances, removal costs, etc.) of €12,7 00, estimated based on 

2012 draft budget for recruiting per new headcount. 

EN 

169 

EN 

 
  
The method of calculating the increase in the required budget for the next three years is presented in more detail in table below.  

Cost type 

Calculation 

Amount (in EUR millions) 

2013 

2014 

2015 

Total 

Title 1: Staff expenditure 

11 Salaries and allowances 

- of which temporary agents 

=5*127*1,28 

- of which SNEs 

=11*73*1,28 

- of which contract agents 

12 Expenditure related to recruitment 

=16*12,7 

13 Mission expenses 

15 Training 

=16*10 

=16*1 

Total Title 1: Staff expenditure 

Title  2: 
expenditure 

Infrastructure 

and  operating 

=16*30  

0 

0 

0 

0 

0 

0 

0 

0 

813 

813 

1,626 

1,028 

1,028 

2,056 

0 

203 

0 

0 

0 

203 

160 

160 

320 

16 

16 

32 

2,220 

2,017 

4,237 

480 

480 

960 

EN 

170 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Title 3: Operational expenditure 

Total 

Of which Community contribution (40%) 

Of which Member State contribution (60%) 

0 

0 

0 

0 

0 

0 

0 

2,700 

1,080 

1,620 

2,497 

999 

1,498 

5,197 

2,078 

3,119 

The following table presents the proposed establishment plan for the five temporary agent positions. 

Function group and grade 

Temporary 
posts 

AD 8 

AD 7 

AD 6 

AD 5 

AD total 

1 

1 

1 

2 

5 

EN 

171 

EN