Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2014/59/EU as regards early intervention measures, conditions for resolution and financing of resolution action
Date: 2023-04-18
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: aid for restructuring, company in difficulties, credit institution, economic stabilisation, financial control, financial intervention, financial legislation, financial solvency, investment company

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   EUROPEAN COMMISSION  Strasbourg, 18.4.2023  COM(2023) 227 final 2023/0112 (COD)  Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2014/59/EU as regards early intervention measures, conditions for resolution and financing of resolution action (Text with EEA relevance) {SWD(2023) 225-226 final} - {SEC(2023) 230 final}  
 
 
EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

• 
The  proposed  amendments  to  Directive  2014/59/EU1  (the  Bank  Recovery  and  Resolution 
Directive  or  BRRD)  are  part  of  the  crisis  management  and  deposit  insurance  (CMDI) 
legislative  package  that  also  includes  amendments  to  Regulation  (EU)  No 806/20142  (the 
Single  Resolution  Mechanism  Regulation  or  SRMR)  and  to  Directive  2014/49/EU3  (the 
Deposit Guarantee Schemes Directive or DGSD). 

The  EU  crisis  management  framework  is  well-established,  however,  previous  episodes  of 
bank failures have shown that there is need for improvements. The aim of the CMDI reform is 
to  build  on  the  objectives  of  the  crisis  management  framework  and  to  ensure  a  more 
consistent approach to resolution, so that any bank in crisis can exit the market in an orderly 
manner,  while  preserving  financial  stability,  taxpayer  money  and  ensuring  depositor 
confidence.  In  particular,  the  existing  resolution  framework  for  smaller  and  medium-sized 
banks  needs  to  be  strengthened  with  respect  to  its  design,  implementation  and,  most 
importantly,  incentives  for  its  application,  so  that  it  can  be  more  credibly  applied  to  those 
banks. 

Context of the proposal 

In  the  aftermath  of  the  global  financial  and  sovereign  debt  crises,  the  EU  took  decisive 
actions, in line with international calls for reform, to create a safer financial sector for the EU 
single market. This included providing the tools and powers to handle the failure of any bank 
in  an  orderly  manner,  while  preserving  financial  stability,  public  finances  and  depositor 
protection. The Banking Union was created in 2014 and is currently made up of two pillars: a 
Single Supervisory Mechanism (SSM) and a Single Resolution Mechanism (SRM). However, 
the  Banking  Union  is  still  incomplete  and  is  missing  its  third  pillar:  a  European  deposit 
insurance  scheme  (EDIS)4.  The  Commission’s  proposal  adopted  on  24 November  2015  to 
establish EDIS5 is still pending. 

The Banking Union is supported by a Single Rulebook which, in what concerns the CMDI, is 
made up of three EU legal acts adopted in 2014: the BRRD, the SRMR and the DGSD. The 
BRRD  defines  the  powers,  rules  and  procedures  for  the  recovery  and  resolution  of  banks, 
including cross-border cooperation arrangements to tackle cross-border banking failures. The 
SRMR creates the Single Resolution Board (SRB) and the Single Resolution Fund (SRF) and 
defines  powers,  rules  and  procedures  for  the  resolution  of  the  entities  established  in  the 

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Directive  2014/59/EU  of  the  European  Parliament  and  of  the  Council  of  15 May  2014  establishing  a 
framework  for  the  recovery  and  resolution  of  credit  institutions  and  investment  firms  and  amending 
Council  Directive  82/891/EEC,  and  Directives  2001/24/EC,  2002/47/EC,  2004/25/EC,  2005/56/EC, 
2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) 
No 648/2012, of the European Parliament and of the Council (OJ L 173, 12.6.2014, p. 190). 
Regulation  (EU)  No 806/2014  of  the  European  Parliament  and  of  the  Council  of  15  July  2014 
establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain 
investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and 
amending Regulation (EU) No 1093/2010 (OJ L 225, 30.7.2014, p. 1). 
Directive  2014/49/EU  of  the  European  Parliament  and  of  the  Council  of  16 April  2014  on  deposit 
guarantee schemes (OJ L 173, 12.6.2014, p. 149). 
Furthermore, there is still no agreement on a credible and robust mechanism for providing liquidity in 
resolution in the Banking Union, in line with the standard set by international peers. 
COM/2015/0586 final. 

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Banking  Union,  in  the  context  of  the  single  resolution  mechanism.  The  DGSD  ensures  the 
protection of depositors and sets-out the rules for the use of DGS funds. The BRRD and the 
DGSD apply in all Member States while the SRMR applies in Member States participating in 
the Banking Union.  

The 2019  banking package, also  known as  the ‘risk  reduction package’, revised the  BRRD, 
the  SRMR,  the  Capital  Requirements  Regulation  (CRR)6  and  the  Capital  Requirements 
Directive  (CRD)7.  These  revisions  included  measures  delivering  on  the  EU’s  commitments 
made  in  international  fora8  to  take  further  steps  towards  completing  the  Banking  Union  by 
providing credible risk reduction measures to mitigate threats to financial stability.  

In November 2020, the Eurogroup agreed on the creation and early introduction of a common 
backstop to the SRF by the European Stability Mechanism (ESM)9.  

The  crisis  management  and  deposit  insurance  (CMDI)  reform  and  the  broader 
implications for the Banking Union 

Together with the CMDI reform, a complete Banking Union, including its third pillar, EDIS, 
would  offer  a  higher  level  of  financial  protection  and  confidence  to  EU’s  households  and 
businesses, increase trust and strengthen financial stability as necessary conditions for growth, 
prosperity and resilience in the Economic and Monetary Union and in the EU more generally. 
The Capital Markets Union complements the Banking Union as both initiatives  are essential 
to finance the twin transitions (digital and green), step up the international role of the euro and 
strengthen  the  EU’s  open  strategic  autonomy  and  its  competitiveness  in  a  changing  world, 
particularly considering the current challenging economic and geopolitical environment10, 11. 
In June 2022, the Eurogroup did not agree to a more comprehensive work plan to complete 
the  Banking  Union  by  including  EDIS.  Instead,  the  Eurogroup  invited  the  Commission  to 
table  more  targeted  legislative  proposals  for  reforming  the  EU  framework  for  bank  crisis 
management and national deposit insurance12.  
In parallel, the European Parliament, in its 2021 annual report on the Banking Union13, also 
stressed  the  importance  of  completing  it  with  the  establishment  of  EDIS  and  supported  the 
Commission in putting forward a legislative proposal on the CMDI review. While EDIS was 
not explicitly endorsed by the Eurogroup, it would make the CMDI reform more robust and it 

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Regulation  (EU)  No 575/2013  of  the  European  Parliament  and  of  the  Council  of  26 June  2013  on 
prudential  requirements  for  credit  institutions  and  investment  firms  and  amending  Regulation  (EU) 
No 648/2012 (OJ L 176, 27.6.2013, p. 1). 
Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the 
activity  of  credit  institutions  and  the  prudential  supervision  of  credit  institutions,  amending  Directive 
2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 338). 
The  Basel  Committee  on  Banking  Supervision  and  the  Financial  Stability  Board  (FSB).  Financial 
Stability  Board  (2014  updated  version),  Key  Attributes  of  effective  resolution  regimes  for  financial 
institutions  and  (2015),  Principles  on  Loss-absorbing  and  Recapitalisation  Capacity  of  Globally 
Systemically  Important  Banks  (G-SIBs)  in  Resolution,  Total  Loss-absorbing  Capacity  (TLAC)  Term 
Sheet. 
Eurogroup  (30 November  2020),  Statement  of  the  Eurogroup  in  inclusive  format  on  the  ESM  reform 
and  the  early  introduction of  the  backstop  to  the  Single  Resolution  Fund. The  implementation  would 
take place over 2022-2024. However, the  Agreement Amending the Treaty Establishing the European 
Stability Mechanism is still pending ratification. 
European Commission (2020), Commission Work Programme 2021, section 2.3, p. 5.  
European Commission (2023), Long-term competitiveness of the EU: looking beyond 2030. 
Eurogroup (16 June 2022), Eurogroup statement on the future of the Banking Union. 
European Parliament (2022), Banking Union – annual report 2021; the European Parliament has issued 
a report on the Banking Union every year starting 2015. 

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would  deliver  synergies  and  efficiency  gains  for  the  industry.  Such  a  legislative  package 
would be part of the  agenda for completing the  Banking Union, as  emphasised in  President 
von  der  Leyen’s  Political  Guidelines,  which  also  recalled  the  importance  of  EDIS,  and  as 
regularly supported by leaders14. 

The objectives of the crisis management and deposit insurance (CMDI) framework 

The  CMDI  framework  was  designed  to  mitigate  the  risks  and  manage  the  failure  of 
institutions of any size, while achieving four overarching objectives:  

(i) 

(ii) 

protect  financial  stability  while  avoiding  contagion,  thereby  ensuring  market 
discipline and continuity of critical functions for society,  

safeguard the functioning of the single market and provide a level playing field 
across the EU;  

(iii)  minimise recourse to taxpayer money and weaken the bank-sovereign loop and  

(iv)  protect depositors and ensure consumer confidence.  

The  CMDI  framework  provides  for  a  set  of  instruments  that  can  be  applied  in  the  various 
stages  of  the  life  cycle  of  banks  in  distress:  recovery  action  supported  by  recovery  plans 
drafted  by  banks;  early  intervention  measures;  measures  to  prevent  the  failure  of  a  bank; 
resolution plans prepared by resolution authorities; and a resolution toolbox when the bank is 
declared failing or likely to fail and it is deemed that the resolution of the bank (rather than its 
liquidation) is in the public interest. Additionally, national insolvency procedures, which are 
outside of the CMDI framework15 continue to apply for those failing banks that can be dealt 
with  under  these  national  procedures,  where  they  are  more  suitable  (rather  than  resolution) 
and do not harm public interest or endanger financial stability.  

The  CMDI  framework  is  aimed  at  providing  a  combination  of  funding  sources  to  manage 
failures in an economically efficient manner, protecting financial stability and depositors and 
maintaining market discipline, while reducing recourse to the public budget and ultimately the 
cost  to  taxpayers.  The  cost  of  resolving  the  bank  is  first  covered  through  the  bank’s  own 
resources,  i.e.  allocated  to  the  shareholders  and  creditors  of  the  bank  itself  (constituting  the 
bank’s  internal  loss  absorbing  capacity),  which  also  reduces  moral  hazard  and  improves 
market  discipline.  If  needed,  it  can  be  complemented  by  funds  from  deposit  guarantee 
schemes (DGS) and resolution financing arrangements (national resolution funds (RF) or the 
SRF  in  the  Banking  Union).  These  funds  are  financed  by  contributions  by  all  banks 
irrespective of their size and business model. In the Banking Union, these rules were further 
integrated by entrusting the SRB with managing and overseeing the SRF, which is funded by 
contributions  from  the  industry  in  the  participating  Member  States  of  the  Banking  Union. 
Depending on the tool applied to a bank in distress (e.g. preventive, precautionary, resolution 
or alternative measures under national insolvency proceedings) and the specific details of the 

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Euro Summit Meeting (24 March 2023), Statement of the Euro Summit, meeting in inclusive format.  
National insolvency proceedings are not harmonised. However, the decision by the resolution authority 
whether  to  place  a  failing  bank  in  resolution,  which  requires  a  comparison  between  resolution  and 
national  insolvency  proceedings  (public  interest  assessment),  is  part  of  the  CMDI  framework.  If  a 
resolution authority decides not to place a failing bank in resolution, the case is subsequently treated at 
national  level,  where  the  assessment  of  the  initiation  of  insolvency  proceedings  or  of  other  types  of 
winding up proceedings takes place, according to the specific details of national insolvency regimes.  

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case, State aid16 control may be necessary for interventions by an RF/SRF, a DGS or public 
funding from the State budget. 

Reasons for the proposal 

Notwithstanding  the  progress  achieved  since  2014,  resolution  has  been  rarely  applied, 
especially  in  the  Banking  Union.  Areas  for  further  strengthening  and  adjustment  were 
identified  as  regards  the  CMDI  framework  in  terms  of  design,  implementation  and  most 
importantly, incentives for its application. 

To date, many failing banks of a smaller or medium size have been dealt with under national 
regimes often involving the use of taxpayer money (bailouts) instead of the industry-funded 
safety nets, such as the SRF in the Banking Union that so far has been unused in resolution. 
This  goes  against  the  intention  of  the  framework  as  it  was  set-up  after  the  global  financial 
crisis,  which  involved  a  major  paradigm  shift  from  bailout  to  bail-in.  In  this  context,  the 
opportunity  cost  of  the  resolution  financing  arrangements  financed  by  all  banks  is 
considerable. 

The  resolution  framework  did  not  fully  deliver  on  key  overarching  objectives,  notably 
facilitating  the  functioning  of  the  EU  single  market  in  banking  by  ensuring  a  level  playing 
field, handling cross-border and domestic crises and minimising recourse to taxpayer money.  

The  reasons  are  mainly  due  to  misaligned  incentives  in  choosing  the  right  tool  to  manage 
failing  banks,  leading  to  the  non-application  of  the  harmonised  resolution  framework,  in 
favour  of  other  avenues.  This  is  due  overall  to  the  broad  discretion  in  the  public  interest 
assessment,  difficulties  in  accessing  funding  in  resolution  without  imposing  losses  on 
depositors, and easier access to funding outside of resolution. Following this path raises risks 
of fragmentation and suboptimal outcomes in managing banks’ failures, in particular those of 
smaller and medium-sized banks.  

The review of the CMDI framework and the interaction with national insolvency proceedings 
should provide solutions to address these issues. It should also enable the framework to fully 
achieve its objectives and be fit for purpose for all banks in the EU irrespective of their size, 
business  model and liability structure, even smaller and medium-sized banks, if required by 
prevailing circumstances. The revision should aim at ensuring a consistent application of the 
rules across Member States, delivering a better level playing field, while protecting financial 
stability  and  depositors,  preventing  contagion  and  reducing  recourse  to  taxpayer  money.  In 
particular,  the  framework  should  be  improved  to  facilitate  the  resolution  of  smaller  and 
medium-sized banks as initially expected, by mitigating the impacts on financial stability and 
the real economy without recourse to public funding, and by fostering the confidence of their 
depositors,  consisting  primarily  of  households  and  small  and  medium-sized  enterprises 
(SMEs). In terms of the magnitude of the changes envisaged, the CMDI review does not seek 
to overhaul the current framework but rather to bring much needed improvements in  several 
key areas to make the framework work as intended for all banks. 

Summary of the crisis management and deposit insurance (CMDI) reform elements 

The  amendments  included  in  the  CMDI  package  cover  a  range  of  policy  aspects  and 
constitute a coherent response to the identified problems: 

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State aid rules are intrinsically linked with and complementary to the CMDI framework. These rules are 
not subject to this review and this impact assessment. In order to ensure consistency between the two 
frameworks, the Eurogroup invited the Commission in November 2020 to conduct a review of the State 
aid framework for banks, and to complete it in parallel with the CMDI framework review, ensuring its 
entry into force at the same time with the updated CMDI framework. 

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expanding the scope of resolution by reviewing the public interest assessment, 
when  this  achieves  the  objectives  of  the  framework,  e.g.  protecting  financial 
stability,  taxpayer  money  and  depositor  confidence  better  than  national 
insolvency proceedings; 

strengthening  the  funding  in  resolution  by  complementing  the  internal  loss- 
absorbing capacity of institutions, which remains the first line of defence, with 
the  use  of  DGS  funds  in  resolution  to  help  access  resolution  funds  without 
imposing  losses  on  depositors  where  appropriate,  subject  to  conditions  and 
safeguards; 

amending the ranking of claims in insolvency and ensuring a general depositor 
preference with a single-tier depositor preference, with the aim of enabling the 
use of DGS funds in measures other than payout of covered deposits; 

harmonising  the  least  cost  test  for  all  types  of  DGS  interventions  outside 
payout of covered deposits in insolvency to improve the level playing field and 
ensure consistency of outcomes; 

clarifying  the  early  intervention  framework  by  removing  overlaps  between 
early  intervention  and  supervisory  measures,  providing  legal  certainty  on  the 
applicable  conditions  and  facilitating  cooperation  between  competent  and 
resolution authorities; 

ensuring a timely triggering of resolution; and 

improvements  of  DGSD 
improving  depositor  protection  (e.g. 
provisions on scope of protection and cross-border cooperation, harmonisation 
of  national  options,  and improvement  of  transparency  on  financial  robustness 
of DGSs). 

targeted 

• 

Consistency with existing policy provisions in the policy area 

The proposal puts forward amendments to the existing legislation to render it fully consistent 
with existing policy provisions in the area of bank crisis management and deposit insurance. 
The review of the BRRD/SRMR and of the DGSD aims at improving the functioning of the 
framework in a way that provides the tools to resolution authorities to  be able to handle the 
failure  of  any  bank,  irrespective  of  size  and  business  model,  in  order  to  preserve  financial 
stability, protect depositors, and avoid recourse to taxpayer money. 

• 

Consistency with other EU policies 

The proposal builds on the reforms carried out in the aftermath of the financial crisis that led 
to the creation of the Banking Union and the single rulebook for all EU banks. 

The proposal helps strengthen the EU financial legislation adopted in the last decade to reduce 
risks in the financial sector and ensure an orderly management of bank failures. The aim is to 
make  the  banking  system  more  robust  and  ultimately  promote  the  sustainable  financing  of 
economic  activity  in  the  EU.  It  is  fully  consistent  with  the  EU's  fundamental  goals  of 
promoting  financial  stability,  reducing  taxpayers’  support  in  bank  resolution  and  protecting 
depositor confidence. These objectives are conducive to a high level of competitiveness and 
consumer protection. 

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2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

The proposal amends an existing directive, the BRRD, in particular as regards the improved 
application  of  the  tools  that  are  already  available  in  the  bank  recovery  and  resolution 
framework,  clarifying  the  conditions  for  resolution,  facilitating  access  to  safety  nets  in  the 
event  of  bank  failure,  and  improving  the  clarity  and  consistency  of  funding  rules.  By 
establishing  harmonised  requirements  for  applying  the  CMDI  framework  to  banks  in  the 
internal  market,  the  proposal  considerably  reduces  the  risk  of  divergent  national  rules  in 
Member States, which could distort competition in the internal market. 

Consequently,  the  legal  basis  for  the  proposal  is  the  same  as  the  legal  basis  of  the  original 
legislative act, namely Article 114 TFEU. That provision allows for measures to be adopted 
for the approximation of national provisions which have as their objective the establishment 
and functioning of the internal market. 

• 

Subsidiarity (for non-exclusive competence)  

The legal basis falls within the internal market area, which is considered a shared competence, 
as  defined  by  Article 4  TFEU.  Most  of  the  actions  considered  represent  updates  and 
amendments  to  existing  EU law, and as such, they concern areas  where the  EU has already 
exercised its competence and does not intend to cease exercising such competence.  

Given  that  the  objectives  pursued  by  the  proposed  measures  aim  at  supplementing  already 
existing EU legislation, they can be best achieved at EU level rather than by different national 
initiatives. In particular, the rationale for a specific and harmonised EU resolution regime for 
all banks in the EU was laid out at the inception of the framework in 2014. Its main features 
reflect  international  guidance  and  the  ‘Key  Attributes  of  Effective  Resolution  Regimes  for 
Financial Institutions’ adopted by the Financial Stability Board in the aftermath of the 2008 
global financial crisis.  

The principle of subsidiarity is embedded in the existing resolution framework. Its objectives, 
namely  the  harmonisation  of  the  rules  and  processes  for  resolution,  cannot  be  sufficiently 
achieved by Member States. Rather, by reason of the effects of a failure of any institution in 
the whole EU, they can be better achieved at EU level through EU action. 

The  intention  of  the  existing  resolution  framework  has  always  been  to  provide  a  common 
toolbox to  deal  effectively  with  any  bank  failure,  irrespective  of  its  size,  business  model  or 
location, in an orderly way, where this is necessary to preserve financial stability of the EU, 
the Member State or the region in which it operates, and to protect depositors without relying 
on public funds.  

The  proposal  amends  certain  provisions  of  the  BRRD  to  improve  the  existing  framework, 
particularly when it comes to applying it to smaller and medium-sized banks, as otherwise it 
may not reach its objectives.  

Risks to financial stability, depositor confidence or the use of public finances in one Member 
State may have far-reaching impacts on a cross-border basis and may ultimately contribute to 
a fragmentation of the single market. The lack of action at EU level for less significant banks 
and their perceived exclusion from a mutualised safety net would also potentially affect their 
ability  to  access  markets  and  attract  depositors  when  compared  with  significant  banks. 
Furthermore, national solutions to tackle bank failures would worsen the bank-sovereign link 
and undermine the idea behind the Banking Union of introducing a paradigm shift from bail-
out to bail-in. 

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Acting  at  EU  level  to  reform  the  resolution  framework  will  not  prescribe  the  strategy  that 
should  be  taken  when  banks  fail.  The  choice  between  an  EU  harmonised  resolution 
strategy/tool  and  the  national  liquidation  strategy  will  remain  at  the  discretion  of  the 
resolution  authority  on  the  basis  of  the  public  interest  assessment.  This  is  tailored  to  each 
specific failure case and not automatically driven by considerations such as the bank size, the 
geographical outreach of its activities and the structure of the banking sector. In practice, this 
makes the public interest assessment the subsidiarity test in the EU.  

Thus,  while  a  case-by-case  basis  needs  to  be  used  for  assessing  whether  a  bank  undergoes 
resolution  or  not,  it  is  crucial  that  the  possibility  for  all  banks  to  undergo  resolution  is 
preserved and that resolution authorities have the right incentives to opt for resolution, due to 
the potentially systemic nature of all institutions, as already provided for in the BRRD. 

Member States may still consider liquidation for the smaller or medium-sized banks under the 
reformed framework. In this respect, national insolvency regimes (which are not harmonised) 
remain  in  place  when  an  insolvency  procedure  is  deemed  a  better  alternative  to  resolution. 
The continuum of tools is preserved in this way, including those outside resolution, such as: 
preventive and precautionary measures; resolution tools; alternative measures within national 
insolvency proceedings and payout of covered deposits in the event of piecemeal liquidation.  

Amending  the  BRRD  is  therefore  considered  the  best  option.  It  strikes  the  right  balance 
between  harmonising  rules  and  maintaining  national  flexibility,  where  relevant.  The 
amendments  would  further  promote  a  uniform  application  of  the  resolution  framework  and 
the  convergence  of  practices  of  supervisory  and  resolution  authorities,  as  well  as  ensure  a 
level  playing  field  throughout  the  internal  market  for  banking  services.  This  is  particularly 
important  in  the  banking  sector  where  many  institutions  operate  across  the  EU  internal 
market. National rules would not achieve these objectives. 

• 

Proportionality 

Under the principle of proportionality, the content and form of EU action should not exceed 
what  is  necessary  to  achieve  its  objectives,  consistent  with  the  overall  objectives  of  the 
Treaties.  

Proportionality has been an integral part of the impact assessment accompanying the proposal. 
The  proposed  amendments  have  been  individually  assessed  against  the  proportionality 
objective.  In  addition,  the  lack  of  proportionality  of  the  existing  rules  has  been  assessed  in 
several  areas  and  specific  options  have  been  analysed  aimed  at  reducing  administrative 
burden and compliance costs for smaller institutions, in particular by removing the obligation 
to  determine  the  minimum  requirement  for  own  funds  and  eligible  liabilities  (MREL)  for 
certain types of entities. 

The conditions to access the resolution financing arrangements under the current framework 
do  not  sufficiently  account  for  distinctions  on  grounds  of  proportionality  based  on  the 
resolution  strategy,  size  and/or  business  model.  The  ability  of  banks  to  fulfil  the  access 
conditions  to  the  resolution  financing  arrangement  depends  on  the  stock  of  bail-inable 
instruments  available  in  their  balance  sheets  at  the  time  of  the  intervention.  However, 
evidence  suggests  that  some  (smaller  and  medium-sized)  banks  in  certain  markets  face 
structural  difficulties  in  building  up  the  MREL.  For  those  banks,  considering  their  specific 
liability structure (particularly those relying significantly on deposit funding), certain deposits 
would need to be bailed-in in order to access the resolution financing arrangement, which may 
raise concerns of financial stability and operational feasibility considering the economic and 
social  impact  in  several  Member  States.  The  proposed  amendments  (e.g.  clear  rules  on 
tailoring  the  MREL  for  transfer  resolution  strategies,  introducing  a  single-tier  depositor 

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preference  and  allowing  DGS  funds  to  bridge  the  gap  to  access  the  resolution  financing 
arrangement) would improve access to funding in resolution. They would also introduce more 
proportionality  for  banks  that  would  be  resolved  under  transfer  strategies,  by  allowing  the 
protection of deposits from bail-in where appropriate, and addressing effectively the problem 
of funding of resolution without weakening the minimum bail-in conditions for accessing the 
resolution financing arrangement. 

• 

Choice of the instrument 

It is proposed that the measures be implemented by amending the BRRD through a directive. 
The proposed measures refer to or further develop already existing provisions incorporated in 
this legal instrument. 

Some  of  the  proposed  amendments,  for  instance  those  affecting  market  exit  following  a 
negative  public  interest  assessment,  would  leave  Member  States  with  a  sufficient  degree  of 
flexibility, at the stage of their transposition into national law, to maintain different national 
rules on winding up. 

3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EVALUATIONS, 

POST 

OF 

EX 

STAKEHOLDER 

Ex post evaluations/fitness checks of existing legislation 

The CMDI framework was designed to avert and manage the failure of institutions of any size 
or  business  model.  It  was  developed  with  the  objectives  of  maintaining  financial  stability, 
protecting  depositors,  minimising  the  use  of  public  support,  limiting  moral  hazard,  and 
improving the internal  market  for financial services. The evaluation  concluded that, overall, 
the  CMDI  framework  should  be  improved  in  certain  respects,  such  as  better  protection  of 
taxpayer money. 

In  particular,  the  evaluation  shows  that  legal  certainty  and  predictability  in  managing  bank 
failures  remains  insufficient.  The  decision  of  public  authorities  on  whether  to  resort  to 
resolution  or  insolvency  may  differ  considerably  across  Member  States.  In  addition,  safety 
nets  financed  by  the  industry  are  not  always  effective  and  divergent  access  conditions  to 
funding  in  resolution  and  outside  resolution  persist.  These  affect  incentives  and  create 
opportunities for arbitrage when decisions are made on what crisis management tool to use. 
Finally,  depositor  protection  remains  uneven  and  inconsistent  across  Member  States  in  a 
number of areas. 

• 

Stakeholder consultations 

The Commission conducted extensive exchanges through different consultation tools to reach 
out to all stakeholders involved, in order to better understand how the framework performed 
as well as the possible scope for improvements. 

In 2020, the Commission launched a consultation on a combined inception impact assessment 
and a roadmap aimed at providing a detailed analysis of actions to be taken at EU level and 
the potential impact of different policy options on the economy, society and the environment. 

In 2021, the Commission launched two consultations: a targeted and a public consultation to 
seek stakeholder feedback on how the CMDI framework was applied and views on possible 
modifications.  The  targeted  consultation,  comprising  39  general  and  specific  technical 
questions,  was  available  in  English  only  and  open  from  26 January  to  20 April  2021.  The 
public consultation consisted of 10 general questions, available in  all EU languages and ran 
over the feedback period from 25 February to 20 May 2021.  

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In  addition,  the  Commission  hosted  a  high-level  conference  on  18 March  2021  gathering 
representatives from all relevant stakeholders. The conference confirmed the importance of an 
effective framework but also highlighted the current weaknesses. 

Commission staff have also repeatedly consulted Member States on the EU implementation of 
the  CMDI  framework  and  on  possible  revisions  of  the  BRRD/SRMR  and  DGSD  in  the 
context of the Commission Expert Group on Banking, Payments and Insurance. In parallel to 
the discussions in the Expert Group, the issues addressed in this proposal were also covered in 
meetings of the Council’s preparatory bodies, namely the Council Working Party on Financial 
Services and the Banking Union and the High-Level Working Group on EDIS. 

Furthermore,  during  the  preparatory  phase  of  the  legislation,  Commission  staff  also  held 
numerous  meetings  (physical  and  virtual)  with  representatives  of  the  banking  industry  and 
with other stakeholders. 

The  results  of  all  the  above-mentioned  initiatives  have  fed  into  the  preparation  of  this 
proposal and the accompanying impact assessment. They have provided clear evidence of the 
need to update and complete the current rules to best achieve the objectives of the framework. 
Annex  2  of  the  impact  assessment  provides  the  summaries  of  these  consultations  and  the 
public conference. 

• 

Collection and use of expertise 

The  Commission  issued  a  call  for  advice  to  the  European  Banking  Authority  (EBA)  on 
funding in insolvency and resolution. The Commission sought targeted technical advice to: (i) 
assess  the  reported  difficulty  for  some  smaller  and  medium-sized  banks  to  issue  sufficient 
loss-absorbing financial instruments; (ii) examine the current requirements to access available 
sources  of  funding  in  the  current  framework;  and  (iii)  assess  the  quantitative  impacts  of 
various possible policy options in the area of funding in resolution and insolvency and their 
effectiveness in achieving the policy objectives. The EBA responded in October 202117. 

The Commission also benefited from the opinion  provided by the Fit for Future Platform in 
December  2021.  The  opinion  highlighted  the  need  to  make  the  CMDI  framework  fit  for 
purpose  for  all  banks,  in  a  proportionate  manner,  taking  into  consideration  the  potential 
impact on depositors’ confidence and on financial stability. 

• 

Impact assessment18 

The  proposal  has  been  subject  to  an  extensive  impact  assessment  taking  into  account  the 
feedback  received  from  stakeholders  and  the  need  to  address  various  interconnected  issues 
spanning three different legal texts. 

The impact assessment considered a range of policy options to address the problems identified 
in the design and implementation of the crisis management and deposit insurance framework. 
Given  the  strong  links  between  the  crisis  management  toolbox  and  its  funding,  the  impact 
assessment  considered  packages  of  policy  options  that  bundle  together  relevant  design 
features of the CMDI framework to ensure a  comprehensive and consistent approach. Some 
changes proposed – related to early intervention measures, the triggers to determine whether a 
bank is failing or likely to fail, and the harmonisation of certain features of the DGSD – are 
common across the option packages considered.  

17 
18 

EBA (22 October 2021), Call for advice regarding funding in resolution and insolvency. 
Please  see  references  to  SWD(2023)226  (summary  sheet  of  the  IA)  and  SEC(2023)230  (the  positive 
opinion of the Regulatory Scrutiny Board). 

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The  different  packages  of  options  are  mainly  focused  on  analysing  the  spectrum  of 
possibilities  to  broaden  credibly  and  effectively  the  scope  of  resolution  as  a  function  of  the 
level  of  ambition  in  making  the  funding  more  accessible.  In  particular,  the  policy  options 
consider facilitating the use of DGS funds in resolution, including serving as a bridge, under 
the  least-cost  test  safeguard,  to  improve  the  proportionality  in  accessing  the  resolution 
financing arrangements for banks, particularly smaller and medium-sized banks, being subject 
to transfer strategies with market exit. In addition, the policy options explore the possibility of 
using  DGS  funds  more  effectively  and  efficiently  under  a  harmonised  least  cost  test  for 
measures other than the payout of covered deposits, seeking to improve the compatibility of 
incentives  for  resolution  authorities  when  selecting  the  most  appropriate  tool  to  manage  a 
crisis. Unlocking DGS funds for measures other than the payout of covered deposits depends 
on where the DGS ranks in the hierarchy of claims. Therefore, the policy options also explore 
different scenarios of harmonisation of depositor preference.  

In light of these elements, the impact assessment explores three possible packages of policy 
options that deliver outcomes with varying ranges of ambition. Each package strives to create 
an  incentive-based  framework,  by  encouraging  the  application  of  resolution  tools  in  a  more 
consistent  manner,  increasing  legal  certainty  and  predictability,  levelling  the  playing  field, 
and facilitating access to common safety nets, all while maintaining some alternatives outside 
resolution under national insolvency procedures. However, by design, the packages of options 
achieve these objectives to a varying extent and their political feasibility differs. 

The preferred option envisages ambitious improvements in the funding equation, opening the 
possibility for the resolution scope to be substantially broadened to include more smaller and 
medium-sized banks and a better alignment of incentives for deciding on the best crisis tool 
for these institutions. It was considered more effective, efficient and coherent in achieving the 
objectives of the framework relative to other options, including the baseline where no action 
is taken. In particular, the removal of the super-preference for the DGS was identified as the 
most effective means of ensuring that DGS funds can be used in resolution. The existence of a 
super-preference for DGS claims is the main reason why the DGS funds can almost never be 
used outside a payout of covered deposits in insolvency because of the impact it has on the 
outcome of the least cost test (LCT) that privileges a payout. However, it was found that the 
super-preference  ends  up protecting the financial  means of the DGS  and the banking sector 
from  possible  replenishment  by  hindering  any  DGS  intervention  in  resolution,  without 
bringing a better protection for covered deposits. Therefore, the removal  of  the DGS super-
preference is necessary to address the existing outcome of the LCT assessment that is skewed 
towards  payout  and  to  provide  adequate  funding  in  resolution  to  make  the  resolution  of 
smaller and medium-sized banks through a transfer of business and market exit of the failed 
bank feasible.  

The impact assessment also included another option consisting of an ambitious reform of the 
CMDI  framework  including  EDIS,  in  the  form  of  an  intermediate,  hybrid  model,  different 
from  the  2015  Commission  proposal.  This  option  acknowledges  the  importance  of 
establishing a common deposit insurance system for the robustness of the framework and the 
completion of the Banking Union;  however, it has  been assessed as politically unfeasible at 
this stage. 

The proposal would entail costs for authorities and certain banks, depending on the extent to 
which resolution would be expanded on the basis of case-by-case public interest assessments 
and the specific circumstances of each case. Using the DGS funds and the RF/SRF would be 
more  cost-efficient  in  terms  of  financial  means  required  to  be  used,  however  it  may  also 
trigger  replenishment  needs  through  contributions  from  the  industry.  Overall,  costs  for 
resolution authorities and banks would, however, be compensated by the benefits of enhanced 

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preparedness for a larger spectrum of banks, clarified incentives when deciding which crisis 
tools  to  use,  reduced  recourse  to  taxpayer  funds,  and  increased  financial  stability  and 
depositor confidence, all thanks to clearer rules and access to industry-funded safety nets. For 
consumers and the public, the costs should be limited and clearly outweighed by the benefits, 
particularly  through  increased  depositor  protection,  financial  stability  and  reduced  use  of 
taxpayer money. 

The  Regulatory  Scrutiny  Board  endorsed  the  impact  assessment  following  a  first  negative 
opinion.  To  address  the  comments  raised  by  the  Board,  the  impact  assessment  has  been 
extended to include additional explanations on: (i) the nature of the problems the review aims 
to  address  and  the  general  merits  of  resolution  compared  with  insolvency  proceedings  to 
protect  financial  stability,  depositor  confidence  and  minimise  the  recourse  to  taxpayers 
money; (ii) clarifications on how the reform complies with the principle of subsidiarity; and 
(iii) additional details on other aspects such as consistency with the review of State aid rules, 
the interaction with the 2015 Commission proposal on EDIS, how the EBA’s advice has been 
taken into account or the conditions in which DGS could intervene in resolution. 

• 

Regulatory fitness and simplification 

The review is mainly focused on the overall set-up and functioning of the crisis management 
and deposit insurance framework, with particular attention being paid to smaller and medium 
sized  banks  and  a  more  equal  treatment  of  depositors.  The  proposed  reform  is  expected  to 
bring benefits with respect to the effectiveness of the framework and legal clarity. 

The reform is technology-neutral and does not impact digital readiness. 

• 

Fundamental rights 

The EU is committed to high standards of protection for fundamental rights and is a signatory 
to  a  broad  set  of  conventions  on  human  rights.  In  this  context,  the  proposal  complies  with 
these  rights,  as  listed  in  the  main  UN  conventions  on  human  rights,  the  Charter  of 
Fundamental Rights of the European Union, which is an integral part of the EU Treaties and 
the European Convention on Human Rights. 

4. 

BUDGETARY IMPLICATIONS 

The proposal does not have implications for the EU budget. 

5. 

• 

OTHER ELEMENTS 

Implementation plans and monitoring, evaluation and reporting arrangements 

The  proposal  requires  Member  States  to  transpose  the  amendments  to  the  BRRD  in  their 
national laws within 18 months from the entry into force of the amending Directive.  

The  proposal  includes  requirements  for  the  EBA  to  issue  standards  in  relation  to  certain 
provisions of the framework and to report to the Commission on its effective implementation, 
e.g.  in  relation  to  resolvability  assessments  conducted  by  resolution  authorities  or  the 
preparation for resolution execution.  

The  legislation  will  be  subject  to  an  evaluation  5  years  after  its  implementation  deadline  in 
order to assess how effective and efficient it has been in terms of achieving its objectives and 
to decide whether new measures or amendments are needed. 

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6. 

DETAILED  EXPLANATION  OF  THE  SPECIFIC  PROVISIONS  OF  THE 
PROPOSAL 

Early intervention measures and preparation for resolution 

The  conditions  for  applying  early  intervention  measures,  including  the  removal  of 
management and appointment of temporary managers, are amended to remove ambiguity and 
provide competent authorities with the necessary legal certainty. Articles 27(1), 28 and 29(1) 
are amended to provide that early intervention measures may be used when the conditions for 
supervisory measures under CRD or Directive (EU) 2019/203419 (Investment Firms Directive 
or  IFD)  have  been  met,  but  those  measures  have  not  been  taken  by  the  institution  or  are 
deemed insufficient to address the identified issues. The existing triggers not covered by CRD 
or  IFD  are  preserved.  At  the  same  time,  the  internal  sequencing  between  early  intervention 
measures, removal of managers and appointment of temporary managers is removed – under 
the proposal, they are all subject to the same triggers, but competent authorities are required to 
follow  the  proportionality  principle  when  choosing  the  most  appropriate  measure  for  each 
circumstance.  The  EBA  mandate  for  guidelines  promoting  the  consistent  application  of  the 
triggers is maintained. 

The early intervention measures listed in Article 27 BRRD that overlapped with the available 
supervisory powers under Article 104 CRD or Article 49 IFD (concerning the examination of 
the financial situation by the management body, the removal of managers that no longer meet 
the suitability criteria, changes to the business strategy and to the operational structure of the 
institution) are removed from the BRRD and retained only in CRD/IFD. This should address 
the  practical  and  administrative  challenges  observed  by  competent  authorities  in  applying 
those overlapping measures. 

To  expand  the  limited  provisions  in  BRRD  requiring  cooperation  between  competent  and 
resolution authorities when the financial situation of a bank starts deteriorating, a new Article 
30a details the interactions and responsibilities of competent and resolution authorities in the 
run-up  to  resolution.  The  competent  authority  is  required  to  notify  the  resolution  authority 
when  it  adopts  certain  supervisory  measures  under  CRD  or  IFD  (particularly  those  that 
previously overlapped with early intervention measures), when it considers that the conditions 
for  early  intervention  are  met  and  when  it  actually  applies  early  intervention  measures. 
Competent authorities in cooperation with resolution authorities should monitor the financial 
situation of the institution and its compliance with any imposed measure. At the same time, 
the  competent  authority  must  provide  the  resolution  authority  with  all  the  information 
necessary for preparing for resolution, or require the institution itself to provide it. It is also 
clarified that the resolution authority has the power to market or make arrangements for the 
marketing of the institution and to request the creation of a virtual data room without being 
dependent on the prior application of early intervention measures. Competent and resolution 
authorities are required to cooperate closely when considering taking any early intervention or 
resolution preparation actions to ensure consistency and effectiveness. 

Early warning of failing or likely to fail  

Article 30a includes an obligation for the competent authority to notify sufficiently early the 
resolution  authority as soon as it considers that there is  a  material  risk that an institution or 
entity  meets  the  conditions  for  being  assessed  as  failing  or  likely  to  fail,  as  laid  down  in 

19 

Directive  of  the  European  Parliament  and  of  the  Council  of  27 November  2019  on  the  prudential 
supervision  of  investment  firms  and  amending  Directives  2002/87/EC,  2009/65/EC,  2011/61/EU, 
2013/36/EU, 2014/59/EU and 2014/65/EU (OJ L 314, 5.12.2019, p. 64). 

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Article  32(4).  This  notification  should  include  the  reasons  for  the  competent  authority's 
assessment as well as an overview of the alternative solutions that may prevent the failure of 
the institution or entity concerned within a reasonable timeframe. 

In  recognition  of  the  critical  role  that  the  timing  of  resolution  action  plays  with  respect  to 
preserving as much as possible the levels of capital, MREL and liquidity of the institution or 
entity,  and  more  generally,  in  ensuring  that  the  necessary  conditions  are  in  place  for  the 
resolution  authority  to  successfully  execute  the  resolution  strategy  prepared  for  each 
institution or entity, the resolution authority is empowered to assess, in close cooperation with 
the competent authority, what  it  considers to  be  a reasonable timeframe for the purposes of 
looking  for  solutions  of  private  or  administrative  nature,  able  to  prevent  the  failure.  During 
this  early  warning  period, 
its 
competences,  while  liaising  with  the  resolution  authority  in  line  with  Article  30a.  The 
competent  authority  and  the  resolution  authority  should  monitor,  in  close  cooperation,  the 
evolution  of  the  situation  of  the  institution  or  entity  and  the  implementation  of  alternative 
measures.  In  this  context,  the  resolution  authority  and  the  competent  authority  should  meet 
regularly, with a frequency set by the resolution authority. 

the  competent  authority  should  continue  exercising 

If no appropriate alternative measure which would avert the failure is found or implemented 
within this timeframe, the competent authority should assess whether the institution or entity 
is  failing  or  likely  to  fail.  Where  the  competent  authority  concludes  that  the  institution  or 
entity  is  failing  or  likely  to  fail,  it  should  formally  communicate  this  to  the  resolution 
authority, following the procedure laid down in Article 32(1) and (2). The resolution authority 
may  also  make  this  assessment  itself,  where  the  Member  State  has  exercised  the  national 
option provided in Article 32(2). The resolution authority should then determine whether the 
conditions for resolution are met. Where the public interest assessment results in the need to 
resolve the institution or entity, the resolution authority should subsequently adopt a decision 
taking resolution action. This is in line with the recent case law of the Court of Justice of the 
EU  related  to  a  case  taking  place  in  the  Banking  Union,  according  to  which  the  ECB’s 
assessment is a preparatory measure designed to allow the SRB to take a decision regarding 
the  resolution  of  a  bank.  The  Court  further  stated  that  the  SRB  has  the  exclusive  power  to 
assess  the  conditions  required  for  the  application  of  resolution  action,  subject  to  the 
endorsement  of  the  resolution  scheme  by  the  Commission  and,  where  applicable,  non-
objection by the Council20. 

Public interest assessment 

The CMDI framework was designed to avert and manage the failure of institutions of any size 
while protecting depositors and taxpayers. When a bank is considered failing or likely to fail 
and there is a public interest in resolving it, the resolution authorities will intervene by using 
the tools and powers granted by the BRRD in absence of a private solution. In the absence of 
a  public  interest  for  resolution,  the  bank  failure  should  be  handled  through  national  orderly 
winding  up  proceedings  carried  out  by  national  authorities,  potentially  with  financing  from 
the DGS or other funding sources, as appropriate.  

In  essence,  the  public  interest  assessment  (PIA)  compares  resolution  against  insolvency,  in 
particular  assessing  how  each  scenario  achieves  the  resolution  objectives.  The  resolution 
objectives against which the assessment is made includes: (i) the impact on financial stability 
(a  wide-spread  crisis  may  result  in  a  different  outcome  of  the  PIA  than  an  idiosyncratic 

20 

Order  of  6 May  2019,  ABLV  Bank/ECB,  T-281/18,  EU:T:2019:296,  paragraphs  34  to  36,  and 
Judgment of 6 May 2021, ABLV Bank/ECB, C-551/19 P and C-552/19 P, EU:C:2021:369, paragraphs 
62 to 71. 

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failure); (ii) the assessment of the impact on the bank’s critical functions; and (iii) the need to 
limit  the  use  of  extraordinary  public  financial  support.  Under  the  current  framework, 
resolution  can  only  be  chosen  where  insolvency  would  not  allow  achieving  the  resolution 
objectives to the same extent.  

The BRRD and SRMR leave margin of discretion to resolution authorities when carrying out 
the  PIA,  which  leads  to  divergent  applications  and  interpretations  that  do  not  always  fully 
reflect  the  logic  and  intention  of  the  legislation.  In  some  cases,  particularly  within  the 
Banking Union, the PIA has been applied rather restrictively. 

To minimise divergences and widen the application of the PIA, i.e. broadening the scope of 
resolution, the proposal includes the following legislative amendments: 

Amendments to the resolution objectives 

The  current  definition  of  ‘critical  functions’  does  not  include  an  explicit  reference  to  the 
impact  of  their  disruption  on  the  real  economy  and  financial  stability  at  a  regional  level, 
leading  to  possible  interpretation  that  functions  may  only  be  deemed  critical  when  their 
discontinuation  has  impacts  at  a  national  level.  To  avoid  divergent  interpretation,  in  the 
definition  of  ‘critical  functions’  reference  is  added  to  the  ‘national  or  regional  level’  of  the 
impact of the disturbance of their discontinuation to the real economy or to financial stability 
(Article 2(1), point (35)). 

The  resolution  objective  requiring  minimising  the  reliance  on  extraordinary  public  financial 
support does not allow for a distinction between the use of national budget money and the use 
of  industry-funded  safety  nets  (national  resolution  funds,  SRF  or  DGSs).  Therefore,  this 
resolution  objective  is  amended  to  include  a  specific  reference  to  support  provided  by  the 
budget  of  a  Member  State,  to  indicate  that  funding  provided  by  the  industry-funded  safety 
nets  should  be  considered  preferable  to  funding  supported  by  taxpayers’  money  (Article 
31(1),  point  (c)).  This  is  complemented  with  a  change  in  the  procedural  rules  on  PIA, 
requiring the resolution  authority to  consider  and compare all extraordinary public financial 
support that can reasonably be expected to be provided to the institution in resolution against 
those  in  the  insolvency  counterfactual.  If  liquidation  aid  is  expected  in  the  insolvency 
counterfactual,  this  should  lead  to  a  positive  PIA  outcome  (Article  32(5),  second 
subparagraph). 

The resolution  objective related to  depositor protection is  amended to  clarify that resolution 
should aim at protecting depositors, while minimising losses for deposit guarantee schemes. 
This  means  that  resolution  should  be  preferred  if  insolvency  would  be  more  costly  for  the 
DGS. 

Procedural  changes  to  the  comparison  between  resolution  and  national  insolvency 
proceedings 

Under  the  current  BRRD,  resolution  authorities  are  expected  to  choose  insolvency  unless 
opting  for  resolution  would  better  achieve  the  resolution  objectives.  The  current  text  of 
Article  32(5)  provides  that  resolution  shall  only  be  chosen  when  winding  up  the  institution 
under  normal  insolvency  proceedings  would  not  meet  the  resolution  objectives  to  the  same 
extent.  To  allow  broadening  the  resolution  application,  Article  32(5),  first  subparagraph,  is 
amended  to  clarify  that  national  insolvency  proceedings  should  be  selected  as  the  preferred 
strategy only when they achieve the framework’s objectives better than resolution (and not to 
the same extent). While keeping insolvency as the default option, the amendment leads to an 
increase  in  the  burden  of  proof  for  resolution  authorities  in  demonstrating  that  resolution  is 
not  in  the  public  interest.  Nevertheless,  the  PIA  will  remain  a  case-by-case  decision  at  the 
discretion of the resolution authority. 

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Use of DGS in resolution  

A  fundamental  principle  of  the  current  resolution  framework  is  that  funding  in  resolution 
should be first  and foremost provided by the bank’s internal  resources (its  capital  and other 
liabilities, including certain categories of deposits), which are used to cover its losses. These 
can  be  complemented  by  external  sources  of  funding,  namely  (1)  the  resolution  financing 
arrangement – but only after 8% of the capital and liabilities of the bank have been used to 
cover its losses – and (2) the DGS – in lieu of covered depositors up to the amount of losses 
that they would have suffered (were it possible for them to be subject to losses in resolution). 
For certain smaller and mid-sized banks, especially those primarily financed with deposits, it 
can be very difficult to meet these requirements to access industry-financed external funding 
without  bailing-in  deposits  above  the  coverage  level  and  those  excluded  from  coverage. 
However, in certain cases incurring losses on deposits can lead to widespread contagion and 
financial  instability,  exacerbating  the  risks  of  broader  banks  runs,  and  thereby  also  have 
serious adverse impact on the real economy. 

Therefore, to ensure a higher degree of proportionality of the resolution framework, enhance 
the application of transfer tools in resolution for smaller or medium-sized banks that will exit 
the market, and facilitate DGS interventions in support of such tools where needed to prevent 
depositors from bearing losses, Article 109 is amended to clarify certain aspects of the use of 
DGS  in  resolution.  The  fundamental  principle  that  the  first  line  of  defence  in  case  of  bank 
distress  should  always  be  the  banks’  internal  loss  absorption  capacity,  as  well  as  the 
conditions  for  access  to  the  resolution  financing  arrangement,  are  preserved.  In  particular, 
Article  109  clarifies  that  the  DGS  can  be  used  to  support  transfer  transactions  that  include 
covered  deposits,  and,  under  certain  conditions,  also  eligible  deposits  beyond  the  coverage 
level and deposits excluded from the DGS guarantee. The DGS contribution should cover part 
of  or  the  entire  difference  between  the  value  of  the  deposits  transferred  to  a  buyer  or  to  a 
bridge institution and the value of the transferred assets. Where a contribution is required by 
the  buyer  as  part  of  the  transaction  to  ensure  its  capital  neutrality  and  preserve  compliance 
with the buyer’s capital requirements, the DGS is also allowed to contribute to this effect. 

To avoid depletion and ensure that the DGS has sufficient resources to maintain its functions, 
the contribution of the DGS in resolution remains subject to certain limits.  

On the one hand, Article 109(1) requires that any loss which the DGS may bear as a result of 
an intervention in resolution does not exceed the loss that the DGS would bear in insolvency 
if it paid out covered depositors and subrogated to their claims. This amount is determined by 
the DGS on the basis of the least cost test, in accordance with the criteria and methodology set 
out in DGSD for any possible use of DGS. These same criteria and methodology are also to 
be used when determining the treatment that the DGS would have received had the institution 
entered normal insolvency proceedings when carrying out the ex-post valuation under Article 
74  for  the  purposes  of  assessing  compliance  with  the  ‘no  creditor  worse  off’  principle  and 
determining whether any compensation is owed to the DGS.  

On the other hand, the amount of the DGS contribution may not exceed any shortfall in the 
value  of  the  assets  of  the  institution  under  resolution  transferred  to  the  buyer  or  the  bridge 
institution in comparison to the value of the transferred deposits and liabilities with the same 
or  a  higher  priority  ranking  in  insolvency  than  those  deposits.  This  is  to  ensure  that  the 
contribution  of  the  DGS  is  only  used  for  the  purposes  of  depositor  protection,  where 
appropriate, and not for the protection of creditors that rank below deposits in insolvency. 

Furthermore, it is clarified in Article 109(1) that the DGS can only contribute to a transaction 
including  all  deposits  if it  is  concluded  by  the  resolution  authority  that  the  eligible  deposits 
exceeding  the  coverage  level  provided  by  the  DGS,  as  well  as  the  deposits  excluded  from 

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coverage,  should  be  protected  from  losses  and  cannot  be  bailed-in  nor  left  in  the  residual 
institution  under  resolution,  which  will  be  wound  up.  In  particular,  this  would  be  the  case 
where the exclusion is strictly necessary and proportionate in order to preserve the continuity 
of critical functions and core business lines or where necessary to avoid widespread contagion 
and financial instability which could cause a serious disturbance to the economy of the Union 
or of a Member State. To ensure access to resolution financing arrangements where necessary 
for  the  implementation  of  a  transfer  strategy,  paragraph  2b  of  Article  109  provides  that  the 
DGS contributions in resolution should count towards the 8% total liabilities and own funds 
(TLOF)  requirement  for  accessing  the  resolution  financing  arrangement.  If  the  contribution 
made  by  shareholders  and  creditors  of  the  institution  under  resolution  through  reductions, 
write-down or conversion of their liabilities, summed with the contribution made by the DGS 
amounts  to  at  least  8%  of  the  institution’s  total  liabilities  including  own  funds,  it  will  be 
possible for the resolution authority to use the resolution financing arrangement to finance the 
resolution action, which must lead to the failing institution’s exit from the market. To ensure 
that  MREL  remains  the  first  line  of  defence  and  to  preserve  level  playing  field,  this  should 
only be possible  for institutions for which the resolution  plan or group resolution  plan does 
not provide for its winding up in an orderly manner in case of failure, given that the MREL of 
these institutions has been set at a level that includes both the loss absorption as well as the 
recapitalisation amounts. 

The  use  of  DGS  funds  enabling  access  to  the  resolution  financing  arrangements  is  not 
expected  to  impact  institutions’  incentives  to  comply  with  MREL.  This  is  because  the 
incentives to comply with MREL are built into the governance of the framework. Resolution 
authorities  calibrate  MREL  requirements  for  all  institutions  with  resolution  strategies, 
including smaller and mid-sized institutions where appropriate, according to the existing legal 
provisions  and  address  any  failure  to  comply  through  several  measures.  Additionally, 
institutions’  obligation  to  disclose  publicly  their  MREL  requirement  and  capacity,  that  will 
start to apply in 2024 (as provided under the existing rules), will reinforce market discipline 
and compliance. Moreover, the use of the DGS to facilitate access to the resolution financing 
arrangement will be possible only for transfer strategies with  market  exit and on a case-by-
case basis where justified by resolution authorities. Therefore, since the failed institution will 
exit the market after resolution should DGS funds be used, this mechanism de facto prevents 
any advantage with regard to MREL calibration or the use of DGS funds compared to other 
institutions that would continue operating after being restructured. Importantly, moral hazard 
exists  due  to  the  possibility  of  subsidies  outside  resolution  in  the  form  of  public  funds  in 
insolvency.  By  allowing  a  more  credible  application  of  resolution  through  DGS  use  in 
specific cases, the reform aims to disincentivise the recourse to taxpayer money, which may 
affect market expectations ex ante, leading to more market discipline and decreasing the risk 
of  moral  hazard.  Finally,  the  use  of  the  DGS  contribution  towards  compliance  with  the  8% 
TLOF  threshold  to  access  the  resolution  financing  arrangements  is  restricted  to  those 
institutions  for  which  MREL  has  been  set  (i.e.  institutions  and  entities  that  have  not  been 
identified  as  liquidation  entities)  and  includes  both  the  loss  absorption  as  well  as  the 
recapitalisation  components,  in  light  of  the  fact  that  the  respective  resolution  plan  or  group 
resolution plan does not provide for their winding up in case of failure. 

Depositor preference 

Under the current wording of Article 108(1), BRRD creates a three-tier depositor preference 
in the hierarchy of claims. It provides that covered deposits and DGS claims must have a so-
called ‘super-preference’ in the creditor ranking in the insolvency laws in each Member State 
relative to non-covered preferred deposits (the part of eligible deposits from natural persons 

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and  SMEs  exceeding  the  coverage  level  of  EUR  100  000).  The  latter  must  rank  above  the 
claims of ordinary unsecured creditors.  

BRRD is presently silent on the ranking of the remaining deposits, that is, non-covered non-
preferred  (i.e.,  corporate  non-SME  deposits  exceeding  the  coverage  level  of  EUR  100  000) 
and  excluded  deposits  (which,  under  the  current  framework  include  deposits  of  public 
authorities,  financial  sector  entities  and  pension  funds).  In  most  Member  States,  the  non-
covered  non-preferred  deposits  rank  in  insolvency  alongside  ordinary  unsecured  claims, 
including senior debt instruments eligible for MREL (section A of figure below), while in a 
minority of Member States, they already rank above ordinary unsecured claims (section B of 
figure below). 

The  super-preference  of  the  DGS  in  the  current  framework  (i.e.,  its  rank  above  claims  of 
depositors that are not covered) impacts the results of the least cost test in a way that the DGS 
funds can almost never be used outside the payout of covered deposits in insolvency, because 
the DGS would expect a full or very high recovery of the resources used to reimburse covered 
deposits.  

On the other hand, the lack of  general depositor preference  (i.e., the  ranking of all deposits 
above ordinary unsecured claims) in some Member States creates an unlevel playing field and 
potential impediments to resolution in cross-border contexts and might lead to breaches of the 
‘no  creditor  worse  off’  principle,  where,  for  financial  stability  reasons,  it  is  necessary  to 
exclude non-covered deposits from bearing losses. 

To facilitate the use of the DGS in resolution under the least cost test safeguard where this is 
necessary  to  maintain  financial  stability  and  protect  depositors,  as  well  as  to  remove 
impediments  to  resolution,  Article  108(1)  is  amended  to  introduce  a  general  depositor 
preference with a single-tiered ranking. This would be achieved thanks to two modifications. 
First, the legal preference in the insolvency laws of Member States required by BRRD relative 
to ordinary unsecured claims is extended to include all deposits. This entails that all deposits, 
including  eligible  deposits  of  large  corporates  and  excluded  deposits,  rank  above  ordinary 
unsecured claims. Second, the relative ranking between the different categories of deposits is 
replaced by a single-tier depositor preference, where the super-preference of the DGS/covered 
deposits is removed, and where all deposits rank  pari passu (i.e., at the same level amongst 
themselves) and above ordinary unsecured claims.  

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Stylised  view  of  creditor  hierarchy  in  insolvency  under  the  current  framework  (three-tier 
depositor  preference)  and  under  the  proposed  reform  (single-tier  general  depositor 
preference) 

Source: Commission staff. 

As shown by the impact assessment, a single-tier depositor preference would not impinge on 
the  protection  currently  enjoyed  by  covered  depositors,  who  are  always  insured  under  the 
DGSD in case their accounts become unavailable and are mandatorily excluded from bearing 
losses in  resolution  (Article 44(2)  BRRD). The higher preferred ranking  of the DGS claims 
protects  instead  the  banking  industry,  which  pays  contributions  to  the  DGS.  Nevertheless, 
from  the  perspective  of  the  banking  industry  itself,  the  higher  priority  of  the  DGS  does  not 
necessarily lead to  less  frequent  need for replenishment of the DGS  given that the  result of 
this higher priority would be more frequent use of DGS resources for payout than for transfer 
strategies in resolution. This is so because a payout requires using the DGS available financial 
means  to  cover  the  gross  amount  of  covered  deposits,  and  there  is  a  time  lag  between  the 
payout  and  recovery  in  sometimes  lengthy  insolvency  procedures,  as  well  as  a  loss  on  the 
franchise value of assets. 

Additionally, regarding the argument of cost-efficiency associated with the use of DGS funds 
in  resolution  compared  to  the  cost  of  payout  of  covered  deposits  in  insolvency,  empirical 
evidence  referenced  in  the  impact  assessment21  shows  that  paying  out  covered  deposits  can 
quickly  deplete  the  financial  means  of  the  DGS  (even  when  fully-filled)  or  that,  in  some 
cases,  the  DGS  financial  means  cannot  sustain  a  payout  event  when  the  amount  of  covered 
deposits  is  significant.  In  this  regard,  the  CMDI  review  aims  to  enable  cheaper,  more  cost-
efficient alternative uses of the DGS in resolution, when compared to the cost of DGS payout 
in  insolvency, to  support a transfer of  assets and  liabilities (including deposits) followed by 

21 

ECB (October 2022), Protecting depositors and saving money - why DGS in the EU should be able to 
support transfers of assets and liabilities when a bank fails. 

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market exit. See the impact assessment for a comprehensive analysis (including by the EBA 
in its reply to the Commission’s call for advice from October 2021).  

Conditions for providing extraordinary public financial support 

In order to ensure that public funds in the form of extraordinary public financial support are 
not  used  to  support  institutions  or  entities  that  are  not  financially  viable,  it  is  necessary  to 
provide for strict conditions on when such support can be provided and what form it can take. 
The  existing  rules  provide  for  certain  limitations  but  are  not  sufficiently  precise. 
Extraordinary  public  financial  support  outside  of  resolution  should  be  limited  to  cases  of 
precautionary recapitalisation, preventive measures of DGS aimed at preserving the financial 
soundness and long-term viability of credit institutions,  measures taken by DGS to preserve 
the  access  of  depositors  and  other  forms  of  support  granted  in  the  context  of  winding  up 
proceedings. Providing extraordinary public financial support in any other situations outside 
of  resolution  should  not  be  permitted  and  should  result  in  the  receiving  institution  or  entity 
being considered as failing or likely fail. 

Precautionary recapitalisation 

Particular attention must be paid to the extraordinary public financial support granted in the 
form  of  precautionary  recapitalisation.  It  is  necessary  to  lay  down  more  clearly  the 
permissible  forms  of  precautionary  measures  provided  outside  of  resolution  and  aimed  at 
recapitalising  the  entity  concerned.  The  measures  granted  should  be  temporary  in  nature 
because they are supposed to address adverse consequences of external shocks and not used to 
compensate for intrinsic weaknesses linked, for example, to an outdated business model. Use 
of  perpetual  instruments,  such  as  Common  Equity  Tier  1,  should  become  exceptional  and 
possible  only  if  other  forms  of  capital  instruments  would  not  be  adequate.  Such  change  is 
necessary to ensure that the support remains temporary in nature. Stronger and more explicit 
requirements  on determining in  advance the duration and exit strategy for the precautionary 
measures  are  also  needed.  The  entity  receiving  support  should  be  solvent  at  the  time  the 
measures are applied, i.e. assessed by the competent authority as not being in breach and not 
likely to  breach the  applicable capital  requirements  in  the next  12 months.  If the conditions 
under which the support is granted are not adhered to, the entity receiving the support should 
be considered as failing or likely to fail. 

Article 32b and market exit 

Regardless of a potential expansion of the application of resolution, the resolution of some EU 
banks will not be in the public interest. In such cases banks should be wound up in accordance 
with  national  law.  The  applicable  national  rules  are  very  heterogeneous  across  EU  Member 
States,  both  in  terms  of  the  conditions  which  trigger  the  initiation  of  a  procedure,  and  the 
structure  of  the  procedure  itself.  In  some  Member  States,  the  bank  would  go  into  normal 
insolvency, in others a special insolvency or liquidation regime for banks exists or there are 
several procedures available, not necessarily leading in all cases to the exit of the bank from 
the market. Furthermore, the triggers for commencing national insolvency proceedings are not 
always  aligned  with  the  failing  or  likely  to  fail  determination  under  the  BRRD.  This  can 
create  uncertainty  as  to  whether  insolvency  proceedings  can  start  (so  called  “limbo 
situations”) or whether the procedure leads to a clear outcome in terms of ensuring exit from 
the market. 

To  address  such  situations,  the  2019  Banking  Package  introduced  Article  32b,  requiring 
Member  States  to  ensure  the  orderly  winding  up  in  accordance  with  the  applicable  national 
law  of  failing  banks,  which  are  not  resolved  due  to  a  negative  PIA.  However,  the 
implementation of this provisions in national legal frameworks is not sufficient to address all 

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residual  risks  of  failing  institutions  not  exiting  the  market.  In  particular,  there  is  still 
uncertainty as to which procedure should apply in these cases, and particularly whether only 
normal insolvency proceedings should apply or whether any other national procedures could 
also apply.  

Therefore, to resolve the existing inconsistency and uncertainty across Member States, Article 
32b is amended to provide further framing and clarity, and to ensure that applicable national 
procedures  lead  to  the  market  exit  of  the  bank  within  a  reasonable  timeframe.  The 
amendments  neither  aim  at,  nor  lead  to  harmonisation  of  national  insolvency  rules,  and  a 
margin  at  national  level  is  preserved  as  to  how  this  market  exit  should  occur  (i.e.,  whether 
through a sale or otherwise).  

In this context, it is also proposed to further enhance the role of the withdrawal of the bank’s 
license when failing or likely to fail is declared, and no resolution ensues. The new provision 
of Article 32b(3) empowers the supervisor to withdraw the license solely based on the failing 
or  likely  to  fail  determination,  which  on  its  turn  shall  be  a  sufficient  condition  for  relevant 
national administrative or judicial authorities to initiate without delay the applicable national 
winding-up procedure. 

Amendments related to the minimum requirement for own funds and eligible liabilities 
(MREL) 

MREL for transfer strategies 

As  part  of  resolution  planning,  resolution  authorities  are  defining  the  preferred  and  variant 
resolution  strategies  and  preparing  the  application  of  the  relevant  tools  to  ensure  their 
effective  execution.  For  large  and  complex  institutions,  open-bank  bail-in  is,  in  general, 
expected to be the preferred resolution tool, implying the write-down and conversion of own 
funds  and  eligible  liabilities  to  absorb  losses  and  recapitalise  the  bank  emerging  from 
resolution. 

In  parallel,  certain  smaller  and  medium-sized  institutions  with  business  models  based 
predominantly  on  funding  through  equity  and  deposits  may  be  candidates  for  transfer  tool 
strategies  which  involve  selling  parts  or  all  of  the  business  to  a  purchaser  or  a  bridge 
institution,  transferring  non-performing  assets  to  an  asset  management  vehicle,  and  market 
exit. 

As already provided under the current framework, the level of the MREL requirement should 
reflect  the  preferred  resolution  strategy.  The  existing  provision  of  Article  45c  focuses  on 
MREL  calibration  for bail-in  strategies (requirement for loss absorption  and recapitalisation 
amount,  with  detailed  rules  on  how  each  should  be  adjusted,  and  on  subordination 
requirements  mostly  geared  towards  ensuring  compliance  with  the  8%  TLOF  requirement). 
While  acknowledging  the  possibility  to  use  resolution  tools  other  than  bail-in,  the  current 
BRRD  does  not  regulate  in  detail  MREL  calibration  for  transfer  strategies.  In  practice,  this 
leads to legal uncertainty and divergent methodologies applied by resolution authorities when 
setting MREL for such strategies. 

It is therefore necessary to provide a clearer legal basis for distinguishing MREL calibration 
for  transfer  strategies  from  the  one  for  bail-in,  also  for  the  sake  of  proportionality  and 
consistent  application.  In  this  respect,  and  taking  into  account  also  current  practices  of 
resolution authorities, a new Article 45ca is added which sets out the principles which should 
be  considered  when  calibrating  MREL  for  transfer  strategies  -  size,  business  model,  risk 
profile,  transferability  analysis,  marketability,  whether  the  strategy  is  asset  transfer  or  share 
deal  and  complementary  use  of  asset  management  vehicle  for  assets  which  cannot  be 
transferred.  

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The amendments reinforce the principle that MREL should remain the first and main line of 
defence for all banks, including for those that will be subject to a transfer strategy and market 
exit, to ensure that losses are absorbed to the maximum extent possible by shareholders and 
creditors.  

Estimating the combined buffer requirement in case of prohibition of certain distributions 

To address an existing gap in legal clarity of the current framework with respect to the power 
of the resolution authorities to prohibit certain distributions in case of failure of an entity to 
meet  the combined buffer requirement in  addition  to  its MREL, and in  particular where the 
entity  is  not  subject  to  the  combined  buffer  requirement  (under  Article  104a  of  Directive 
2013/36/EU)  on  the  same  basis  as  its  MREL,  a  new  paragraph  7  is  added  to  Article  16a  to 
clarify  that  the  power  to  prohibit  certain  distributions  should  be  applied  on  the  basis  of  the 
estimation of the combined buffer requirement resulting from the delegated act under Article 
45c(4)  that  specifies  the  methodology  to  be  used  by  resolution  authorities  to  estimate  the 
combined buffer requirement in such circumstances.  

De minimis exemption from certain MREL requirements  

Under  the  MREL  rules  in  BRRD,  structurally  subordinated  liabilities  referred  to  in  Article 
72b(2)(d)(iii) CRR are captured by the definition of ‘subordinated eligible instruments’ used 
throughout  Article 45b BRRD. However, liabilities that are permitted to  be eligible in CRR 
under  the  de  minimis  exemption  in  Article  72b(4)  CRR  do  not  qualify  as  ‘subordinated 
eligible  instruments’  under  BRRD  because  paragraph  4  of  Article  72b  CRR  is  explicitly 
excluded from the definition in Article 2(1), point (71b), of BRRD.  

To  correct  this  inconsistency,  a  new  paragraph  is  added  to  Article  45b  BRRD,  allowing 
resolution  authorities  to  permit  resolution  entities  to  comply  with  the  MREL  subordination 
requirements using senior liabilities when the conditions in Article 72b(4) CRR are met.  

To  ensure  alignment  with  the  TLAC  framework,  resolution  entities  benefitting  from  the  de 
minimis exemption may not have their MREL subordination requirement adjusted downwards 
by  an  amount  equivalent  to  the  3.5%  TREA  allowance  for  TLAC  pursuant  to  the  second 
sentence of the first subparagraph of Article 45b(4) BRRD. 

Contingent liabilities 

The  proposal also  introduces  clarifications  regarding  the  status  of  contingent  liabilities  and 
provisions for the purposes of resolution planning and execution. The amendments take in to 
account  the  International  Accounting  Standards  Board’s  (IASB)  International  Accounting 
Standard (IFRS) 37 ‘Provisions, Contingent Liabilities and Contingent Assets’ and introduce 
references  to  (i)  provisions  (liabilities  of  uncertain  timing  or  amount)  and  (ii)  contingent 
liabilities (possible obligations depending on whether some uncertain future event occurs, or 
present  obligations  for  which  payment  is  not  probable  or  the  amount  cannot  be  measured 
reliably).  The  two  categories  differ  from  the  perspective  of  the  degree  of  likelihood  of  a 
payment having to be made and provisions should be treated as liabilities whereas contingent 
liabilities  would  not  be  treated  as  such.  From  a  resolution  perspective  this  means  that 
provisions  which  have  been  recognised  should,  in  principle,  be  bail-inable  while  contingent 
liabilities are unlikely to be bailed in given their uncertain nature. 

Contributions and irrevocable payment commitments 

To take into account the end of the initial period for the build-up of the resolution financing 
arrangements  and  the  ensuing  reduction  in  the  amount  of  regular  ex  ante  contributions, 
technical amendments are made to Articles 102 and 104 to disconnect the maximum amount 
of  ex  post  contributions  that  may  be  raised  from  the  amount  of  the  regular  ex  ante 

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contributions, thus avoiding a disproportionately low cap on ex post contributions, as well as 
to allow for a deferral of the collection of the regular ex ante contributions in case the cost of 
an annual collection would not be proportionate to the amount to be raised. The treatment of 
irrevocable payment commitments is also clarified in Article 103, both as regards their use in 
resolution and as regards the procedure to follow in case an institution or entity ceases to be 
subject to the obligation to pay contributions. 

In  addition,  to  provide  more  transparency  and  certainty  with  respect  to  the  share  of 
irrevocable payment commitments in the total amount of ex ante contributions to be raised, it 
is clarified that resolution authorities should determine such share on an annual basis, subject 
to the applicable limits.  

Mandates for the EBA 

Resolution  authorities  have  in  the  past  years  developed  and  implemented  a  wide  set  of 
policies  to  improve  banks’  resolvability  and  ensure  an  adequate  level  of  preparation  in  the 
implementation  of  resolution  tools  and  powers  in  the  event  of  resolution.  The  EBA  has 
developed common standards to  supplement the provisions set  out in  BRRD and harmonise 
authorities’ practices across the Union. 

To ensure that the applicable standards remain fit for purpose, and that new ones are adopted 
where  appropriate,  new  roles  and  responsibilities  are  given  to  the  EBA  to  report  on  the 
existing  practices,  foster  convergence  and  promote  a  high  level  of  preparedness  among  the 
competent  and  resolution  authorities. New mandates are introduced for the EBA to  monitor 
the  actions  taken  by  resolution  authorities  to  ensure  an  effective  implementation  of  the 
framework and assess possible divergences among Member States in the areas of resolvability 
assessments and the operationalisation of resolution tools and powers. In addition, a new role 
for EBA is introduced to foster convergence and exchanges between competent and resolution 
authorities  through  the  coordination  of  Union-wide  exercises  to  test  the  application  of  the 
framework, in recovery and resolution.  

Moreover, in light of the multiple national options available to Member States under Article 
44a, EBA is asked to report on the application of that article, comparing the way it has been 
implemented  in  the  Member  States  and  analysing  the  impact  of  any  divergences  on  cross-
border operations.  

Finally, as institutions and entities may be required to comply with internal MREL either on 
an individual or consolidated basis, practice has shown that, in some situations, the additional 
own funds requirements and the combined buffer requirement provided in CRD are not set on 
the  same  basis  as  the  internal  MREL.  For  this  reason,  the  existing  regulatory  technical 
standards on the estimation of the additional own funds requirements and the combined buffer 
requirement,  which  have  been  adopted  through  Commission  Delegated  Regulation  (EU) 
2021/111822, should be expanded to  capture not  just  resolution  entities but  also  entities that 
have not been identified as resolution entities. The EBA mandate in Article 45c(4) is amended 
accordingly. 

22 

Commission  Delegated  Regulation  (EU)  2021/1118  of  26  March  2021  supplementing  Directive 
2014/59/EU  of  the  European  Parliament  and  of  the  Council  with  regard  to  regulatory  technical 
standards specifying the methodology to be  used by resolution authorities to estimate the requirement 
referred to in Article 104a of Directive 2013/36/EU of the European Parliament and of the Council and 
the combined buffer requirement for resolution entities at the resolution group consolidated level where 
the resolution group is not subject to those requirements under that Directive (OJ L 241, 8.7.2021, p. 1). 

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Other provisions 

To reduce the administrative burden on institutions as regards obligations to update recovery 
plans  on  an  annual  basis,  a  third  subparagraph  is  added  to  Article  5,  paragraph  2,  which 
provides that supervisors shall have the discretion to waive the requirement to update certain 
parts of the plan for a given cycle in the absence of any changes to the legal or organisational 
structure of the institution, its business or its financial situation. 

Under the current text of the BRRD, recovery plans shall not assume any access to or receipt 
of extraordinary public financial support. The rule in Article 5, paragraph 3 is supplemented 
to provide that, in addition to public financial support, recovery plans shall not assume access 
to  or  receipt  of  central  bank  emergency  liquidity  assistance  or  any  central  bank  liquidity 
assistance provided under non-standard collateralisation, tenor and interest rate terms. 

Resolution  authorities  are  required  to  identify  measures  to  be  taken  with  respect  to  group 
entities  when  drafting  group  resolution  plans.  The  intensity  and  level  of  detail  of  this  work 
with respect to subsidiaries that are not resolution entities may vary depending on the size and 
risk profile of the institutions and entities concerned, the presence of critical functions and the 
group  resolution  strategy.  BRRD  is  thus  amended  with  the  introduction  of  a  new 
subparagraph in Article 12(1), which will allow resolution authorities to  follow a simplified 
approach, where appropriate, when carrying out this task. 

Clarifications to Article 44(7) 

The current provision of Article 44(7) is unclear as to what are the condition and the sequence 
of  use  of  the  resolution  financing  arrangement  and  alternative  financing  sources  after  the 
provision  of  initial  financing  of  up  to  the  5  %  TLOF  limit  and  after  all  unsecured,  non-
preferred liabilities, other than eligible deposits, have been written down or converted in full. 
Therefore,  paragraph  7  of  Article  44  is  amended  to  provide  legal  clarity  and  additional 
flexibility to use the RF beyond the 5% TLOF.  

Resolution colleges 

To  ensure  alignment  with  Article  51(3)  of  Directive  (EU)  2013/36  which  provides  for  the 
establishment  of  colleges  of  supervisors  by  the  competent  authorities  supervising  an 
institution with significant branches in other Member States to facilitate the cooperation and 
exchange of information between the home and host supervisors, a new paragraph 6a is added 
to Article 88 BRRD which provides for the setting up of resolution colleges in these cases to 
facilitate the cooperation and exchange of information between the home and host resolution 
authorities. 

Ranking of resolution financing arrangements’ claims  

Article 37(7) provides that the resolution financing arrangement should be able to recover any 
reasonable  expenses  properly  incurred  in  connection  with  the  use  of  resolution  tools  and 
powers from the institution under resolution as a preferred creditor. However, BRRD did not 
specify  the  relative  ranking  of  the  resolution  financing  arrangement  to  other  preferred 
creditors.  The  new  paragraph  9  added  to  Article  108  clarifies  that  those  claims  of  the 
resolution financing arrangement should rank above the claims of depositors and of DGSs. 

Additionally,  the  resolution  financing  arrangement  can  be  further  used  in  resolution  for  the 
purposes identified in Article 101. So far, BRRD has not specified whether such use creates a 
claim in favour of the resolution financing arrangement and, if so, on the insolvency ranking 
of such claim. A new paragraph 8 is added in Article 108 specifying that, where the activity of 
the  institution  under  resolution  is  partially  transferred  to  a  bridge  institution  or  a  private 
purchaser  with  the  support  of  the  resolution  financing  arrangement,  it  should  have  a  claim 

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against the residual entity. The existence of such claim should be assessed on a case-by-case 
basis,  depending  on  the  resolution  strategy  and  the  way  in  which  the  resolution  financing 
arrangement  was  concretely  used,  but  it  should  be  connected  to  the  use  of  the  resolution 
financing  arrangement  to  bear  losses  in  lieu  of  creditors,  such  as  when  the  arrangement  is 
used  to  guarantee  assets  and  liabilities  transferred  to  a  recipient  or  to  cover  the  difference 
between the transferred assets and liabilities.  

Where the resolution  financing arrangement is  used to  support the application of the bail-in 
tool as the primary resolution strategy (Article 43(2), point (a)), in lieu of the write down and 
conversion of the liabilities of certain  creditors, this  should not  generate a claim against the 
institution  under  resolution,  as  it  would  eliminate  the  purpose  of  the  resolution  financing 
arrangement’s contribution. Compensations paid due to the breach of the ‘no creditor worse 
off’  principle  should  likewise  not  generate  a  claim  in  favour  of  the  resolution  financing 
arrangement. 

Information exchange  

Article 128 is amended to allow the Single Resolution Board, the ECB and other members of 
the  European  System  of  Central  Banks,  the  EBA,  the  resolution  authorities  and  competent 
authorities to provide the Commission with all information necessary for the performance of 
its tasks related to policy development. 

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2023/0112 (COD) 

Proposal for a 

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

amending Directive 2014/59/EU as regards early intervention measures, conditions for 
resolution and financing of resolution action 

(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, 

After transmission of the draft legislative act to the national parliaments, 
Having regard to the opinion of the European Central Bank23,  
Having regard to the opinion of the European Economic and Social Committee24,  

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1) 

23 
24 
25 

26 

27 

The  Union  resolution  framework  for  credit  institutions  and  investment  firms 
(‘institutions’)  was  established  in  the  aftermath  of  the  2008-2009  global  financial 
crisis  and  following  the  internationally  endorsed  Key  Attributes  of  Effective 
Resolution  Regimes  for  Financial  Institutions25 of  the Financial Stability  Board. The 
Union  resolution  framework  consists  of  Directive  2014/59/EU  of  the  European 
Parliament  and  of  the  Council26  and  Regulation  (EU)  No  806/2014  of  the  European 
Parliament  and  of  the  Council27.Both  acts  apply  to  institutions  established  in  the 
Union,  and  to  any  other  entity  that  falls  under  the  scope  of  that  Directive  or  of  that 
Regulation (‘entities’). The Union resolution framework aims at dealing in an orderly 
manner  with  the  failure  of  institutions  and  entities  by  preserving  institutions  and 
entities’  critical  functions  and  avoiding  threats  to  financial  stability,  and  at  the  same 
time  protecting  depositors  and  public  funds.  In  addition,  the  Union  resolution 

OJ C , , p. . 
OJ C , , p. . 
Financial Stability Board, Key Attributes of Effective Resolution Regimes for Financial Institutions, 15 
October 2014. 
Directive  2014/59/EU  of  the  European  Parliament  and  of  the  Council  of  15  May  2014 establishing  a 
framework  for  the  recovery  and  resolution  of  credit  institutions  and  investment  firms  and  amending 
Council  Directive  82/891/EEC,  and  Directives  2001/24/EC,  2002/47/EC,  2004/25/EC,  2005/56/EC, 
2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) 
No 648/2012, of the European Parliament and of the Council (OJ L 173, 12.6.2014, p. 190). 
Regulation  (EU)  No  806/2014  of  the  European  Parliament  and  of  the  Council  of  15  July  2014 
establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain 
investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and 
amending Regulation (EU) No 1093/2010 (OJ L 225, 30.7.2014, p. 1). 

EN 

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(2) 

(3) 

(4) 

framework  intends  to  foster  the  development  of  the  internal  market  in  banking  by 
creating a harmonised regime to address cross-border crises in a coordinated way and 
by avoiding issues of distortions of competition and risks of unequal treatment. 

Several  years  into  its  implementation,  the  Union  resolution  framework  as  currently 
applicable  does  not  deliver  as  intended  with  respect  of  some  of  those  objectives.  In 
particular,  while  institutions  and  entities  have  made  significant  progress  towards 
resolvability and have dedicated significant resources to that end, in particular through 
the build-up of the loss  absorption  and  recapitalisation capacity  and the filling-up of 
resolution financing arrangements, the Union resolution framework is seldom resorted 
to.  Failures  of  certain  smaller  and  medium-sized  institutions  and  entities  are  instead 
mostly  addressed  through  unharmonised  national  measures.  Taxpayer  money  is  used 
rather  than  resolution  financing  arrangements.  That  situation  appears  to  arise  from 
inadequate  incentives.  Those  inadequate  incentives  result  from  the  interplay  of  the 
Union resolution  framework with  national  rules, whereby the broad discretion in  the 
public interest assessment is not always exercised in a way that reflects how the Union 
resolution  framework  was intended to  apply.  At the same time, the  Union resolution 
framework saw little use due to the risks for depositors of deposit-funded institutions 
to  bear  losses  to  ensure  that  those  institutions  can  access  external  funding  in 
resolution, in particular in the absence of other bail-inable liabilities. Finally, the fact 
that  there  are  less  stringent  rules  on  access  to  funding  outside  resolution  than  in 
resolution  has  discouraged  the  application  of  the  Union  resolution  framework  in 
favour of other solutions, which often entail the use of taxpayers’ money instead of the 
own  resources  of  the  institution  and  entity  or  industry-funded  safety  nets.  That 
situation,  in  turn,  generates  risks  of  fragmentation,  risks  of  suboptimal  outcomes  in 
managing  institutions  and  entities’  failures,  in  particular  in  the  case  of  smaller  and 
medium-sized  institutions  and  entities,  and  opportunity  costs  from  unused  financial 
resources. It is therefore necessary to ensure a more effective and coherent application 
of the Union resolution framework and to ensure that it can be applied whenever that 
is  in  the  public  interest,  including  for  certain  smaller  and  medium-sized  institutions 
primarily funded through deposits and without sufficient other bail-inable liabilities.  

The intensity, and level of detail, of the resolution planning work needed with respect 
to subsidiaries that have not been identified as resolution entities varies depending on 
the  size  and  risk  profile  of  the  institutions  and  entities  concerned,  the  presence  of 
critical  functions,  and  the  group  resolution  strategy.  Resolution  authorities  should 
therefore be able to consider those factors when identifying the measures to be taken 
in respect of such subsidiaries and follow a simplified approach where appropriate.  

An  institution  or  entity  that  is  being  wound  up  under  national  law,  following  a 
determination that the institution or entity is  failing or likely to fail and a conclusion 
by the resolution authority that its resolution is not in the public interest, is ultimately 
heading towards market exit. That implies that a plan for actions to be taken in case of 
failure  is  not  needed,  irrespective  of  whether  the  competent  authority  has  already 
withdrawn  the  authorisation  of  the  institution  or  entity  concerned.  The  same  applies 
for  a  residual  institution  under  resolution  after  the  transfer  of  assets,  rights  and 
liabilities in the context of a transfer strategy. It is therefore appropriate to specify that 
in those situations, the adoption of resolution plans is not required. 

(5) 

Resolution authorities may currently prohibit certain distributions where an institution 
or entity fails to meet the combined buffer requirement when considered in addition to 
the minimum requirement for own funds and eligible liabilities (‘MREL’). However, 
in  certain  situations,  an  institution  or  entity  might  be  required  to  comply  with  the 

EN 

26 

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MREL on a different basis than the basis on which that institution or entity is required 
to comply  with the combined buffer requirement. That situation creates uncertainties 
as to the conditions for the exercise of the powers of resolution authorities to prohibit 
distributions and for the calculation of the Maximum Distributable Amount related to 
MREL.  It  should  therefore  be  laid  down  that,  in  those  cases,  resolution  authorities 
should exercise the power to prohibit certain distributions based on the estimate of the 
combined buffer requirement resulting from Commission Delegated Regulation (EU) 
2021/111828. To ensure transparency and legal certainty, resolution authorities should 
communicate  the  estimated  combined  buffer  requirement  to  the  institution  or  entity, 
which should then publicly disclose that estimated combined buffer requirement. 

Early  intervention  measures  were  created  to  enable  competent  authorities  to  remedy 
the deterioration of the financial and economic situation of an institution or entity and 
to reduce, to the extent possible, the risk and impact of a possible resolution. However, 
due  to  a  lack  of  certainty  regarding  the  triggers  for  application  of  those  early 
intervention  measures  and  partial  overlaps  with  supervisory  measures,  early 
intervention  measures  have  seldom  been  used.  The  conditions  for  the  application  of 
those early intervention measures should therefore be simplified and further specified. 
To  dispel  uncertainties  concerning  the  conditions  and  timing  for  the  removal  of  the 
management  body  and  the  appointment  of  temporary  administrators,  those  measures 
should  be  explicitly  identified  as  early  intervention  measures  and  their  application 
should be subject to the same triggers. At the same time, competent authorities should 
be  required  to  select  the  appropriate  measures  to  address  a  specific  situation  in 
compliance  with  the  principle  of  proportionality.  To  enable  competent  authorities  to 
take into account reputational risks or risks related to money laundering or information 
and communication technology, competent authorities should assess the conditions for 
application  of  early  intervention  measures  not  only  on  the  basis  of  quantitative 
indicators, such as capital or liquidity requirements, level of leverage, non-performing 
loans or concentration of exposures, but also on the basis of qualitative triggers. 

To  improve  legal  certainty,  the  early  intervention  measures  laid  down  in  Directive 
2014/59/EU that overlap with already existing powers under the prudential framework 
laid down in  Directive 2013/36/EU of the European Parliament and of the Council29 
and  in  Directive  (EU) 2019/2034  of  the  European  Parliament  and  of  the  Council30 
should be removed. In addition, it is necessary to ensure that resolution authorities are 
able  to  prepare  for  the  possible  resolution  of  an  institution  or  entity.  The  competent 
authority should therefore inform the resolution authorities of the deterioration of the 
financial  condition  of  an  institution  or  entity  sufficiently  early,  and  resolution 
authorities  should  have  the  necessary  powers  for  the  implementation  of  preparatory 
measures.  Importantly,  to  enable  the  resolution  authorities  to  react  as  swiftly  as 

Commission  Delegated  Regulation  (EU)  2021/1118  of  26  March  2021  supplementing  Directive 
2014/59/EU  of  the  European  Parliament  and  of  the  Council  with  regard  to  regulatory  technical 
standards specifying the methodology to be  used by resolution authorities to estimate the requirement 
referred to in Article 104a of Directive 2013/36/EU of the European Parliament and of the Council and 
the combined buffer requirement for resolution entities at the resolution group consolidated level where 
the resolution group is not subject to those requirements under that Directive (OJ L 241, 8.7.2021, p. 1). 
Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the 
activity  of  credit  institutions  and  the  prudential  supervision  of  credit  institutions,  amending  Directive 
2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 338). 
Directive (EU) 2019/2034 of the European Parliament and of the Council of 27 November 2019 on the 
prudential  supervision  of  investment  firms  and  amending  Directives  2002/87/EC,  2009/65/EC, 
2011/61/EU, 2013/36/EU, 2014/59/EU and 2014/65/EU (OJ L 314, 5.12.2019, p. 64). 

(6) 

(7) 

28 

29 

30 

EN 

27 

  EN 

 
                                                 
possible  to  a  deterioration  of  the  situation  of  an  institution  or  an  entity,  the  prior 
application of early intervention measures should not be a condition for the resolution 
authority  to  make  arrangements  for  the  marketing  of  the  institution  or  entity  or  to 
request information to update the resolution plan and prepare the valuation. To ensure 
a  consistent,  coordinated,  effective  and  timely  reaction  to  the  deterioration  of  the 
financial  situation  of  an  institution  or  entity  and  to  prepare  properly  for  a  possible 
resolution,  it  is  necessary  to  enhance  the  interaction  and  coordination  between 
competent  authorities  and  resolution  authorities.  As  soon  as  an  institution  or  entity 
meets  the  conditions  for  application  of  early  intervention  measures,  competent 
authorities  and  resolution  authorities  should  increase  their  exchanges  of  information, 
including provisional information, and monitor the financial situation of the institution 
or entity jointly. 

It is necessary to ensure timely action and early coordination between the competent 
authority  and  the  resolution  authority,  when  an  institution  or  entity  is  still  a  going 
concern, but where there is a material risk that the institution or entity may fail. The 
competent  authority  should  therefore  notify  the  resolution  authority  as  early  as 
possible  of  such  risk.  That  notification  should  contain  the  reasons  for  the  competent 
authority’s  assessment  and  an  overview  of  the  alternative  private  sector  measures, 
supervisory  action  or  early  intervention  measures  that  are  available  to  prevent  the 
failure  of  the  institution  or  entity  within  a  reasonable  timeframe.  Such  early 
notification  should  not  prejudice  the  procedures  to  determine  whether  the  conditions 
for  resolution  are  met.  The  prior  notification  by  the  competent  authority  to  the 
resolution authority of a material risk that an institution or entity is failing or likely to 
fail  should  not  be  a  condition  for  a  subsequent  determination  that  an  institution  or 
entity is actually failing or likely to fail. Moreover, if at a later stage the institution or 
entity is assessed to be failing or likely to fail and there are no alternative solutions to 
prevent such failure within a reasonable timeframe, the resolution authority has to take 
a  decision  whether  to  take  resolution  action.  In  such  a  case,  the  timeliness  of  the 
decision to apply resolution action to an institution or entity can be fundamental to the 
successful  implementation  of  the  resolution  strategy,  in  particular  because  an  earlier 
intervention in  the institution or entity  can contribute to  ensuring sufficient  levels  of 
loss  absorption  capacity  and  liquidity  to  execute  that  strategy.  It  is  therefore 
appropriate to enable the resolution authority to assess, in close cooperation with the 
competent authority, what constitutes a reasonable timeframe to implement alternative 
measures to avoid the failure of the institution or entity. To ensure a timely outcome 
and to enable the resolution authority to prepare properly for the potential resolution of 
the  institution  or  entity,  the  resolution  authority  and  the  competent  authority  should 
meet  regularly,  and  the  resolution  authority  should  decide  on  frequency  of  those 
meetings considering the circumstances of the case.  

The  resolution  framework  is  meant  to  be  applied  to  potentially  any  institution  or 
entity, irrespective of its size and business model, if the tools available under national 
law  are  not  adequate  to  manage  its  failure.  To  ensure  such  outcome,  the  criteria  to 
apply  the  public  interest  assessment  to  a  failing  institution  or  entity  should  be 
specified.  In  particular,  it  is  necessary  to  clarify  that,  depending  on  the  specific 
circumstances,  certain  functions of the institution  or entity  can be considered critical 
even if their discontinuance would impact financial stability or critical services only at 
regional level.  

(8) 

(9) 

(10)  The  assessment  of  whether  the  resolution  of  an  institution  or  entity  is  in  the  public 
interest  should  reflect  the  consideration  that  depositors  are  better  protected  when 

EN 

28 

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deposit guarantee scheme (‘DGS’) funds are used more efficiently and the losses for 
those funds are minimised. Therefore, in the public interest assessment, the resolution 
objective of protecting depositors should be considered better achieved in resolution if 
opting for insolvency would be more costly for the DGS.  

(11)  The  assessment  of  whether  the  resolution  of  an  institution  or  entity  is  in  the  public 
interest should also reflect, to the extent possible, the difference between, on the one 
hand,  funding  provided  through  industry-funded  safety  nets  (resolution  financing 
arrangements  or  DGSs)  and,  on  the  other  hand,  funding  provided  by  Member  States 
from  taxpayers’  money.  Funding  provided  by  Member  States  bears  a  higher  risk  of 
moral  hazard and a lower incentive for market  discipline. Therefore,  when assessing 
the  objective  of  minimising  reliance  on  extraordinary  public  financial  support, 
resolution  authorities  should  find  funding 
the  resolution  financing 
arrangements or the DGS preferable to funding through an equal amount of resources 
from the budget of Member States. 

through 

(12)  To  ensure  that  the  resolution  objectives  are  attained  in  the  most  effective  way,  the 
outcome of the public interest assessment should be negative only where the winding 
up  of  the  failing  institution  or  entity  under  normal  insolvency  proceedings  would 
achieve the resolution objectives more effectively and not only to the same extent as 
resolution. 

(13)  When a failing institution or entity is not put in resolution, it should be wound down in 
accordance  with  the  procedures  available  under  national  law.  Such  procedures  may 
vary substantially from one Member State to the other. While it is appropriate to allow 
sufficient flexibility to use the existing national procedures, certain aspects should be 
clarified to ensure that the institutions or entities concerned exit the market.  

(14) 

(15) 

It  should  be  ensured  that  the  relevant  national  administrative  or  judicial  authority 
swiftly  initiates  a  procedure  under  national  law  when  an  institution  or  entity  is 
considered  failing  or  likely  to  fail  and  is  not  put  in  resolution.  Where  voluntary 
liquidation  of  the  institution  or  entity  upon  a  decision  of  shareholders  is  available 
under  national  law,  such  option  should  remain  available.  However,  it  should  be 
ensured  that,  in  absence  of  swift  action  from  the  shareholders,  the  relevant  national 
administrative or judicial authority takes action.  

It should also be laid down that the final outcome of such procedures is the exit of the 
failing institution or entity from the market or the termination of its banking activities. 
Depending on the national law, that objective can be achieved in different ways, which 
may include the sale of the institution or entity or parts of it, sale of specific assets or 
liabilities, a gradual wind down or the termination of its banking activities, including 
payments  and  deposit-taking,  with  a  view  to  selling  its  assets  gradually  to  repay  the 
affected  creditors.  However,  to  enhance  the  predictability  of  the  procedures,  that 
outcome should be reached within a reasonable timeframe. 

(16)  Competent  authorities  should  be  empowered  to  withdraw  the  authorisation  of  an 
institution or entity solely on the basis of the fact that the institution or entity is failing 
or likely to  fail and is  not  put  in  resolution.  Competent  authorities should  be able to 
withdraw  the  authorisation  to  support  the  objective  of  winding  up  the  institution  or 
entity  in  accordance  with  national  law,  particularly  in  cases  where  the  available 
procedures  under  national  law  cannot  be  initiated  at  the  moment  the  institution  or 
entity  is  determined  to  be  failing  or  likely  to  fail,  including  the  cases  where  the 
institution  or  entity  is  not  yet  balance  sheet  insolvent.  To  further  ensure  that  the 
objective  of  winding  up  the  institution  or  entity  can  be  achieved,  Member  States 

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29 

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(17) 

should  ensure  that  the  withdrawal  of  the  authorisation  by  the  competent  authority  is 
also included among the possible conditions to initiate at least one of the procedures 
available under national law and applicable to institutions or entities that are failing or 
likely to fail but are not put in resolution. 

In  light  of  the  experience  acquired  in  the  implementation  of  Directive  2014/59/EU, 
Regulation (EU) No 806/2014 and Directive 2014/49/EU of the European Parliament 
and  of  the  Council31,  it  is  necessary  to  specify  further  the  conditions  under  which 
measures  of  a  preventive  precautionary  nature  that  qualify  as  extraordinary  public 
financial  support  may  exceptionally  be  granted.  To  minimise  distortions  of 
competition arising from differences in nature of DGSs in the Union, interventions of 
DGSs  in  the  context  of  preventive  measures  complying  with  Directive  2014/49/EU 
that qualify as extraordinary public financial support should exceptionally be allowed 
where  the  beneficiary  institution  or  entity  does  not  meet  any  of  the  conditions  for 
being  deemed  as  failing  or  likely  to  fail.  It  should  be  ensured  that  precautionary 
measures  are  taken  sufficiently  early.  The  European  Central  Bank  (ECB)  currently 
bases  its  consideration  that  an  institution  or  entity  is  solvent,  for  the  purposes  of 
precautionary  recapitalisation,  on  a  forward-looking  assessment  for  following  12 
months  of  whether  the  institution  or  entity  can  comply  with  the  own  funds 
requirements set out in Regulation (EU) No 575/2013 of the European Parliament and 
of the Council32 or in Regulation (EU) 2019/2033 of the European Parliament and of 
the  Council33,  and  the  additional  own  funds  requirement  laid  down  in  Directive 
2013/36/EU  or  Directive  (EU)  2019/2034.  That  practice  should  be  laid  down  in 
Directive  2014/59/EU.  Moreover,  measures  to  provide  relief  for  impaired  assets, 
including asset management vehicles or asset guarantee schemes, can prove effective 
and efficient in addressing causes of possible financial distresses faced by institutions 
and  entities  and  preventing  their  failure  and  could  therefore  constitute  relevant 
precautionary  measures.  It  should  be  therefore  specified  that  such  precautionary 
measures can take the form of impaired asset measures. 

(18)  To  preserve  market  discipline,  protect  public  funds  and  avoid  distortions  of 
competition, precautionary measures should remain the exception and only be applied 
to  address  situations  of  serious  disturbance  in  the  market  or  to  preserve  financial 
stability. Moreover, precautionary measures should not be used to address incurred or 
likely losses. The most reliable instrument to identify incurred or likely to be incurred 
losses  is  an  asset  quality  review  by  the  ECB,  the  European  Supervisory  Authority 
(European Banking Authority) (EBA), established by Regulation (EU) No 1093/2010 
of  the  European  Parliament  and  of  the  Council34  or  national  competent  authorities. 
Competent  authorities  should  use  such  a  review  to  identify  incurred  or  likely  to  be 
incurred losses where such review can be carried out within a reasonable timeframe. 

31 

32 

33 

34 

Directive  2014/49/EU  of  the  European  Parliament  and  of  the  Council  of  16  April  2014  on  deposit 
guarantee schemes (OJ L 173, 12.6.2014, p. 149). 
Regulation  (EU)  No  575/2013  of  the  European  Parliament  and  of  the  Council  of  26  June  2013  on 
prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 
648/2012 (OJ L 176, 27.6.2013, p. 1). 
Regulation (EU) 2019/2033 of the European Parliament and of the Council of 27 November 2019 on 
the prudential requirements of investment firms and amending Regulations (EU) No 1093/2010, (EU) 
No 575/2013, (EU) No 600/2014 and (EU) No 806/2014 (OJ L 314, 5.12.2019, p. 1). 
Regulation (EU) No 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/EC (OJ L 331, 15.12.2010, p. 12). 

EN 

30 

  EN 

 
                                                 
Where that is not possible, competent authorities should identify incurred or likely to 
be  incurred  losses  in  the  most  reliable  way  possible  under  the  prevailing 
circumstances, based on on-site inspections where appropriate. 

(19)  Precautionary  recapitalisation  is  aimed  at  supporting  viable  institutions  and  entities 
identified as likely to encounter temporary difficulties in the near future and to prevent 
their situation from deteriorating further. To avoid that public subsidies are granted to 
businesses  that  are  already  unprofitable  when  the  support  is  granted,  precautionary 
measures granted in the form of acquisition of own funds instruments or other capital 
instruments  or  through  impaired  asset  measures  should  not  exceed  the  amount 
necessary to cover capital shortfalls as identified in the adverse scenario of a stress test 
or  equivalent  exercise.  To  ensure  that  public  financing  is  ultimately  discontinued, 
those  precautionary  measures  should  also  be  limited  in  time  and  contain  a  clear 
timeline  for  their  termination  (exit  strategy).  Perpetual  instruments,  including 
Common Equity Tier 1 capital, should only be used in exceptional circumstances and 
be subject to certain quantitative limits because by their nature they are not well suited 
for compliance with the condition of temporariness.  

(20)  Precautionary  measures  should be limited to  the  amount that  the institution or entity 
would  need  to  maintain  its  solvency  in  the  case  of  an  adverse  scenario  event  as 
determined  in  a  stress  test  or  equivalent  exercise.  In  the  case  of  precautionary 
measures  in  the  form  of  impaired  asset  measures,  the  receiving  institution  or  entity 
should  be  able  to  use  that  amount  to  cover  losses  on  the  transferred  assets  or  in 
combination  with  an  acquisition  of  capital  instruments,  provided  that  the  overall 
amount  of  the  shortfall  identified  is  not  exceeded.  It  is  also  necessary  to  ensure  that 
such  precautionary  measures  in  the  form  of  impaired  asset  measures  comply  with 
existing  State  aid  rules  and  best  practices,  that  they  restore  the  institution  or  entity's 
long-term  viability,  that  State  aid  is  limited  to  the  minimum  necessary  and  that 
distortions  of  competition  are  avoided.  For  those  reasons,  the  authorities  concerned 
should in case of precautionary measures in the form of impaired asset measures take 
into  account  the  specific  guidance,  including  the  AMC  Blueprint35  and  the 
Communication on Tackling Non-Performing Loans36. Those precautionary measures 
in  the  form  of  impaired  asset  measures  should  always  be  subject  to  the  overriding 
condition of temporariness. Public guarantees granted for a specified period in relation 
to  the  impaired  assets  of  the  institution  or  entity  concerned  are  expected  to  ensure 
better compliance with  the temporariness  condition  than transfers of such assets  to  a 
publicly  supported  entity.  To  ensure  the  market  exit  of  institutions  and  entities  that 
prove  not  to  be  viable,  despite  the  support  received,  it  is  necessary  to  lay  down  that 
non-compliance  by  the  institution  or  entity  concerned  with  the  terms  of  the  support 
measures specified at the time such measures were granted is to result in the institution 
or entity concerned being considered failing or likely to fail.  

(21)  To cover material infringements of prudential requirements, it is necessary to further 
specify the conditions for determining that holding companies are failing or likely to 
fail. An infringement of those requirements by a holding company should be material 
where  the  type  and  extent  of  such  infringement  is  comparable  with  an  infringement 
that,  if  committed  by  a  credit  institution,  would  have  justified  the  withdrawal  of  the 
authorisation  by  the  competent  authority  in  accordance  with  Article  18  of  Directive 
2013/36/EU. 

35 
36 

COM(2018) 133 final. 
COM(2020) 822 final. 

EN 

31 

  EN 

 
                                                 
(22)  Member  States  may  have,  under  their  national  laws,  powers  to  suspend  payment  or 
delivery  obligations  that  may  include  eligible  deposits.  Where  the  suspension  of 
payment or delivery obligations is not directly related to the financial circumstances of 
the  credit  institution,  deposits  may  not  be  unavailable  for  the  purposes  of  Directive 
2014/49/EU. As a consequence, depositors may not be able to access their deposits for 
an extended period. To maintain depositor trust and confidence in the banking sector 
and  maintain  financial  stability,  Member  States  should  ensure  that  depositors  have 
access to an appropriate daily amount from their deposits, to cover, in particular, the 
cost  of  living,  should  their  deposits  be  made  inaccessible  due  to  a  suspension  of 
payments for reasons other than leading to depositor payout. Such a procedure should 
remain exceptional,  and  Member States should  ensure that depositors have access  to 
appropriate daily amounts. 

(23)  To increase legal certainty, and in view of the potential relevance of liabilities which 
may arise from future uncertain events, including the outcome of litigations pending at 
the  time  of  resolution,  it  is  necessary  to  lay  down  which  treatment  those  liabilities 
should  receive  for  the  purposes  of  the  application  of  the  bail-in  tool.  The  guiding 
principles  in  that  respect  should  be  those  provided  in  the  accounting  rules,  and 
particularly  the  accounting  rules  laid  down  in  the  International  Accounting  Standard 
37  as  adopted  by  Commission  Regulation  (EC)  No 1126/200837.  On  that  basis, 
resolution  authorities  should  draw  a  distinction  between  provisions  and  contingent 
liabilities.  Provisions  are  liabilities  that  relate  to  a  probable  outflow  of  funds  and 
which  can  be  reliably  estimated.  Contingent  liabilities  are  not  recognised  as 
accounting  liabilities  as  they  relate  to  an  obligation  which  cannot  be  considered 
probable at the time of the estimate or cannot be reliably estimated. 

(24)  Since provisions are accounting liabilities, it should be specified that such provisions 
are  to  be  treated  the  same  way  as  other  liabilities.  Such  provisions  should  be  bail-
inable, unless they meet one of the specific criteria for being excluded from the scope 
of the bail-in tool. Given the potential relevance of those provisions in resolution and 
to  ensure  certainty  in  the  application  of  the  bail-in  tool,  it  should  be  specified  that 
provisions  are  part  of  the  bail-inable  liabilities  and  that,  as  a  result,  the  bail-in  tool 
applies to them. It should also be ensured that, after the application of the bail-in tool, 
those liabilities and any obligations or claims arising in relation to them are treated as 
discharged for all purposes. That is particularly relevant for liabilities and obligations 
arising from judicial claims against the institution under resolution. 

(25)  According  to  accounting  principles,  contingent  liabilities  cannot  be  recognised  as 
liabilities  and  should  therefore  not  be  bail-inable.  It  is  however  necessary  to  ensure 
that  a  contingent  liability  that  would  arise  from  an  event  which  is  improbable  or 
cannot be reliably estimated at the time of resolution does not impair the effectiveness 
of the resolution strategy and in particular of the bail-in tool. To achieve that objective, 
the  valuer  should,  as  part  of  the  valuation  for  the  purposes  of  resolution,  assess 
contingent  liabilities  that  are  included  in  the  balance  sheet  of  the  institution  under 
resolution  and  quantify  the  potential  value  of  those  liabilities  to  the  valuer’s  best 
abilities.  To  ensure  that,  after  the  resolution  process,  the  institution  or  entity  can 
sustain  sufficient  market  confidence  for  an  appropriate  amount  of  time,  the  valuer 
should take into account that potential value when establishing the amount by which 

37 

Commission  Regulation  (EC)  No  1126/2008  of  3  November  2008  adopting  certain  international 
accounting  standards  in  accordance  with  Regulation  (EC)  No  1606/2002  of  the  European  Parliament 
and of the Council (OJ L 320, 29.11.2008, p. 1). 

EN 

32 

  EN 

 
                                                 
bail-inable liabilities need to be written down or converted to restore the capital ratios 
of the institution under resolution. In particular, the resolution authority should apply 
its conversion powers to bail-inable liabilities to the extent necessary to ensure that the 
recapitalisation of the institution under resolution is sufficient to cover potential losses 
which  may  be  caused  by  a  liability  that  may  arise  because  of  an  improbable  event. 
When assessing the amount to be written down or converted, the resolution authority 
should  carefully  consider  the  impact  of  the  potential  loss  on  the  institution  under 
resolution  based  on  a  number  of  factors,  including  the  likelihood  of  the  event 
materialising, the time frame for its materialisation and the amount of the contingent 
liability. 

(26) 

In  certain  circumstances,  after  the  resolution  financing  arrangement  has  provided  a 
contribution  up  to  the  maximum  of  5 %  of  the  institution  or  entity’s  total  liabilities 
including own funds,  resolution  authorities may  use  additional sources  of funding to 
further  support  their  resolution  action.  It  should  be  specified  more  clearly  in  which 
circumstances the resolution financing arrangement may provide further support where 
all  liabilities  with  a  priority  ranking  lower  than  deposits  that  are  not  mandatorily  or 
discretionarily excluded from bail-in have been written down or converted in full. 
(27)  Regulation  (EU)  2019/876  of  the  European  Parliament  and  of  the  Council38, 
Regulation  (EU)  2019/877  of  the  European  Parliament  and  of  the  Council39  and 
Directive  (EU)  2019/879  of  the  European  Parliament  and  of  the  Council40 
implemented  in  the  Union  the  international  ‘Total  Loss-absorbing  Capacity  (TLAC) 
Term  Sheet’,  published  by  the  Financial  Stability  Board  on  9  November  2015  (the 
‘TLAC standard’), for global  systemically important  banks, referred to  in  Union  law 
as global systemically important institutions (G-SIIs). Regulation (EU) 2019/877 and 
Directive  (EU)  2019/879  also  amended  the  MREL  set  out  in  Directive  2014/59/EU 
and  in  Regulation  (EU)  No  806/2014.  It  is  necessary  to  align  the  provisions  in 
Directive  2014/59/EU  on  the  MREL  with  the  implementation  of  the  TLAC  standard 
for G-SIIs with respect to certain liabilities that could be used to meet the part of the 
MREL  that  should  be  met  with  own  funds  and  other  subordinated  liabilities.  In 
particular,  liabilities  that  rank  pari  passu  with  certain  excluded  liabilities  should  be 
included in the own funds and subordinated eligible instruments of resolution entities 
where the  amount of those excluded liabilities on the balance sheet  of the resolution 
entity does not exceed 5 % of the amount of the own funds and eligible liabilities of 
the resolution entity and no risks related to the ‘no creditor worse off’ principle arise 
from that inclusion.  

(28)  The  rules  for  determining  the  MREL  are  mostly  focused  on  setting  the  appropriate 
level of the MREL with the assumption of the bail-in tool as the preferred resolution 
strategy.  However,  Directive  2014/59/EU  allows  resolution  authorities  to  use  other 

38 

39 

40 

Regulation (EU) 2019/876 of the European Parliament and of the Council of 20 May 2019 amending 
Regulation (EU) No 575/2013 as regards the leverage ratio, the net stable funding ratio, requirements 
for  own  funds  and  eligible  liabilities,  counterparty  credit  risk,  market  risk,  exposures  to  central 
counterparties,  exposures  to  collective  investment  undertakings,  large  exposures,  reporting  and 
disclosure requirements, and Regulation (EU) No 648/2012 (OJ L 150, 7.6.2019, p. 1). 
Regulation (EU) 2019/877 of the European Parliament and of the Council of 20 May 2019 amending 
Regulation  (EU)  No  806/2014  as  regards  the  loss-absorbing  and  recapitalisation  capacity  of  credit 
institutions and investment firms (OJ L 150, 7.6.2019, p. 226). 
Directive  (EU)  2019/879  of  the  European  Parliament  and  of  the  Council  of  20  May  2019  amending 
Directive  2014/59/EU  as  regards  the  loss-absorbing  and  recapitalisation  capacity  of  credit  institutions 
and investment firms and Directive 98/26/EC (OJ L 150, 7.6.2019, p. 296). 

EN 

33 

  EN 

 
                                                 
resolution tools, namely those relying on the transfer of the business of the institution 
under resolution to a private purchaser or to a bridge institution. It should therefore be 
specified that, in case the resolution plan envisages the use of the sale of business tool 
or  of  the  bridge  institution  tool  and  the  resolution  entity’s  exit  from  the  market, 
resolution authorities should determine the level of the MREL for the resolution entity 
concerned on the basis of the specificities of those resolution tools and of the different 
loss-absorbing and recapitalisation needs those tools entail.  

(29)  The level of the MREL for resolution entities is the sum of the amount of the losses 
expected in resolution and the recapitalisation amount that enable the resolution entity 
to continue to comply with its conditions for authorisation and enabling it to pursue its 
activities  for  the  appropriate  period.  Certain  preferred  resolution  strategies  entail  the 
transfer of assets, rights and liabilities to a recipient and market exit, in particular the 
sale  of  business  tool.  In  those  cases,  the  objectives  pursued  by  the  recapitalisation 
component  might  not  apply  to  the  same  extent,  because  the  resolution  authority  will 
not  be  required  to  ensure  that  the  resolution  entity  restores  compliance  with  its  own 
funds  requirements  after  resolution  action.  Nevertheless,  the  losses  in  such  cases  are 
expected  to  exceed  the  resolution  entity’s  own  funds  requirements.  It  is  therefore 
appropriate  to  lay  down  that  the  level  of  the  MREL  of  those  resolution  entities 
continues  to  include  a  recapitalisation  amount  that  is  adjusted  in  a  way  that  is 
proportionate to the resolution strategy. 

(30)  Where the resolution strategy envisages the use of resolution tools other than bail-in, 
the  recapitalisation  needs  of  the  entity  concerned  will  generally  be  smaller  after 
resolution  than  in  case  of  open  bank  bail-in.  The  calibration  of  the  MREL  in  such  a 
case  should  take  that  aspect  into  account  when  estimating  the  recapitalisation 
requirement. Therefore, when adjusting the level of the MREL for resolution entities 
the resolution plan of which envisages the sale of business tool or the bridge institution 
tool  and  its  exit  from  the  market,  resolution  authorities  should  take  into  account  the 
features of those tools, including the expected perimeter of the transfer to the private 
purchaser  or  to  the  bridge  institution,  the  types  of  instruments  to  be  transferred,  the 
expected value and marketability of those instruments and the design of the preferred 
resolution  strategy,  including  the  complementary  use  of  the  asset  separation  tool. 
Since the resolution authority has to decide on a case by case basis on any possible use 
in  resolution  of  funds  from  DGS  and  since  such  decision  cannot  be  assumed  with 
certainty  ex  ante,  the  resolution  authorities  should  not  consider  the  potential 
contribution of the DGS in resolution when calibrating the level of the MREL.  

(31) 

It  is  necessary  to  ensure  equal  incentives  to  build  sufficient  amounts  of  MREL  for 
institutions and entities that would be subject to transfer strategies both in and outside 
resolution.  The  setting  of  level  of  the  MREL  for  institutions  or  entities  that  may  be 
subject  to  of  measures  in  the  context  of  national  insolvency  proceedings  pursuant  to 
Article 11(5) of Directive 2014/49/EU should therefore follow the same rules as those 
applicable  to  the  setting  of  the  MREL  for  resolution  entities  whose  preferred 
resolution strategy provides for the sale of business or transfer to a bridge institution 
leading to its exit from the market.  

(32)  There  are  interactions  between  the  resolution  framework  and  the  market  abuse 
framework.  In  particular,  while  actions  taken  in  preparation  for  resolution  are 
susceptible of qualifying as inside information under Regulation (EU) No 596/2014 of 

EN 

34 

  EN 

 
the  European  Parliament  and  of  the  Council41,  their  premature  disclosure  risks 
jeopardising the resolution process. Institutions under resolution are able to take steps 
to address that issue by requesting a delay in the disclosure of inside information under 
Article  17(5)  of  Regulation  (EU)  No  596/2014.  However,  the  right  incentives  might 
not always be present at the time of preparing for resolution in order for the institution 
under resolution to take the initiative to make such a request. To avoid such situations, 
resolution  authorities  should  have  the  power  to  directly  request  a  delay  in  the 
disclosure  of  inside  information  pursuant  to  Article  17(5)  of  Regulation  (EU)  No 
596/2014 on behalf of an institution under resolution. 

(33)  To  facilitate  resolution  planning,  the  assessment  of  resolvability  and  the  exercise  of 
the  power  to  address  or  remove  impediments  to  resolvability  as  well  as  to  foster 
information  exchange,  the  resolution  authority  of  an  institution  with  significant 
branches in other Member States should establish and chair a resolution college.  

(34)  After the initial build-up period of the resolution financing arrangements referred to in 
Article  102(1)  of  Directive  2014/59/EU,  their  respective  available  financial  means 
may  face  slight  decreases  below  their  target  level,  in  particular  resulting  from  an 
increase  in  covered  deposits.  The  amount  of  the  ex  ante  contributions  likely  to  be 
called  in  those  circumstances  is  thus  likely  to  be  small.  It  may  therefore  be  possible 
that,  in  some  years,  the  amount  of  such  ex  ante  contributions  is  no  longer 
commensurate  to  the  cost  of  the  collection  of  those  contributions.  Resolution 
authorities should therefore be able to defer the collection of the ex ante contributions 
for  1  or  more  years  until  the  amount  to  be  collected  reaches  an  amount  that  is 
proportionate to the cost of the collection process, provided that such deferral does not 
materially  affect  the  capacity  of  resolution  authorities  to  use  resolution  financing 
arrangements. 

(35) 

Irrevocable  payment  commitments  are  one  of  the  components  of  the  available 
financial  means  of  resolution  financing  arrangements.  It  is  therefore  necessary  to 
specify the circumstances in which those payment commitments may be called and the 
applicable  procedure  when  terminating  the  commitments  in  case  an  institution  or 
entity  ceases  to  be  subject  to  the  obligation  to  pay  contributions  to  a  resolution 
financing  arrangement.  In  addition,  to  provide  more  transparency  and  certainty  with 
respect  to  the  share  of  irrevocable  payment  commitments  in  the  total  amount  of  ex 
ante contributions to be raised, resolution authorities should determine  such share on 
an annual basis, subject to the applicable limits. 

(36)  The  maximum  annual  amount  of  extraordinary  ex  post  contributions  to  resolution 
financing arrangements that are allowed to be called, is currently limited to three times 
the amount of the ex ante contributions. After the initial build-up period referred to in 
Article 102(1) of Directive 2014/59/EU, such ex ante contributions will depend only, 
in  circumstances  other  than  the  use  of  the  resolution  financing  arrangements,  on 
variations  in  the  level  of  covered  deposits  and  are  therefore  likely  to  become  small. 
Basing  the  maximum  amount  of  extraordinary  ex  post  contributions  on  ex  ante 
contributions  could  then  have  the  effect  of  drastically  limiting  the  possibility  for 
resolution financing arrangements to raise ex post contributions, thereby reducing their 

41 

Regulation  (EU)  No  596/2014  of  the  European  Parliament  and  of  the  Council  of  16  April  2014  on 
market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament 
and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC (OJ L 173, 
12.6.2014, p. 1). 

EN 

35 

  EN 

 
                                                 
capacity for action. To avoid such an outcome, a  different limit should be laid down 
and the maximum amount of extraordinary ex post contributions allowed to be called 
should be set  at  three times one-eighth  of the target  level  of the resolution  financing 
arrangement concerned.  

(37)  Directive 2014/59/EU partially harmonised the ranking of deposits under national laws 
governing  normal  insolvency  proceedings.  Those  rules  provided  for  a  three-tier 
ranking  of  deposits,  whereby  covered  deposits  had  the  highest  priority  ranking, 
followed by eligible deposits of natural persons and micro, smaller and medium-sized 
enterprises  above  the  coverage  level.  The  remaining  deposits,  i.e.  deposits  of  large 
corporates  exceeding  the  coverage  level  and  deposits  that  are  not  eligible  for 
repayment  by  the  DGS,  were  required  to  have  a  lower  priority  ranking,  but  their 
position  was  not  otherwise  harmonised.  Finally,  the  claims  of  DGSs  benefitted  from 
the same higher priority ranking as covered deposits. Nevertheless, this has not proved 
to  be  the  optimal  solution  for  depositor  protection.  Partial  harmonisation  created 
differences  in  the  treatment  of  those  remaining  depositors  across  Member  States,  in 
particular as an increasing number of Member States have decided to also grant a legal 
preference to the remaining deposits. Those differences also created difficulties when 
determining  the  insolvency  counterfactual  for  cross-border  groups  during  the 
resolution valuations. Furthermore, the lack of general depositor preference along with 
the  three-tiered  ranking  of  depositors’  claims  had  the  potential  to  create  problems 
regarding compliance with the ‘no creditor worse off’ principle, particularly when the 
deposits  the  priority  of  which  had  not  been  harmonised  by  Directive  2014/59/EU 
ranked at the same level as senior claims. Lastly, the high priority ranking given to the 
claims  of  DGSs  had  not  made  it  possible  for  the  available  financing  means  of  those 
schemes to  be used in  a more efficient and effective way in  interventions other  than 
the  payout  of  covered  deposits  in  insolvency,  namely  in  the  context  of  resolution, 
alternative measures in insolvency or preventive measures. The protection of covered 
deposits does not rely on the priority ranking of the claims of the DGS but is instead 
ensured  through  the  mandatory  exclusions  from  bail-in  in  resolution  and  the  prompt 
repayment from the DGS in case of unavailability of deposits. Therefore, the ranking 
of deposits in the current hierarchy of claims should be amended.  

(38)  The ranking of all deposits should be fully harmonised through the implementation of 
a  general  depositor  preference  with  a  single-tiered  approach,  whereby  all  deposits 
benefit  from  a  higher  priority  ranking  over  ordinary  unsecured  claims,  without  any 
differentiation  between  different  types  of  deposits.  At  the  same  time,  the  use  of  the 
deposit  guarantee  schemes  in  resolution,  insolvency  and  in  preventive  measures 
should  always  remain  subject  to  compliance  with  the  relevant  conditionality,  in 
particular the so-called ‘least cost test’. 

(39)  A  general  depositor  preference  will  contribute  to  reinforcing  depositors’  confidence 
and  to  further  prevent  the  risk  of  bank  runs.  Enhanced  depositor  protection  is  also 
aligned with the central role deposits play in the real economy, being the primary tool 
for  savings  and  for  payments,  as  well  as  in  the  banking  activity,  where  the  deposits 
represent  an  important  source  of  funding  and  are  a  key  driver  of  confidence  in  the 
banking  system,  which  becomes  of  particular  relevance  in  times  of  market  stress. 
Moreover, a general depositor preference improves the resolvability of institutions and 
entities  by  increasing  their  ability  to  comply  with  the  requirements  to  access  the 
resolution financing arrangements and decreasing the amount of funding required from 
those  arrangements,  due  to  the  lower  risk  of  breaching  the  ‘no  creditor  worse  off’ 
principle  where  bailing-in  ordinary  unsecured  debt.  In  particular,  the  removal  of 

EN 

36 

  EN 

 
deposits  from  the  insolvency  class  of  ordinary  unsecured  claims  would  increase  the 
bail-inability  of  remaining  ordinary  unsecured  claims  by  minimising  the  risk  of 
breaches  of  the  ‘no  creditor  worse  off’  principle.  By  reducing  the  likelihood  of 
deposits being written down or converted to ensure access to the resolution financing 
arrangements, the general depositor preference would contribute to making the bail-in 
tool more effective and credible and would lead to an increase of the transparency and 
legal  certainty  of  the  resolution  framework.  The  general  depositor  preference  would 
also  contribute  to  the  credibility  of  transfer  strategies  in  resolution,  as  it  would 
facilitate the inclusion of the entire deposit contract in the perimeter of liabilities to be 
transferred  to  a  private  purchaser  or  to  a  bridge  institution,  to  the  benefit  of  the 
customer  relationship  and  the  franchise  value  of  the  institution  under  resolution. 
Lastly,  a  full  harmonisation  of  the  insolvency  ranking  of  depositors  would  be 
beneficial from the cross-border and level playing field perspective.  

(40)  A  single-tiered  approach  for  the  priority  ranking  of  deposits  under  national  laws 
governing  normal  insolvency  proceedings  contributes  to  a  more  efficient  and  less 
costly  protection  of  all  deposits.  For  covered  deposits,  that  approach  facilitates  the 
financing by the  DGS of measures other than the payout  of  covered deposits, which 
can be more effective and less disruptive in protecting access to the deposited funds as 
they do not lead to an interruption of access to bank accounts and payment services. 
For the deposits  that are not  covered, that approach  facilitates their protection  where 
necessary for the protection of financial stability and depositor confidence. Finally, by 
introducing  flexibility  in  the  use  of  those  potentially  less  costly  mechanisms  for 
depositor  protection,  that  approach  minimises  the  immediate  disbursement  needs  of 
the DGSs, thereby ensuring a better preservation of their available financing means in 
case  other  crises  occur  and  decreasing  the  burden  on  the  banking  sector,  who  are 
called to replenish those funds.  

(41)  The  changes  to  the  priority  ranking  of  deposits,  in  particular  the  elimination  of  the 
higher  ranking  of  covered  deposits  and  the  claims  of  the  DGSs  relative  to  all  other 
deposits, would not negatively affect the protection afforded to covered deposits in the 
event  of  failure,  as  that  protection  would  continue  to  be  guaranteed  through  the 
mandatory  exclusion  of  covered  deposits  from  loss  absorption  in  case  of  resolution 
and,  ultimately,  by  the  payout  provided  by  the  DGS  in  event  of  unavailability  of 
deposits. 

(42)  Resolution financing arrangements can be used to support the application of the sale of 
business  tool  or  of  the  bridge  institution  tool,  whereby  a  set  of  assets,  rights  and 
liabilities of the institution under resolution are transferred to a recipient. In that case, 
the resolution financing arrangement may have a claim against the residual institution 
or entity in its subsequent winding up under normal insolvency proceedings. That may 
occur where the resolution financing arrangement is used in connection to losses that 
creditors would have otherwise borne, including under the form of guarantees to assets 
and  liabilities  or  coverage  of  the  difference  between  the  transferred  assets  and 
liabilities.  To  ensure  that  the  shareholders  and  creditors  left  behind  in  the  residual 
institution or entity effectively absorb the losses of the institution under resolution and 
improve  the  possibility  of  repayments  in  insolvency  to  the  resolution-specific  safety 
net,  those  claims  of  the  resolution  financing  arrangement  against  the  residual 
institution or entity, and claims that arise from reasonable expenses properly incurred, 
should  rank  in  insolvency  above  the  claims  of  deposits  and  of  the  DGS.  Since 
financing 
to  shareholders  and  creditors  by 
compensations  paid 
arrangements  due  to  breaches  of  the  ‘no  creditor  worse  off’  principle  aim  to 

resolution 

EN 

37 

  EN 

 
compensate  for the results  of resolution  action, those compensations should not  give 
rise to claims of those arrangements.  

(43)  To ensure sufficient flexibility and to facilitate DGS interventions in support of the use 
of the resolution  tools, where they lead to  the exit from  the market  of the institution 
under  resolution  and  where  necessary  to  prevent  losses  being  borne  by  depositors, 
certain aspects of the use of DGS in resolution should be specified. In particular, it is 
necessary  to  specify  that  the  DGS  can  be  used  to  support  transfer  transactions  that 
include deposits, including eligible deposits beyond the coverage level provided by the 
DGS,  and  also  deposits  excluded  from  repayment  by  a  DGS,  in  certain  cases  and 
under clear conditions. The contribution of the DGS should be aimed at covering the 
shortfall  in  the  value  of  the  assets  transferred  to  a  buyer  or  bridge  institution  in 
comparison to the value of the transferred deposits. Where a contribution is required 
by  the  buyer  as  part  of  the  transaction  to  ensure  its  capital  neutrality  and  preserve 
compliance with the buyer’s capital requirements, the DGS should also be allowed to 
contribute to that effect. The support of the DGS to resolution action should take the 
form  of  cash  or  other  forms,  such  as  guarantees  or  loss  sharing  agreements  that  can 
minimise the impact of the support on the available financial means of the DGS while 
simultaneously allowing the contribution of the DGS to meet its purposes. 

(44)  The contribution of the DGS in resolution should be subject to certain limits. First, it 
should be ensured that any loss which the DGS may bear as a result of an intervention 
in resolution does not exceed the loss that the DGS would bear in insolvency if it paid 
out covered depositors and subrogated to their claims over the institution’s assets. That 
amount should be determined on the basis of the least cost test, in accordance with the 
criteria  and  methodology  set  out  in  Directive  2014/49/EU.  Those  criteria  and 
methodology should also be used when determining the treatment that the DGS would 
have  received  had  the  institution  entered  normal  insolvency  proceedings  when 
carrying  out  the  ex-post  valuation  for  the  purposes  of  assessing  compliance  with  the 
‘no creditor worse off’ principle and determining any compensation owed to the DGS. 
Second,  the  amount  of  the  DGS’s  contribution  aimed  at  covering  the  difference 
between  the  assets  and  liabilities  to  be  transferred  to  a  purchaser  or  to  a  bridge 
institution  should  not  exceed  the  difference  between  the  transferred  assets  and  the 
transferred  deposits  and  liabilities  with  the  same  or  a  higher  priority  ranking  in 
insolvency than those deposits. That would ensure that the contribution of the DGS is 
only used for the purposes of avoiding the imposition of losses on depositors, where 
appropriate,  and  not  for  the  protection  of  creditors  that  rank  below  deposits  in 
insolvency.  Nevertheless,  the  sum  of  the  contribution  of  the  DGS  to  cover  the 
difference between assets and liabilities with the contribution of the DGS towards the 
own  funds  of  the  recipient  entity  should  not  exceed  the  cost  of  repaying  covered 
depositors as calculated under the least cost test. 

(45) 

It should be specified that the DGS may only contribute to a transfer of liabilities other 
than  covered  deposits  in  the  context  of  a  resolution  if  the  resolution  authority 
concludes that deposits others than covered deposits cannot be bailed-in, nor left in the 
residual  institution  under  resolution  which  will  be  wound  up.  In  particular,  the 
resolution  authority  should  be  allowed  to  avoid  allocating  losses  to  those  deposits 
where the exclusion is strictly necessary and proportionate  to preserve the continuity 
of  critical  functions  and  core  business  lines  or  where  necessary  to  avoid  widespread 
contagion  and  financial  instability,  which  could  cause  a  serious  disturbance  to  the 
economy  of  the  Union  or  of  a  Member  State.  The  same  reasons  should  apply  to  the 
inclusion  in  the  transfer  to  a  buyer  or  to  a  bridge  institution  of  bail-inable  liabilities 

EN 

38 

  EN 

 
with  a priority ranking lower than that of deposits.  In that case, the transfer of those 
bail-inable liabilities should  not  be supported by the contribution  of the DGS.  If any 
financial support to the transfer of those bail-inable liabilities is required, that support 
should be provided by the resolution financing arrangement. 

(46)  Given  the  possibility  to  use  DGS  in  resolution,  it  is  necessary  to  specify  further  the 
way  in  which  the  DGS  contribution  can  count  towards  the  calculation  of  the 
requirements to access resolution financing arrangements. If the contribution made by 
shareholders and creditors of the institution under resolution through reductions, write-
down  or  conversion  of  their  liabilities,  summed  with  the  contribution  made  by  the 
DGS, amounts to at least 8 % of the institution’s total liabilities including own funds, 
the institution should be able to access the resolution financing arrangement to receive 
further  funding,  where  necessary  to  ensure  effective  resolution  in  line  with  the 
resolution objectives. If those conditions are met, the contribution of the DGS should 
be  limited  to  the  amount  necessary  to  enable  access  to  the  resolution  financing 
arrangement.  To  ensure  that  resolution  continues  to  be  primarily  financed  by  the 
institution’s  internal  resources  and  to  minimise  distortions  of  competition,  the 
possibility  to  use  the  DGS  contribution  to  ensure  access  to  resolution  financing 
arrangements should only be possible for institutions for which the resolution plan or 
the group resolution plan does not provide for their winding up in an orderly manner 
in case of failure, given that the MREL determined by resolution authorities for those 
institutions  has  been  set  at  a  level  that  includes  both  the  loss  absorption  and  the 
recapitalisation amounts. 

(47) 

their  contribution 

to  resolution  preparedness  and 

In view of the role of EBA in furthering the convergence of authorities' practices, EBA 
should  monitor  and  report  on  the  design  and  implementation  of  the  resolvability 
assessments  of  institutions  and  groups  and  on  the  actions  and  preparations  of 
resolution authorities to ensure an effective implementation of the resolution tools and 
powers.  In  those  reports,  EBA  should  also  assess  the  level  of  transparency  of  the 
measures  taken  by  resolution  authorities  towards  relevant  external  stakeholders  and 
the  extent  of 
institutions’ 
resolvability.  EBA  should  furthermore  report  on  the  measures  adopted  by  Member 
States for the protection of retail  investors in  what  concern debt  instruments  that are 
eligible  for  the  MREL  pursuant  to  Directive  2014/59/EU,  comparing  and  assessing 
any  potential  impact  on  cross-border  operations.  The  scope  of  existing  regulatory 
technical standards on the estimation of the additional own funds requirements and the 
combined  buffer  requirement  for  resolution  entities  should  be  expanded  to  include 
entities  that have not  been identified as  resolution  entities, where those requirements 
have  not  been  set  on  the  same  basis  as  the  MREL.  In  the  annual  report  on  MREL, 
EBA should also assess the policy implementation by resolution authorities of the new 
rules for the calibration of the MREL for transfer strategies. In the context of EBA’s 
tasks  of  contributing  to  ensure  a  coherent  and  coordinated  crisis  management  and 
resolution regime in the Union, EBA should coordinate and oversee crisis simulation 
exercises.  Those  simulations  should  cover  the  coordination  and  cooperation  between 
competent authorities, resolution authorities and DGSs during the deterioration of the 
financial situation of institutions and entities, testing the application of the toolbox in 
recovery  and  resolution  planning,  early  intervention,  and  resolution  in  a  holistic 
manner.  Those  exercises  should  consider  in  particular  the  cross-border  dimension  in 
the  interaction  between  the  relevant  authorities  and  the  application  of  the  available 
tools and powers. Where relevant, the crisis simulation exercises should also  capture 
the  adoption  and  implementation  of  resolution  schemes  within  the  Banking  Union, 
pursuant to Regulation (EU) No 806/2014. 

EN 

39 

  EN 

 
(48)  High-quality impact assessment is crucial for the development of sound and evidence-
based legislative proposals,  while facts  and evidence are key to  inform  the decisions 
taken  during  the  legislative  procedure.  For  that  reason,  resolution  authorities, 
competent authorities, the Single Resolution Board, the ECB and other members of the 
European System of Central  Banks  and  EBA, should  provide  the Commission,  at  its 
request,  with  all  the  information  it  needs  for  its  policy  development  related  tasks, 
including the preparation of impact assessments and the preparation and negotiation of 
legislative proposals.  

(49)  Directive 2014/59/EU should therefore be amended accordingly. 

(50)  Since  the  objectives  of  this  Directive,  namely  to  improve  the  effectiveness  and 
efficiency  of  the  recovery  and  resolution  framework  for  institutions  and  entities, 
cannot be sufficiently achieved by the Member States due to the risks that diverging 
national approaches might entail for the integrity of the single market but can rather, 
by  amending  rules  that  are  already  set  at  Union  level,  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  Treaty  on  the  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, 

HAVE ADOPTED THIS DIRECTIVE: 

Article 1 

Amendments to Directive 2014/59/EU 

Directive 2014/59/EU is amended as follows: 

(1) 

Article 2(1) is amended as follows:  

(a) 

the following point (29a) is inserted: 

‘(29a) ‘alternative private sector measure’ means any support not qualifying as 
extraordinary public financial support;’; 

(b)  point (35) is replaced by the following: 

the 
‘(35)  ‘critical  functions’  means  activities,  services  or  operations 
discontinuance of which is likely in one or more Member States to lead to the 
disruption  of  services  that  are  essential  to  the  real  economy  or  to  disrupt 
financial  stability  at  national  or  regional  level,  due  to  the  size,  market  share, 
external and internal interconnectedness,  complexity or cross-border activities 
of an institution or group, with particular regard to the substitutability of those 
activities, services or operations;’; 

(c) 

point (71) is replaced by the following: 

‘(71) ‘bail-inable liabilities’ means the liabilities, including those giving rise to 
accounting provisions, and capital instruments that do not qualify as Common 
Equity Tier 1, Additional Tier 1 or Tier 2 instruments of an institution or entity 
as referred to Article 1(1), points (b), (c) or (d), and that are not excluded from 
the scope of the bail-in tool pursuant to Article 44(2);’; 

(d) 

the following points (83d) and (83e) are inserted: 

EN 

40 

  EN 

 
‘(83d) ‘non-EU G-SII’ means a non-EU G-SII as defined in Article 4(1), point 
(134), of Regulation (EU) No 575/2013; 

(83e)  ‘G-SII  entity’  means  a  G-SII  entity  as  defined  in  Article  4(1),  point 
(136), of Regulation (EU) No 575/2013;’; 

(e) 

the following point (93a) is inserted: 

‘(93a)  ‘deposit’  means,  for  the  purposes  of  Articles  108  and  109,  deposit  as 
defined in Article 2(1), point (3), of Directive 2014/49/EU;’; 

(2) 

in Article 5, paragraphs 2, 3 and 4 are replaced by the following: 

‘2. Competent authorities shall ensure that the institutions update their recovery plans 
at  least  annually  or  after  a  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  material  change  to,  the  recovery  plan.  Competent  authorities 
may require institutions to update their recovery plans more frequently.  

In  the  absence  of  changes  referred  to  in  the  first  subparagraph  in  12  months 
following  the  latest  annual  update  of  the  recovery  plan,  the  competent  authorities 
may  exceptionally  waive,  until  the  subsequent  12-month  period,  the  obligation  to 
update the recovery plan. 

3. Recovery plans shall not assume any access to or receipt of any of the following: 

(a) 

extraordinary public financial support; 

(b) 

central bank emergency liquidity assistance; 

(c) 

central bank liquidity assistance provided under non-standard collateralisation, 
tenor or interest rate terms. 

4. Recovery plans shall include, where applicable, an analysis of how and when an 
institution may apply, in the conditions addressed by the plan, for the use of central 
bank  facilities  not  excluded  from  the  scope  of  the  recovery  plan  pursuant  to 
paragraph  3  and  identify  those  assets  which  would  be  expected  to  qualify  as 
collateral.’; 

(3) 

in Article 6, paragraph 5 is replaced by the following: 

‘5. Where the competent authority assesses that there are material deficiencies in the 
recovery  plan,  or  material  impediments  to  its  implementation,  it  shall  notify  the 
institution or the parent undertaking of the group of its assessment and shall require 
the institution to submit, within 3 months, extendable with the authorities’ approval 
by 1 month, a revised plan demonstrating how those deficiencies or impediments are 
addressed.’; 

(4) 

in Article 8(2), the third subparagraph is replaced by the following: 

‘EBA may, at the request of a competent authority, assist the competent authorities in 
reaching  a  joint  decision  in  accordance  with  Article  31(2),  point  (c),  of  Regulation 
(EU) No 1093/2010.’; 

(5) 

in Article 10, the following paragraph 8a is inserted: 

‘8a.  Resolution  authorities  shall  not  adopt  resolution  plans  where  an  institution  is 
being  wound  up  in  accordance  with  the  applicable  national  law  pursuant  to  Article 
32b or where Article 37(6) applies.’; 

(6) 

Article 12 is amended as follows: 

EN 

41 

  EN 

 
(a) 

in paragraph 1, the following third subparagraph is added: 

‘The  identification  of  the  measures  to  be  taken  in  respect  of  the  subsidiaries 
referred  to  in  the  first  subparagraph,  point  (b),  that  are  not  resolution  entities 
may  be  subject  to  a  simplified  approach  by  resolution  authorities  if  such 
approach does not negatively  affect the resolvability of the group, taking into 
account  the  size  of  the  subsidiary,  its  risk  profile,  the  absence  of  critical 
functions and the group resolution strategy.’; 

(b) 

the following paragraph 5a is inserted: 

‘5a.  Resolution  authorities  shall  not  adopt  resolution  plans  where  an  entity  is 
being  wound  up  in  accordance  with  the  applicable  national  law  pursuant  to 
Article 32b or where Article 37(6) applies.’; 

(7) 

in Article 13(4), the fourth subparagraph is replaced by the following: 

‘EBA may, at the request of a resolution authority, assist the resolution authorities in 
reaching  a  joint  decision  in  accordance  with  Article  31(2),  point  (c),  of  Regulation 
(EU) No 1093/2010.’; 

(8) 

in Article 15, the following paragraph 5 is added: 

‘5. EBA shall monitor the drawing up of internal policies for and implementation of 
the resolvability assessments of institutions or groups provided for in this Article and 
in  Article  16  by  resolution  authorities.  EBA  shall  report  to  the  Commission  on  the 
existing  practices  on  resolvability  assessments  and  possible  divergences  across 
Member States by … [PO please insert the date = 2 years after the date of entry into 
force of this Directive] and monitor the implementation of any recommendation set 
out in that report, where appropriate. 

The report referred to in the first subparagraph shall cover at least the following: 

(a) 

(b) 

(c) 

an  assessment  of  the  methodologies  developed  by  resolution  authorities  to 
carry  out  resolvability  assessments,  including  the  identification  of  areas  of 
possible divergence across Member States; 

an  assessment  of  the  testing  capabilities  required  by  resolution  authorities  to 
ensure an effective implementation of the resolution strategy; 

the  level  of  transparency  towards  relevant  stakeholders  of  the  methodologies 
developed  by  resolution  authorities  to  perform  resolvability  assessments  and 
their outcome.’; 

(9) 

in Article 16a, the following paragraph 7 is added: 

‘7.  Where  an  entity  is  not  subject  to  the  combined  buffer  requirement  on  the  same 
basis as the basis on which it is required to comply with the requirements referred to 
in  Articles 45c  and 45d, resolution  authorities shall apply paragraphs 1 to 6  of this 
Article on the basis of the estimation of the combined buffer requirement calculated 
in  accordance  with  Commission  Delegated  Regulation  (EU)  2021/1118*.  Article 
128, fourth paragraph, of Directive 2013/36/EU shall apply. 

The  resolution  authority  shall  include  the  estimated  combined  buffer  requirement 
referred  to  in  the  first  subparagraph  in  the  decision  determining  the  requirements 
referred  to  in  Articles  45c  and  45d  of  this  Directive.  The  entity  shall  make  the 
estimated  combined  buffer  requirement  publicly  available  together  with  the 
information referred to in Article 45i(3). 

EN 

42 

  EN 

 
______________________________ 

*  Commission  Delegated  Regulation  (EU)  2021/1118  of  26  March  2021 
supplementing Directive 2014/59/EU of the European Parliament and of the Council 
with regard to regulatory technical standards specifying the methodology to be used 
by  resolution  authorities  to  estimate  the  requirement  referred  to  in  Article  104a  of 
Directive  2013/36/EU  of  the  European  Parliament  and  of  the  Council  and  the 
combined  buffer  requirement  for  resolution  entities  at  the  resolution  group 
consolidated  level  where  the  resolution  group  is  not  subject  to  those  requirements 
under that Directive (OJ L 241, 8.7.2021, p. 1).;’ 

(10) 

in Article 17(4), the following third subparagraph is added: 

‘If the measures proposed by  the entity concerned effectively reduce or remove the 
impediments  to  resolvability,  the  resolution  authority  shall  take  a  decision,  after 
consulting  the  competent  authority.  That  decision  shall  indicate  that  the  measures 
proposed effectively reduce or remove the impediments to resolvability and require 
the entity to implement the measures proposed.’; 

(11) 

Article 18 is amended as follows: 

(a) 

paragraph 4 is replaced by the following: 

‘4.  The  group-level  resolution  authority  shall  communicate  any  measure 
proposed  by  the  Union  parent  undertaking  to  the  consolidating  supervisor, 
EBA, the resolution authorities of the subsidiaries and the resolution authorities 
of  the  jurisdictions  in  which  significant  branches  are  located  insofar  as  is 
relevant to the significant branch. The group-level resolution authority and the 
resolution  authorities  of  the  subsidiaries,  after  consulting  the  competent 
authorities  and  the  resolution  authorities  of  jurisdictions  in  which  significant 
branches  are  located,  shall  do  everything  within  their  power  to  reach  a  joint 
decision  within 
identification  of 
substantive  impediments,  and  if  necessary,  the  assessment  of  the  measures 
proposed  by  the  Union  parent  undertaking  and  the  measures  required  by  the 
authorities  in  order  to  address  or  remove  the  impediments,  which  shall  take 
into account the potential impact of the measures in all Member States where 
the group operates.’; 

the  resolution  college  regarding 

the 

(b)  paragraph 9 is replaced by the following:  

‘9. In the absence of a joint decision on the taking of any measures referred to 
in  Article  17(5),  point  (g),  (h)  or  (k),  EBA  may,  upon  the  request  of  a 
resolution  authority  in  accordance  with  paragraphs  6,  6a  or  7  of  this  Article, 
assist  the  resolution  authorities  in  reaching  an  agreement  in  accordance  with 
Article 19(3) of Regulation (EU) No 1093/2010.’; 

(12) 

Articles 27 and 28 are replaced by the following: 

‘Article 27 

Early intervention measures 

1.  Member  States  shall  ensure  that  competent  authorities  may  apply  early 
intervention measures where an institution or entity referred to in Article 1(1), points 
(b), (c) or (d) meets any of the following conditions:  

(a) 

the  institution  or  entity  meets  the  conditions  referred  to  in  Article  102  of 
Directive  2013/36/EU  or  in  Article  38  of  Directive  (EU)  2019/2034,  or  the 

EN 

43 

  EN 

 
competent authority has determined that the arrangements, strategies, processes 
and  mechanisms  implemented  by  the  institution  or  entity  and  the  own  funds 
and  liquidity  held  by  that  institution  or  entity  do  not  ensure  a  sound 
management and coverage of its risks, and either of the following applies:  

(i) 

(ii) 

the institution or entity has not taken the remedial actions required by the 
competent authority, including the measures referred to in Article 104 of 
Directive 2013/36/EU or in Article 49 of Directive (EU) 2019/2034;  

the  competent  authority  deems  that  remedial  actions  other  than  early 
intervention measures  are insufficient  to  address  the problems  due  inter 
alia to a rapid  and significant deterioration of the financial condition of 
the institution or entity; 

(b) 

the  institution  or  entity  infringes  or  is  likely  to  infringe  in  the  12  months 
following  the  assessment  of  the  competent  authority  the  requirements  laid 
down in Title II of Directive 2014/65/EU, in Articles 3 to 7, Articles 14 to 17, 
or Articles 24, 25 and 26 of Regulation (EU) No 600/2014, or in Articles 45e 
or 45f of this Directive. 

The  competent  authority  may  determine  that  the  condition  referred  to  in  the  first 
subparagraph,  point  (a)(ii),  is  met  without  having  previously  taken  other  remedial 
actions, including the exercise of the powers  referred to in Article 104 of Directive 
2013/36/EU or in Article 39 of Directive (EU) 2019/2034. 

1a.  For  the  purposes  of  paragraph  1,  early  intervention  measures  shall  include  the 
following: 

(a) 

the requirement for the management body of the institution or entity referred to 
in Article 1(1), points (b), (c) or (d), to do either of the following: 

(i) 

(ii) 

to implement one or more of the arrangements or measures set out in the 
recovery plan;  

to  update  the  recovery  plan  in  accordance  with  Article  5(2)  where  the 
circumstances  that  led  to  the  early  intervention  are  different  from  the 
assumptions  set  out  in  the  initial  recovery  plan  and  implement  one  or 
more  of  the  arrangements  or  measures  set  out  in  the  updated  recovery 
plan within a specific timeframe;  

(b) 

(c) 

the requirement for the management body of the institution or entity referred to 
in  Article  1(1),  points  (b),  (c)  or  (d)  to  convene  or,  if  the  management  body 
fails  to  comply  with  that  requirement,  convene  directly,  a  meeting  of 
shareholders  of  the  institution  or  entity,  and  in  both  cases  set  the  agenda  and 
require certain decisions to be considered for adoption by the shareholders;  

the requirement for the management body of the institution or entity referred to 
in Article 1(1), points (b), (c) or (d), to draw up a plan, in accordance with the 
recovery  plan  where  applicable,  for  negotiation  on  restructuring  of  debt  with 
some or all of its creditors;  

(d) 

the requirement to change the legal structure of the institution; 

(e) 

the  requirement  to  remove  or  replace  the  senior  management  or  management 
body of the institution or entity referred to in Article 1(1), points (b), (c) or (d), 
in its entirety or with regard to individuals, in accordance with Article 28; 

EN 

44 

  EN 

 
(f) 

appointment  of  one  or  more  temporary  administrators  to  the  institution  or 
entity  referred  to  in  Article  1(1),  points  (b),  (c)  or  (d),  in  accordance  with 
Article 29.  

2.  Competent  authorities  shall  choose  the  appropriate  early  intervention  measures 
based  on  what  is  proportionate  to  the  objectives  pursued,  having  regard  to  the 
seriousness  of  the  infringement  or  likely  infringement  and  the  speed  of  the 
deterioration in the financial situation of the institution or entity referred to in Article 
1(1), points (b), (c) or (d), among other relevant information.  

3. For each of the measures referred to in paragraph 1a, competent authorities shall 
set a deadline that is appropriate for completion of that measure and that enables the 
competent authority to evaluate its effectiveness.  

4. EBA shall, by  …  [PO please insert  the date =  12 months from  the date of entry 
into force of this amending Directive], issue guidelines in accordance with Article 16 
of  Regulation  (EU)  No  1093/2010  to  promote  the  consistent  application  of  the 
triggers referred to in paragraph 1 of this Article. 

Article 28 

Replacement of the senior management or management body 

For the purposes of Article 27(1a), point (e), Member States shall ensure that the new 
senior management or management body, or individual members of those bodies, is 
appointed in accordance with Union and national law and is subject to the approval 
or consent of the competent authority.’; 

(13) 

Article 29 is amended as follows:  

(a) 

paragraphs 1, 2 and 3 are replaced by the following:  

‘1.  For  the  purposes  of  Article  27(1a),  point  (f),  Member  States  shall  ensure 
that  competent  authorities  may,  based  on  what  is  proportionate  in  the 
circumstances,  appoint  any  temporary  administrator  to  do  either  of  the 
following: 

(a) 

temporarily  replace  the  management  body  of  the  institution  or  entity 
referred to in Article 1(1), points (b), (c) or (d); 

(b)  work temporarily with  the management body of the institution or entity 

referred to in Article 1(1), points (b), (c) or (d).  

The competent authority shall specify its  choice under points (a) or (b) at the 
time of appointment of the temporary administrator.  

For  the  purposes  of  the  first  subparagraph,  point  (b),  the  competent  authority 
shall  further  specify  at  the  time  of  the  appointment  of  the  temporary 
administrator  the  role,  duties  and  powers  of  that  temporary  administrator  and 
any  requirements  for  the  management  body  of  the  institution  or  entity  to 
consult or to obtain the consent of the temporary administrator prior to taking 
specific decisions or actions.  

Member  States  shall  require  the  competent  authority  to  make  public  the 
appointment  of  any  temporary  administrator,  except  where  the  temporary 
administrator  does  not  have  the  power  to  represent  the  institution  or  entity 
referred to in Article 1(1), points (b), (c) or (d).  

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Member States shall further ensure that any temporary administrator fulfils the 
requirements set out in Article 91(1), (2) and (8) of Directive 2013/36/EU. The 
assessment  by  competent  authorities  of  whether  the  temporary  administrator 
complies  with  those  requirements  shall  be  an  integral  part  of  the  decision  to 
appoint that temporary administrator.  

2.  The  competent  authority  shall  specify  the  powers  of  the  temporary 
administrator  at  the  time  of  his  or  her  appointment,  based  on  what  is 
proportionate in the circumstances. Such powers may include some or all of the 
powers  of  the  management  body  of  the  institution  or  entity  referred  to  in 
Article 1(1), points (b), (c) or (d), under the statutes of the institution or entity 
and  under  national  law,  including  the  power  to  exercise  some  or  all  of  the 
administrative  functions  of  the  management  body  of  the  institution  or  entity. 
The  powers  of  the  temporary  administrator  in  relation  to  the  institution  or 
entity shall comply with the applicable company law.  

3.  The  competent  authority  shall  specify  the  role  and  functions  of  the 
temporary  administrator  at  the time of  appointment. Such roles and  functions 
may include:  

(a) 

ascertaining the financial position of the institution or entity referred to in 
Article 1(1), points (b), (c) or (d);  

(b)  managing the business or part of the business of the institution or entity 
referred to in Article 1(1), points (b), (c) or (d) to preserve or restore its 
financial position;  

(c) 

taking  measures  to  restore  the  sound  and  prudent  management  of  the 
business of the institution or entity referred to in Article 1(1), points (b), 
(c) or (d).  

The  competent  authority  shall  specify  any  limits  on  the  role  and  functions  of 
the temporary administrator at the time of his or her appointment.’;  

(b) 

in paragraph 5, the second subparagraph is replaced by the following: 

‘In any case, the temporary administrator may exercise the power to convene a 
general  meeting  of  the  shareholders  of  the  institution  or  entity  referred  to  in 
Article 1(1), points (b), (c) or (d) and to set the agenda of such a meeting only 
with the prior consent of the competent authority.’; 

(c) 

paragraph 6 is replaced by the following: 

‘6. At the request of the competent authority, the temporary administrator shall 
draw up reports on the financial position of the institution or entity referred to 
in Article 1(1), points (b), (c) or (d) and on the acts performed in the course of 
his or her appointment, at intervals set by the competent authority, and in any 
case at the end of his or her mandate.’; 

(14) 

Article 30 is amended as follows: 

(a) 

the title is replaced by the following: 

‘Coordination of early intervention measures in relation to groups’; 

(b)  paragraphs 1 to 4 are replaced by the following: 

‘1.  Where  the  conditions  for  the  imposition  of  early  intervention  measures 
under  Article  27  are  met  in  relation  to  a  Union  parent  undertaking,  the 

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consolidating  supervisor  shall  notify  EBA  and  consult  the  other  competent 
authorities  within  the  supervisory  college  before  deciding  to  apply  an  early 
intervention measure.  

2.  Following  the  notification  and  consultation  referred  to  in  paragraph  1  the 
consolidating  supervisor  shall  decide  whether  to  apply  early  intervention 
measures under Article 27 in respect of the relevant Union parent undertaking, 
taking into account the impact of those measures on the group entities in other 
Member States. The consolidating supervisor shall notify the decision to EBA 
and to the other competent authorities within the supervisory college.  

3. Where the conditions for the imposition of early intervention measures under 
Article 27 are met in relation to a subsidiary of a Union parent undertaking, the 
competent authority responsible for the supervision on an individual basis that 
intends to  take a measure in  accordance with  those Articles shall notify  EBA 
and consult the consolidating supervisor.  

On  receiving  the  notification,  the  consolidating  supervisor  may  assess  the 
likely impact of the imposition of early intervention measures under Article 27 
to  the  institution  or  entity  referred to in  Article  1(1), points (b),  (c)  or  (d), in 
question,  on  the  group  or  on  group  entities  in  other  Member  States.  The 
consolidating  supervisor  shall  communicate  that  assessment  to  the  competent 
authority within 3 days.  

Following  that  notification  and  consultation  the  competent  authority  shall 
decide whether to apply an early intervention measure. The decision shall give 
due  consideration  to  any  assessment  of  the  consolidating  supervisor.  The 
competent  authority  shall  notify  the  decision  to  EBA,  the  consolidating 
supervisor and other competent authorities within the supervisory college.  

4.  Where  more  than  one  competent  authority  intends  to  apply  an  early 
intervention  measure  under  Article  27  to  more  than  one  institution  or  entity 
referred  to  in  Article  1(1),  points  (b),  (c)  or  (d),  in  the  same  group,  the 
consolidating  supervisor  and  the  other  relevant  competent  authorities  shall 
assess  whether  it  is  more  appropriate  to  appoint  the  same  temporary 
administrator for all the  entities concerned or to  coordinate the  application of 
the other early intervention measures to more than one institution or entity in 
order to facilitate solutions restoring the financial position of the institution or 
entity concerned. 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  5  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 
Union parent undertaking.  

EBA  may,  at  the  request  of  a  competent  authority,  assist  the  competent 
authorities  in  reaching  an  agreement  in  accordance  with  Article  31  of 
Regulation (EU) No 1093/2010.  

In  the  absence  of  a  joint  decision  within  5  days  the  consolidating  supervisor 
and the competent authorities of subsidiaries may take individual decisions on 
the  appointment  of  a  temporary  administrator  to  the  institutions  or  entities 
referred  to  in  Article  1(1),  points  (b),  (c)  or  (d),  for  which  they  have 
responsibility and on the application of the other early intervention measures.’;  

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(c) 

paragraph 6 is replaced by the following: 

‘6.  EBA  may  at  the  request  of  any  competent  authority  assist  the  competent 
authorities that intend to apply one or more of the measures in Article 27(1a), 
point (a), of this Directive with respect to the points (4), (10), (11) and (19) of 
Section  A  of  the  Annex  to  this  Directive,  in  Article  27(1a),  point  (c),  of  this 
Directive  or  in  Article  27(1a),  point  (d),  of  this  Directive  in  reaching  an 
agreement 
in  accordance  with  Article  19(3)  of  Regulation  (EU)  No 
1093/2010.’;  

(15) 

the following Article 30a is inserted: 

‘Article 30a 

Preparation for resolution 

1.  Member  States  shall  ensure  that  competent  authorities  notify  the  resolution 
authorities without delay of any of the following: 

(a) 

 any of the measures referred to in Article 104(1) of Directive 2013/36/EU they 
require an institution or an entity referred to in Article 1(1), points (b), (c) or 
(d), of this Directive to take ; 

(b)  where supervisory activity shows that the conditions laid down in Article 27(1) 
of  this  Directive  are  met  in  relation  to  an  institution  or  entity  referred  to  in 
Article 1(1), points (b), (c) or (d), of this Directive, the  assessment that those 
conditions are met, irrespective of any early intervention measure; 

(c) 

the application of any of the early intervention measures referred to in Article 
27. 

Competent  authorities  shall  closely  monitor,  in  cooperation  with  the  resolution 
authorities,  the  situation  of  the  institution  or  entity  and  their  compliance  with  the 
measures  referred  to  in  the  first  subparagraph,  point  (a),  that  aim  to  address  a 
deterioration  in  the  situation  of  that  institution  or  entity  and  with  the  early 
intervention measures referred to in the first subparagraph, point (c).  

2. Competent authorities shall notify resolution authorities as early as possible where 
they  consider  that  there  is  a  material  risk  that  one  or  more  of  the  circumstances  in 
Article 32(4) would apply in relation to an institution or an entity referred to Article 
1(1), points (b), (c) or (d). That notification shall contain: 

(a) 

(b) 

the reasons for the notification; 

an overview of the measures which would prevent the failure of the institution 
or entity within a reasonable timeframe, their expected impact on the institution 
or  entity  as  regards  the  circumstances  referred  to  in  Article  32(4)  and  the 
expected timeframe for the implementation of those measures.  

After having received the notification referred to in the first subparagraph, resolution 
authorities  shall  assess,  in  close  cooperation  with  competent  authorities,  what 
constitutes  a  reasonable  timeframe  for  the  purposes  of  the  assessment  of  the 
condition referred to in Article 32(1), point (b), taking into account the speed of the 
deterioration of the conditions of the institution or entity referred to in Article 1(1), 
points  (b),  (c)  or  (d),  the  need  to  implement  effectively  the  resolution  strategy  and 
any  other  relevant  considerations.  Resolution  authorities  shall  communicate  that 
assessment to competent authorities as early as possible. 

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Following the notification referred to in the first subparagraph, competent authorities 
and  resolution  authorities  shall,  in  close  cooperation,  monitor  the  situation  of  the 
institution  or  entity  referred  to  in  Article  1(1),  points  (b),  (c)  or  (d),  the 
implementation  of  the  any  relevant  measures  within  their  expected  timeframe  and 
any  other  relevant  developments.  For  that  purpose,  resolution  authorities  and 
competent  authorities  shall  meet  regularly,  with  a  frequency  set  by  resolution 
authorities  considering  the  circumstances  of  the  case.  Competent  authorities  and 
resolution authorities shall provide each other with any relevant information without 
delay. 

3. Competent authorities shall provide resolution authorities with all the information 
requested by resolution authorities necessary for all of the following: 

(a) 

updating  the  resolution  plan  and  preparing  for  the  possible  resolution  of  the 
institution or entity referred to in Article 1(1), points (b), (c) or (d); 

(b) 

carrying out the valuation referred to in Article 36.  

Where such information is not already available to competent authorities, resolution 
authorities  and  competent  authorities  shall  cooperate  and  coordinate  to  obtain  that 
information. For that purpose, competent authorities shall have the power to require 
the  institution  or  entity  referred  to  in  Article  1(1),  points  (b),  (c)  or  (d),  to  provide 
such  information,  including  through  on-site  inspections,  and  to  provide  that 
information to resolution authorities. 

4. The powers of resolution authorities shall include the power to market to potential 
purchasers,  or  make  arrangements  for  such  marketing,  the  institution  or  entity 
referred to in Article 1(1), points (b), (c) or (d), to potential purchasers, or require the 
institution or entity to do so, for the following purposes: 

(a) 

to  prepare  for  the  resolution  of  that  institution  or  entity,  subject  to  the 
conditions  laid  down  in  Article  39(2)  and  the  confidentiality  provisions  laid 
down in Article 84;  

(b) 

to inform the assessment by the resolution authority of the condition referred to 
in Article 32(1), point (b).  

5. For the purposes of the paragraph 4, resolution authorities shall have the power to 
request the institution or entity referred to in Article 1(1), points (b), (c) or (d), to put 
in  place  a  digital  platform  for  sharing  the  information  that  is  necessary  for  the 
marketing of that institution or entity with potential purchasers or with advisors and 
valuers engaged by the resolution authority.  

6. The determination that the conditions laid down in Article 27(1) are met and the 
prior  adoption  of  early  intervention  measures  shall  not  be  necessary  conditions  for 
resolution authorities to prepare for the resolution of the institution or entity referred 
to  in  Article  1(1),  points  (b),  (c)  or  (d),  or  to  exercise  the  power  referred  to  in  the 
paragraphs 4 and 5 of this Article. 

7.  Resolution  authorities  shall  inform  competent  authorities  of  any  action  taken 
pursuant to paragraphs 4 and 5 without delay. 

8.  Member  States  shall  ensure  that  competent  authorities  and  resolution  authorities 
closely cooperate:  

(a)  when  considering  taking  the  measures  referred  to  in  paragraph  1,  first 
subparagraph, point (a) of this Article, that aim to address a deterioration in the 

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situation of an institution or entity referred to in Article 1(1), points (b), (c) or 
(d), as well as the measures referred to in paragraph 1, first subparagraph, point 
(c) of this Article;  

(b)  when considering taking any of the actions referred to in paragraphs 4 and 5;  

(c) 

during the implementation of the actions referred to in points (a) and (b) of this 
subparagraph.  

Competent authorities and resolution authorities shall ensure that those measures and 
actions are consistent, coordinated and effective.’; 

(16) 

in Article 31(2), points (c) and (d) are replaced by the following: 

‘(c) to protect public funds by minimising reliance on extraordinary public financial 
support, in particular when provided from the budget of a Member State; 

(d) to protect depositors, while minimising losses for deposit guarantee schemes, and 
to protect investors covered by Directive 97/9/EC;’; 

(17) 

Article 32 is amended as follows: 

(a) 

paragraphs 1 and 2 are replaced by the following: 

‘1.  Member  States  shall  ensure  that  resolution  authorities  take  a  resolution 
action  in  relation  to  an  institution  if  resolution  authorities  determine,  upon 
receiving a communication pursuant to in paragraph 2 or on their own initiative 
pursuant  to  the  procedure  laid  down  in  paragraph  2,  that  all  of  the  following 
conditions are met:  

(a) 

the institution is failing or is likely to fail;  

(b)  having  regard  to  the  timing,  the  need  to  implement  effectively  the 
resolution  strategy  and  other  relevant  circumstances,  there  is  no 
reasonable prospect that any alternative private sector measure including 
measures by  an  IPS, supervisory action, early intervention measures, or 
write  down  or  conversion  of  relevant  capital  instruments  and  eligible 
liabilities as referred to in Article 59(2) taken in respect of the institution 
would  prevent  the  failure  of  the  institution  within  a  reasonable 
timeframe;  

(c) 

a resolution action is in the public interest pursuant to paragraph 5. 

2.  Member  States  shall  ensure  that  the  competent  authority  makes  an 
assessment of the condition  referred to  in  paragraph 1, point (a), after  having 
consulted the resolution authority. 

Member  States  may  provide  that,  in  addition  to  the  competent  authority,  the 
assessment of the condition referred to in paragraph 1, point (a), can be made 
by  the  resolution  authority,  after  consulting  the  competent  authority,  where 
resolution  authorities  under  national  law  have  the  necessary  tools  for  making 
such  an  assessment  including,  in  particular,  adequate  access  to  the  relevant 
information.  In  such  a  case,  Member  States  shall  ensure  that  the  competent 
authority  provides  the  resolution  authority  without  delay  with  any  relevant 
information  that  the  latter  requests  to  perform  its  assessment,  before  or  after 
being  informed  by  the  resolution  authority  of  its  intention  to  make  that 
assessment. 

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The assessment of the condition referred to in paragraph 1, point (b), shall be 
made  by  the  resolution  authority  in  close  cooperation  with  the  competent 
authority. The competent authority shall, without delay, provide the resolution 
authority with any relevant information that the resolution authority requests to 
inform its assessment. The competent authority may also inform the resolution 
authority that it considers the condition laid down in the paragraph 1, point (b), 
to be met.’; 

(b)  paragraph 4 is amended as follows: 

(i) 

in the first subparagraph, point (d) is replaced by the following: 

‘(d) extraordinary public financial support is required except where such 
support is granted in one of the forms referred to in Article 32c; 

(ii) 

the second to fifth subparagraphs are deleted; 

(c) 

paragraph 5 is replaced by the following: 

‘5.  For  the  purposes  of  paragraph  1,  point  (c),  a  resolution  action  shall  be 
treated as in the public interest where that resolution action is necessary for the 
achievement  of,  and  is  proportionate  to,  one  or  more  of  the  resolution 
objectives  referred  to  in  Article  31  and  where  winding  up  of  the  institution 
under  normal  insolvency  proceedings  would  not  meet  those  resolution 
objectives more effectively. 

Member States shall ensure that when carrying out the assessment referred  to 
in  the  first  subparagraph,  the  resolution  authority,  based  on  the  information 
available  to  it  at  the  time  of  that  assessment,  considers  and  compares  all 
extraordinary  public  financial  support  that  can  reasonably  be  expected  to  be 
granted  to  the  institution,  both  in  the  event  of  resolution  and  in  the  event  of 
winding up in accordance with the applicable national law.’; 

(18) 

Articles 32a and 32b are replaced by the following: 

‘Article 32a 

Conditions for resolution with regard to a central body and credit institutions 
permanently affiliated to a central body 

Member States shall ensure that resolution authorities may take a resolution action in 
relation  to  a  central  body  and  all  credit  institutions  permanently  affiliated  to  it  that 
are  part  of  the  same  resolution  group  where  the  central  body  and  all  credit 
institutions permanently affiliated to it, or the resolution group to which they belong, 
comply as a whole with the conditions established in Article 32(1). 

Article 32b 

Proceedings in respect of institutions and entities that are not subject to 
resolution action 

1.  Member  States  shall  ensure  that,  when  a  resolution  authority  determines  that  an 
institution  or  entity  referred  to  in  Article  1(1),  points  (b),  (c)  or  (d),  meets  the 
conditions  laid down  in  Article 32(1),  points  (a)  and (b),  but  not  the condition  laid 
down  in  Article  32(1),  point  (c),  the  relevant  national  administrative  or  judicial 
authority  has  the  power  to  initiate  without  delay  the  procedure  to  wind  up  the 
institution or entity in an orderly manner in accordance with the applicable national 
law.  

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2. Member States shall ensure that an institution or entity referred to in Article 1(1), 
points (b), (c) or (d), which is wound up in an orderly manner in accordance with the 
applicable national law exits the market or terminates its banking activities within a 
reasonable timeframe. 

3.  Member  States  shall  ensure  that  when  a  resolution  authority  determines  that  an 
institution  or  entity  referred  to  in  Article  1(1),  points  (b),  (c)  or  (d),  meets  the 
conditions in Article 32(1), points (a) and (b), but not the condition in Article 32(1), 
point  (c),  the  determination  that  the  institution  or  entity  is  failing  or  likely  to  fail 
pursuant  to  Article  32(1),  point  (a)  is  a  condition  for  the  withdrawal  of  the 
authorisation  by  the  competent  authority  pursuant  to  Article  18  of  Directive 
2013/36/EU. 

4.  Member  States  shall  ensure  that  the  withdrawal  of  the  authorisation  of  the 
institution  or  entity  referred  to  in  Article  1(1),  points  (b),  (c)  or  (d)  is  a  sufficient 
condition  for  a  relevant  national  administrative  or  judicial  authority  to  be  able  to 
initiate without delay the procedure to wind up the institution or entity in an orderly 
manner in accordance with the applicable national law.’: 

(19) 

the following Article 32c is inserted: 

‘Article 32c 

Extraordinary public financial support 

1. Member States shall ensure that extraordinary public financial support outside of 
resolution  action may be granted to an institution or entity  as  referred to  in  Article 
1(1), points (b), (c) or (d), on an exceptional basis only in one of the following cases 
and  provided  that  the  extraordinary  public  financial  support  complies  with  the 
conditions and requirements established in the Union State aid framework: 

(a)  where, to remedy a serious disturbance in the economy of a Member State or to 
preserve financial stability, the extraordinary public financial support takes any 
of the following forms:  

(i) 

a State guarantee to back liquidity facilities provided by central banks in 
accordance with the central banks’ conditions;  

(ii) 

a State guarantee of newly issued liabilities;  

(iii)  an acquisition of own funds instruments other than Common Equity Tier 
1 instruments, or of other capital instruments or a use of impaired assets 
measures, at prices, duration and other terms that do not confer an undue 
advantage  upon  the  institution  or  entity  concerned,  where  neither  the 
circumstances referred to  in  Article 32(4), points  (a), (b) or  (c), nor the 
circumstances  referred  to  in  Article  59(3)  are  present  at  the  time  the 
public support is granted; 

(b)  where  the  extraordinary  public  financial  support  takes  the  form  of  an 
intervention by a deposit guarantee scheme to preserve the financial soundness 
and  long-term  viability  of  the  credit  institution  in  compliance  with  the 
conditions set out in Articles 11a and 11b of Directive 2014/49/EU, provided 
that none of the circumstances referred to in Article 32(4) are present;  

(c)  where  the  extraordinary  public  financial  support  takes  the  form  of  an 
intervention by a deposit guarantee scheme in the context of the winding up of 

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an institution pursuant to Article 32b and in accordance with the conditions set 
out in Article 11(5) of Directive 2014/49/EU; 

(d)  where  the  extraordinary  public  financial  support  takes  the  form  of  State  aid 
within  the  meaning  of  Article  107(1)  TFEU  granted  in  the  context  of  the 
winding up of the institution or entity pursuant to Article 32b of this Directive, 
other  than  the  support  granted  by  a  deposit  guarantee  scheme  pursuant  to 
Article 11(5) of Directive 2014/49/EU. 

2.  The  support  measures  referred  to  in  paragraph  1,  point  (a),  shall  fulfil  all  of  the 
following conditions: 

(a) 

(b) 

(c) 

(d) 

the  measures  are  confined  to  solvent  institutions  or  entities,  as  confirmed  by 
the competent authority; 

the measures  are  of a precautionary  and temporary nature  and are  based on  a 
pre-defined  exit  strategy  approved  by  the  competent  authority,  including  a 
clearly specified termination date, sale date or repayment  schedule for  any  of 
the measures provided; 

the  measures  are  proportionate  to  remedy  the  consequences  of  the  serious 
disturbance or to preserve financial stability; 

the  measures  are  not  used  to  offset  losses  that  the  institution  or  entity  has 
incurred or is likely to incur in the near future.  

For the purposes of the first subparagraph, point (a), an institution or entity shall be 
deemed  to  be  solvent  where  the  competent  authority  has  concluded  that  no  breach 
has  occurred,  or  is  likely  to  occur  in  the  12  following  months,  of  any  of  the 
requirements  referred  to  in  Article  92(1)  of  Regulation  (EU)  No  575/2013,  Article 
104a of Directive 2013/36/EU, Article 11(1) of Regulation (EU) 2019/2033, Article 
40 of Directive (EU) 2019/2034 or the relevant applicable requirements under Union 
or national law. 

For the purposes of the first subparagraph, point (d), the relevant competent authority 
shall quantify the losses that the institution or entity has incurred or is likely to incur. 
That  quantification  shall  be  based,  as  a  minimum,  on  the  institution  or  entity’s 
balance  sheet,  provided  that  the  balance  sheet  complies  with  the  applicable 
accounting  rules  and  standards,  as  confirmed  by  an  independent  external  auditor, 
and,  where  available,  on  asset  quality  reviews  conducted  by  the  European  Central 
Bank,  EBA  or  national  authorities,  or,  where  appropriate,  on  on-site  inspections 
conducted by the competent authority. 

The  support  measures  referred  to  in  paragraph  1,  point  (a)(iii),  shall  be  limited  to 
measures  that  have  been  assessed  by  the  competent  authority  as  necessary  to 
maintain  the  solvency  of  the  institution  or  entity  by  addressing  its  capital  shortfall 
established  in  the  adverse  scenario  of  national,  Union  or  SSM-wide  stress  tests  or 
equivalent  exercises  conducted  by  the  European  Central  Bank,  EBA  or  national 
authorities, where applicable, confirmed by the competent authority. 

By way of derogation from paragraph 1, point (a)(iii), acquisition of Common Equity 
Tier 1 instruments shall be exceptionally permitted where the nature of the shortfall 
identified  is  such  that  the  acquisition  of  any  other  own  funds  instruments  or  other 
capital instruments would not make it possible for the institution or entity concerned 
to address its capital shortfall established in the adverse scenario in the relevant stress 
test  or  equivalent  exercise.  The  amount  of  acquired  Common  Equity  Tier  1 

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instruments shall not exceed 2% of the total risk exposure amount of the institution 
or entity concerned calculated in accordance with Article 92(3) of Regulation (EU) 
No 575/2013. 

In  case  any  of  the  support  measures  referred  to  in  paragraph  1,  point  (a),  is  not 
redeemed,  repaid  or  otherwise  terminated  in  accordance  with  the  terms  of  the  exit 
strategy  established  at  the  time  of  granting  such  measure,  the  competent  authority 
shall  conclude  that  the  condition  laid  down  in  Article  32(1),  point  (a),  is  met  in 
relation  to  the  institution  or  entity  which  has  received  those  support  measures,  and 
shall communicate that assessment to the resolution authority concerned. 

3. EBA shall, by [PO please insert the date = 1 year after the date of entry into force 
of this Directive], issue guidelines in accordance with Article 16 of Regulation (EU) 
No 1093/2010  on the type of tests,  reviews or  exercises referred to  in  paragraph 2, 
fourth  subparagraph,  which  may  lead  to  the  support  measures  referred  to  in 
paragraph 1, point (a)(iii).’; 

(20) 

in Article 33, paragraph 2 is replaced by the following: 

‘2. Member States shall ensure that resolution authorities take a resolution action in 
relation  to  an  entity  referred  to  in  Article  1(1),  points  (c)  or  (d),  when  that  entity 
meets the conditions laid down in Article 32(1).  

For  those  purposes,  an  entity  referred  to  in  Article  1(1),  points  (c)  or  (d),  shall  be 
deemed to be failing or likely to fail in any of the following circumstances: 

(a) 

(b) 

the  entity  meets  one  or  more  of  the  conditions  laid  down  in  Article  32(4), 
points (b), (c) or (d); 

the entity infringes materially or there are objective elements that show that the 
entity  will,  in  the  near  future,  infringe  materially  the  applicable  requirements 
laid down in Regulation (EU) No 575/2013 or in Directive 2013/36/EU.’; 

(21) 

Article 33a is amended as follows: 

(a) 

in paragraph 8, the first subparagraph is replaced by the following: 

‘Member States shall ensure that resolution authorities notify the institution or 
the entity referred to  in  Article 1(1), points  (b),  (c) or (d), and the authorities 
referred to in Article 83(2), points (a) to (h), without delay when exercising the 
power referred to in paragraph 1 of this Article after a determination has been 
made that the institution or entity is failing or likely to fail pursuant to Article 
32(1), point (a), and before the resolution decision is taken.’; 

(b) 

in paragraph 9, the second subparagraph is added: 

‘By way of derogation from the first subparagraph, Member States shall ensure 
that where such powers are exercised in respect of eligible deposits and those 
deposits  are  not  considered  unavailable  for  the  purposes  of  Directive 
2014/49/EU, depositors have access to an appropriate daily amount from those 
deposits.’; 

(22) 

Article 35 is amended as follows: 

(a) 

paragraph 1 is replaced by the following: 

‘1. Member States shall ensure that resolution authorities may appoint a special 
manager  to  replace  or  to  work  with  the  management  body  of  the  institution 
under  resolution  or  the  bridge  institution.  Resolution  authorities  shall  make 

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public  the  appointment  of  a  special  manager.  Resolution  authorities  shall 
ensure  that  the  special  manager  has  the  qualifications,  ability  and  knowledge 
required to carry out his or her functions.  

Article  91  of  Directive  2013/36/EU  shall  not  apply  to  the  appointment  of 
special managers.’; 

(b) 

in paragraph 2, the first sentence is replaced by the following: 

‘The  special  manager  shall  have  all  the  powers  of  the  shareholders  and  the 
management body of the institution under resolution or the bridge institution.’; 

(c) 

paragraph 5 is replaced by the following: 

‘5. Member States shall require that a special manager draw up reports for the 
appointing resolution  authority on the economic and financial situation of the 
institution under resolution or the bridge institution and on the acts performed 
in  the  conduct  of  his  or  her  duties,  at  regular  intervals  set  by  the  resolution 
authority and at the beginning and the end of his or her mandate.’; 

(23) 

Article 36 is amended as follows: 

(a) 

in paragraph 1, the first sentence is replaced by the following: 

‘1. Before determining whether the conditions for resolution or the conditions 
for  the  write  down  or  conversion  of  relevant  capital  instruments  and  eligible 
liabilities as referred to in Article 59 are met, resolution authorities shall ensure 
that  a  fair,  prudent  and  realistic  valuation  of  the  assets  and  liabilities  of  the 
institution or entity referred to in Article 1(1), points (b), (c) or (d), is carried 
out  by  a  person  that  is  independent  from  any  public  authority,  including  the 
resolution  authority,  and  the  institution  or  entity  referred  to  in  Article  1(1), 
points (b), (c) or (d).’; 

(b) 

the following paragraph 7a is inserted: 

‘7a. Where necessary to inform the decisions referred to in paragraph 4, points 
(c) and (d), the valuer shall complement the information in paragraph 6, point 
(c), with an estimate of the value of the off-balance sheet assets and liabilities, 
including contingent liabilities and assets.’; 

(24) 

in Article 37, the following paragraph 11 is added: 

‘11. EBA shall monitor the actions and preparation of resolution authorities to ensure 
an  effective  implementation  of  the  resolution  tools  and  powers  in  the  event  of 
resolution.  EBA  shall  report  to  the  Commission  on  the  state  of  play  of  existing 
practices and possible divergences across Member States by … [PO please insert the 
date  =  2  years  after  the  date  of  entry  into  force  of  this  Directive]  and  monitor  the 
implementation of any recommendation set out in that report, where appropriate. 

The report referred to in the first subparagraph shall cover at least the following: 

(a) 

the  arrangements  in  place  to  implement  the  bail-in  tool  and  the  level  of 
engagement with financial market infrastructures and third-country authorities, 
where relevant;  

(b) 

the arrangements in place to operationalise the use of other resolution tools; 

(c) 

the  level  of  transparency  towards  relevant  stakeholders  regarding  the 
arrangements referred to in points (a) and (b).’; 

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(25) 

Article 40 is amended as follows: 

(a) 

in paragraph 1, the introductory sentence is replaced by the following: 

‘In order to  give  effect  to the bridge institution tool and having  regard to  the 
need to maintain critical functions in the bridge institution or to pursue any of 
the resolution objectives, Member States shall ensure that resolution authorities 
have the power to transfer to a bridge institution all of the following:’; 

(b) 

in paragraph 2, the second subparagraph is replaced by the following: 

‘The application of the bail-in tool for the purpose referred to in Article 43(2), 
point  (b),  shall  not  interfere  with  the  ability  of  the  resolution  authority  to 
control the bridge institution. Where the application of the bail-in  tool allows 
for  the  capital  of  the  bridge  institution  to  be  fully  provided  through  the 
conversion  of  bail-inable  liabilities  into  shares  or  other  types  of  capital 
instruments,  the  requirement  that  the  bridge  institution  is  wholly  or  partially 
owned by one or more public authorities may be waived.’; 

(26) 

in Article 42(5), point (b) is replaced by the following: 

‘(b)  such  a  transfer  is  necessary  to  ensure  the  proper  functioning  of  the  institution 
under resolution, the bridge institution or the asset management vehicle itself; or’; 

(27) 

Article 44 is amended as follows: 

(a) 

paragraph 1 is replaced by the following: 

‘1.  Member  States  shall  ensure  that  the  bail-in  tool  may  be  applied  to  all 
liabilities,  including  those  giving  rise  to  an  accounting  provision,  of  an 
institution or entity referred to in Article 1(1), points (b), (c) or (d), that are not 
excluded  from  the  scope  of  that  tool  pursuant  to  paragraphs  2  or  3  of  this 
Article.’; 

(b)  paragraph 5 is replaced by the following: 

'5. The resolution financing arrangement may make a contribution  as  referred 
to in paragraph 4 where all of the following conditions are met:  

(a) 

a contribution to loss absorption and recapitalisation equal to an amount 
not  less  than  8 %  of  the  total  liabilities  including  own  funds  of  the 
institution  under  resolution,  measured  in  accordance  with  the  valuation 
provided  for  in  Article  36,  has  been  made  by  the  shareholders  and  the 
holders of other instruments of ownership, the holders of relevant capital 
instruments  and  other  bail-inable  liabilities  through  reduction,  write 
down or conversion pursuant  to  Article 48(1)  and Article 60(1),  and by 
the deposit guarantee scheme pursuant to Article 109 where relevant; 

(b) 

the contribution of the resolution financing arrangement does not exceed 
5 %  of  the  total  liabilities  including  own  funds  of  the  institution  under 
resolution,  measured  in  accordance  with  the  valuation  provided  for  in 
Article 36.’; 

(c) 

paragraph 7 is replaced by the following: 

‘7.  The  resolution  financing  arrangement  may  make  a  contribution  from 
resources which have been raised through  ex-ante contributions as referred to 
in Article 100(6) and Article 103 and which have not yet been used, provided 
that all of the following conditions are met:  

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(a) 

(b) 

the resolution financing arrangement has made a contribution pursuant to 
paragraph 4 and the 5  % limit  referred to in  paragraph 5, point  (b),  has 
been reached; 

all liabilities ranking lower than deposits, and not excluded from bail-in 
pursuant to Article 44(2) and 44(3), have been written down or converted 
in full. 

In  extraordinary  circumstances,  as  an  alternative  or  in  addition  to  the 
contribution  from  the resolution  financing  arrangement  referred to  in  the first 
subparagraph,  where  the  conditions  laid  down  in  the  first  subparagraph  are 
met,  the  resolution  authority  may  seek  further  funding  from  alternative 
financing sources.’; 

(28) 

in Article 44a, the following paragraph 8 is added: 

‘8. By … [PO please insert the date = 24 months after the date of entry into force of 
this  Directive],  EBA  shall  report  to  the  Commission  on  the  application  of  this 
Article.  That  report  shall  compare  the  measures  adopted  by  the  Member  States  to 
comply with this Article, analyse their effectiveness in protecting retail investors and 
assess their impact on cross-border operations. 

On  the  basis  of  that  report,  the  Commission  may  submit  a  legislative  proposal  to 
amend this Directive.’; 

(29) 

in Article 45, paragraph 1 is replaced by the following: 

‘1.  Member  States  shall  ensure  that  institutions  and  entities  referred  to  in  Article 
1(1), points  (b), (c) and (d), meet,  at  all times, the requirements for own funds and 
eligible liabilities where required by and as determined by the resolution authority in 
accordance with this Article and Articles 45a to 45i.’; 

(30) 

Article 45b is amended as follows: 

(a) 

in  paragraphs  4,  5  and  7,  the  word  ‘G-SIIs’  is  replaced  by  the  words  ‘G-SII 
entities’; 

(b)  paragraph 8 is amended as follows: 

(i) 

(ii) 

in the first subparagraph, the word ‘G-SIIs’ is replaced by the words ‘G-
SII entities’; 

in the second subparagraph, point (c), the word ‘G-SII’ is replaced by the 
words ‘G-SII entity’; 

(iii) 

in  the  fourth  subparagraph,  the  word  ‘G-SIIs’  is  replaced  by  the  words 
‘G-SII entities’; 

(c) 

the following paragraph 10 is added: 

‘10.  Resolution  authorities  may  permit  resolution  entities  to  comply  with  the 
requirements referred to in paragraphs 4, 5 and 7 using own funds or liabilities 
as  referred  to  in  paragraphs  1  and  3  when  all  of  the  following  conditions  are 
met: 

(a) 

for entities that are G-SII entities or resolution entities that are subject to 
Article  45c(5)  or  (6),  the  resolution  authority  has  not  reduced  the 
requirement referred to in paragraph 4 of this Article, pursuant to the first 
subparagraph of that paragraph; 

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(b) 

the liabilities referred to in  paragraph 1 of this  Article that do not  meet 
the condition referred to in Article 72b(2), point (d), of Regulation (EU) 
No 575/2013 comply with the conditions set out in Article 72b(4), points 
(b) to (e), of that Regulation.’; 

(31) 

Article 45c is amended as follows: 

(a) 

in  paragraph  3,  eighth  subparagraph,  the  words  ‘critical  economic  functions’ 
are replaced by the words ‘critical functions’; 

(b)  paragraph 4 is replaced by the following: 

‘4.  EBA  shall  develop  draft  regulatory  technical  standards  specifying  the 
methodology  to  be  used  by  resolution  authorities  to  estimate  the  requirement 
referred  to  in  Article  104a  of  Directive  2013/36/EU  and  the  combined  buffer 
requirement for: 

(a) 

(b) 

resolution  entities  at  the  resolution  group  consolidated  level,  where  the 
resolution  group  is  not  subject  to  those  requirements  under  Directive 
2013/36/EU; 

entities that are not themselves resolution entities, where the entity is not 
subject  to  those  requirements  under  Directive  2013/36/EU  on  the  same 
basis as the requirements referred to in Article 45f of this Directive.  

EBA shall submit those draft regulatory technical standards to the Commission 
by … [OP please insert the date = 12 months from the date of entry into force 
of this amending Directive].  

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.’; 

(c) 

in  paragraph  7,  eighth  subparagraph,  the  words  ‘critical  economic  functions’ 
are replaced by the words ‘critical functions’; 

(32) 

the following Article 45ca is inserted: 

‘Article 45ca 

Determination of the minimum requirement for own funds and eligible 
liabilities for transfer strategies leading to market exit 

1.  When  applying  Article  45c  to  a  resolution  entity  whose  preferred  resolution 
strategy  envisages  primarily  the  use  of  the  sale  of  business  tool  or  the  bridge 
institution  tool  and  its  exit  from  the  market,  the  resolution  authority  shall  set  the 
recapitalisation  amount  provided  in  Article  45c(3)  in  a  proportionate  way  on  the 
basis of the following criteria, as relevant: 

(a) 

(b) 

the resolution entity’s size, business model, funding model and risk profile, and 
the depth of the market in which the resolution entity operates; 

the  shares,  other  instruments  of  ownership,  assets,  rights  or  liabilities  to  be 
transferred  to  a  recipient  as  identified  in  the  resolution  plan,  taking  into 
consideration:  

(i) 

the core business lines and critical functions of the resolution entity;  

(ii) 

the liabilities excluded from bail-in pursuant to Article 44(2);  

(iii) 

the safeguards referred to in Articles 73 to 80; 

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(c) 

the  expected  value  and  marketability  of  the  shares,  other  instruments  of 
ownership,  assets,  rights  or  liabilities  of  the  resolution  entity  referred  to  in 
point (b), taking into account:  

(i) 

any  material  impediments  to  resolvability,  identified  by  the  resolution 
authority,  that  are  directly  related  to  the  application  of  the  sale  of 
business tool or the bridge institution tool; 

(ii) 

the losses resulting from the assets, rights or liabilities left in the residual 
institution; 

(d)  whether  the  preferred  resolution  strategy  envisages  the  transfer  of  shares  or 
other instruments of ownership issued by the resolution entity, or of all or part 
of the assets, rights and liabilities of the resolution entity; 

(e)  whether the preferred resolution strategy envisages the application of the asset 

separation tool. 

2. Where the resolution plan provides that the entity is to be wound up under normal 
insolvency proceedings or other equivalent national procedures and envisages the use 
of the deposit guarantee scheme pursuant to Article 11(5) of Directive 2014/49/EU, 
the resolution authority shall also take into account paragraph 1 of this Article when 
carrying  out  the  assessment  referred  to  in  Article  45c(2a),  second  subparagraph,  of 
this Directive.  

3. The application of paragraph 1 shall not result in an amount that is higher than the 
amount resulting from application of Article 45c(3).’; 

(33) 

in Article 45d(1), the introductory wording is replaced by the following: 

‘The  requirement  referred  to  in  Article 45(1)  for  a  resolution  entity  that  is  a  G-SII 
entity shall consist of the following:’; 

(34) 

in Article 45f(1), the third subparagraph is replaced by the following: 

‘By  way  of  derogation  from  the  first  and  second  subparagraphs  of  this  paragraph, 
Union  parent  undertakings  that  are  not  themselves  resolution  entities,  but  are 
subsidiaries of third-country entities,  shall comply  with  the requirements  laid down 
in Articles 45c and 45d on a consolidated basis.’; 

(35) 

Article 45l is amended as follows: 

(a) 

in paragraph 1, point (a) is replaced by the following: 

‘(a) how the requirement for own funds and eligible liabilities set in accordance 
with  Article  45e  or  Article  45f  has  been  implemented  at  national  level, 
including Article 45ca, and in particular whether there have been divergences 
in the levels set for comparable entities across Member States;’ 

(b) 

in paragraph 3, second subparagraph, the following sentence is added: 

‘The obligation referred to in paragraph 2 shall cease to apply after the second 
report is submitted.’; 

(36) 

in Article 45m, paragraph 4 is replaced by the following: 

‘4. The requirements referred to in Article 45b(4) and (7) and in Article 45c(5) and 
(6), as applicable, shall not apply within the three-year period following the date on 
which  the  resolution  entity  or  the  group  of  which  the  resolution  entity  is  part  has 

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been identified as a G-SII or a non-EU G-SII, or the resolution entity starts to be in 
the situation referred to in Article 45c(5) or (6).’; 

(37) 

in Article 46(2), the first subparagraph is replaced by the following: 

‘The assessment referred to in paragraph 1 of this Article shall establish the amount 
by which bail-inable liabilities need to be written down or converted: 

(a) 

(b) 

to  restore  the  Common  Equity  Tier  1  capital  ratio  of  the  institution  under 
resolution or where applicable establish the ratio of the bridge institution taking 
the  resolution  financing 
into  account  any  contribution  of  capital  by 
arrangement made pursuant to Article 101(1), point (d), of this Directive; 

to sustain sufficient market confidence in the institution under resolution or the 
bridge institution, taking into account any contingent liabilities, and enable the 
institution  under  resolution  to  continue  to  meet,  for  at  least  1  year,  the 
conditions for authorisation and to continue to carry out the activities for which 
it is authorised under Directive 2013/36/EU or Directive 2014/65/EU.’; 

(38) 

in Article 47(1), point (b)(i) is replaced by the following: 

relevant  capital  instruments  and  eligible  liabilities  in  accordance  with  Article 

‘(i) 
59 issued by the institution pursuant to the power referred to in Article 59(2); or’;  

(39) 

Article 52 is amended as follows: 

(a) 

in paragraph 1, the following subparagraph is added: 

‘In exceptional circumstances, the resolution authority may extend the 1 month 
deadline for submission of the business reorganisation plan by another month.’; 

(b) 

in paragraph 5, the following subparagraph is added: 

‘The  resolution  authority  may  require  the  institution  or  entity  referred  to  in 
Article 1(1), points (b), (c) or (d), to include additional elements in the business 
reorganisation plan.’; 

(40) 

in Article 53, paragraph 3 is replaced by the following: 

‘3.  Where  a  resolution  authority  reduces  to  zero  the  principal  amount  of,  or 
outstanding amount payable in respect of, a liability, including a liability giving rise 
to an accounting provision, by means of the power referred to in Article 63(1), point 
(e),  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 entity in any subsequent winding up.’; 

(41) 

Article 55 is amended as follows: 

(a) 

in paragraph 1, point (b) is replaced by the following: 

‘(b) the liability is not a deposit  as  referred to in Article 108(1), points (a) or 
(b)’; 

(b) 

in paragraph 2, the fifth and sixth subparagraphs are replaced by the following: 

‘Where  the  resolution  authority,  in  the  context  of  the  assessment  of  the 
resolvability of an institution or entity referred to in Article 1(1), points (b), (c) 
or (d), in accordance with Articles 15 and 16, or at any other time, determines 
that, within a class of liabilities which includes eligible liabilities, the amount 
of liabilities that do not include the contractual term referred to in paragraph 1 

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of  this  Article,  together  with  the  liabilities  which  are  excluded  from  the 
application  of  the  bail-in  tool  in  accordance  with  Article  44(2)  or  which  are 
likely to be excluded in  accordance with Article 44(3), amounts to more than 
10 % of that class, it shall immediately assess the impact of that particular fact 
on  the  resolvability  of  that  institution  or  entity,  including  the  impact  on  the 
resolvability  resulting  from  the  risk  of  breaching  the  creditor  safeguards 
provided  in  Article  73  when  applying  write-down  and  conversion  powers  to 
eligible liabilities.  

Where  the  resolution  authority  concludes,  on  the  basis  of  the  assessment 
referred to in the fifth subparagraph of this paragraph, that the liabilities which 
do  not  include  the  contractual  term  referred  to  in  paragraph  1  of  this  Article 
create  a  substantive  impediment  to  resolvability,  it  shall  apply  the  powers 
provided  in  Article  17  as  appropriate  to  remove  that  impediment  to 
resolvability.’; 

(42) 

Article 59 is amended as follows: 

(a) 

in paragraph 3, point (e) is replaced by the following: 

‘(e) extraordinary public financial support is required by the institution or the 
entity  referred  to  in  Article  1(1),  points  (b),  (c)  or  (d),  except  where  that 
support is granted in one of the forms referred to in Article 32c.’; 

(b) 

in paragraph 4, point (b) is replaced by the following: 

‘(b) having regard to timing, the need to implement effectively the write down 
and conversion powers or the resolution strategy for the resolution group, and 
other  relevant  circumstances,  there  is  no  reasonable  prospect  that  any  action, 
including  alternative  private  sector  measures,  supervisory  action  or  early 
intervention  measures,  other  than  the  write  down  or  conversion  of  capital 
instruments and eligible liabilities as referred to in paragraph 1a, would prevent 
the failure of the institution or the entity referred to in Article 1(1), points (b), 
(c) or (d), or the group within a reasonable timeframe.’; 

(43) 

Article 63 is amended as follows: 

(a) 

paragraph 1 is amended as follows: 

(i) 

point (m) is replaced by the following: 

‘(m) the power to require the competent authority to assess the acquirer 
of a qualifying holding in a timely manner by way of derogation from the 
time-limits laid down in Article 22 of Directive 2013/36/EU and Article 
12 of Directive 2014/65/EU;’; 

(ii) 

the following point (n) is added: 

‘(n) the power to make requests pursuant to Article 17(5) of Regulation 
(EU) No 596/2014 on behalf of the institution under resolution.’; 

(b) 

in paragraph 2, point (a) is replaced by the following: 

‘(a) subject to Article 3(6) and Article 85(1), requirements to obtain approval 
or consent from any person either public or private, including the shareholders 
or creditors of the institution under resolution and the competent authorities for 
the purposes of Articles 22 to 27 of Directive 2013/36/EU;’; 

(44) 

Article 71a(3) is replaced by the following: 

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‘3. Paragraph 1 shall apply to any financial contract which complies with all of the 
following: 

(a) 

(b) 

the  contract  creates  a  new  obligation,  or  materially  amends  an  existing 
obligation after the entry into force of the provisions adopted at national level 
to transpose this Article;’ 

the  contract  provides  for  the  exercise  of  one  or  more  termination  rights  or 
rights to enforce security interests to which Article 33a, 68, 69, 70 or 71 would 
apply if the financial contract were governed by the laws of a Member State.’; 

(45) 

in Article 74(3), the following point (d) is added: 

‘(d)  when  determining  the  losses  that  the  deposit  guarantee  scheme  would  have 
incurred  had  the  institution  been  wound  up  under  normal  insolvency  proceedings, 
apply  the  criteria  and  methodology  referred  to  in  Article  11e  of  Directive 
2014/49/EU and in any delegated act adopted pursuant to that Article.’; 

(46) 

in Article 88, the following paragraph 6a is inserted: 

‘6a.  To  facilitate  the  tasks  referred  to  in  Articles  10(1),  15(1)  and  17(1)  and  to 
exchange  any  relevant  information,  the  resolution  authority  of  an  institution  with 
significant  branches  in  other  Member  States  shall  establish  and  chair  a  resolution 
college.  

The resolution  authority  of the institution  referred to  in the first  subparagraph shall 
decide  which  authorities  participate  in  a  meeting  or  in  an  activity  of  the  resolution 
college, taking into account the relevance of the activity to be planned or coordinated 
for those authorities, in particular the potential impact on the stability of the financial 
system  in  the  Member  States  concerned  and  the  tasks  referred  to  in  the  first 
subparagraph. 

The resolution  authority  of the institution  referred to  in the first  subparagraph shall 
keep  all  members  of  the  resolution  college  fully  informed,  in  advance,  of  the 
organisation of such meetings, the main issues to be discussed and the activities to be 
considered.  The  resolution  authority  of  the  institution  referred  to  in  the  first 
subparagraph  shall  also  keep  all  the  members  of  the  college  fully  informed,  in  a 
timely manner, of the actions taken in those meetings or the measures carried out.’; 

(47) 

Article 91 is amended as follows: 

(a) 

paragraph 1 is replaced by the following: 

‘1.  Where  a  resolution  authority  decides  that  an  institution  or  any  entity  as 
referred to in Article 1(1), points (b), (c) or (d), that is a subsidiary in a group, 
meets the conditions referred to in Article 32 or 33, that authority shall notify 
without  delay  to  the  group-level  resolution  authority,  if  different,  to  the 
consolidating supervisor, and to the members of the resolution college for the 
group in question the following information: 

(a) 

the decision that the institution or entity referred to in Article 1(1), points 
(b), (c) or (d), meets the conditions referred to in Article 32(1), points (a) 
and (b), or in Article 33(1) or (2) as applicable, or the conditions referred 
to in Article 33(4);  

(b) 

the  outcome  of  the  assessment  of  the  condition  referred  to  in  Article 
32(1), point (c); 

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(c) 

the resolution actions or insolvency measures that the resolution authority 
considers to be appropriate for that institution or that entity. 

The  information  referred  to  in  the  first  subparagraph  may  be  included  in  the 
notifications communicated pursuant to Article 81(3) to the addressees referred 
to in the first subparagraph of this paragraph.’; 

(b) 

in paragraph 7, the second subparagraph is replaced by the following: 

‘EBA  may,  at  the  request  of  a  resolution  authority,  assist  the  resolution 
authorities in reaching a joint decision in accordance with Article 31(2), point 
(c), of Regulation (EU) No 1093/2010.’; 

(48) 

in Article 92(3), the second subparagraph is replaced by the following: 

‘EBA may, at the request of a resolution authority, assist the resolution authorities in 
reaching  a  joint  decision  in  accordance  with  Article  31(2),  point  (c),  of  Regulation 
(EU) No 1093/2010.’; 

(49) 

in Article 97, paragraph 4 is replaced by the following: 

‘4. Resolution authorities shall conclude non-binding cooperation arrangements with 
the  relevant  third-country  authorities  referred  to  in  paragraph  2  where  appropriate. 
Those arrangements shall be in line with EBA framework arrangement. 

Competent authorities shall conclude non-binding cooperation arrangements with the 
relevant third-country authorities referred to in paragraph 2 where appropriate. Those 
arrangements shall be in line with EBA framework arrangement and shall ensure that 
the  information  disclosed  to  the  third-country  authorities  is  subject  to  a  guarantee 
that  professional  secrecy  requirements  at  least  equivalent  to  those  referred  to  in 
Article 53(1) of Directive 2013/36/EU are complied with.’ 

(50) 

in Article 98, paragraph 1 is amended as follows: 

(a) 

the introductory sentence is replaced by the following: 

‘Member  States  shall  ensure  that  resolution  authorities  and  competent 
ministries  exchange  confidential  information,  including  recovery  plans,  with 
relevant  third-country  authorities  only  if  all  of  the  following  conditions  are 
met:’;  

(b) 

the following second and third subparagraphs are added: 

‘Member  States  shall  ensure  that  competent  authorities  exchange  confidential 
information  with  relevant  third  country  authorities  only  if  the  following 
conditions are met:  

(a) 

(b) 

in relation to recovery and resolution-related information, the conditions 
set out in the first subparagraph; 

in relation to other information available to the competent authorities, the 
conditions set out in Article 55 of Directive 2013/36/EU. 

For  the  purposes  of  the  second  subparagraph,  recovery  and  resolution-related 
information  shall  include  all  information  directly  related  to  the  tasks  of 
competent authorities under this Directive, in particular recovery planning and 
recovery  plans,  early  intervention  measures  and  exchanges  with  resolution 
authorities  regarding  resolution  planning,  resolution  plans  and  resolution 
action.’; 

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(51) 

in Article 101, paragraph 2 is replaced by the following: 

‘2. Where the resolution authority determines that the use of the resolution financing 
arrangement  for  the  purposes  referred  to  in  paragraph  1  of  this  Article  is  likely  to 
result in part of the losses of an institution or an entity as referred to in Article 1(1), 
points  (b),  (c)  or  (d),  being  passed  on  to  the  resolution  financing  arrangement,  the 
principles  governing  the  use  of  the  resolution  financing  arrangement  set  out  in 
Article 44 shall apply.’; 

(52) 

in Article 102(3), the first subparagraph is replaced by the following: 

‘If,  after  the  initial  period  of  time  referred  to  in  paragraph  1  of  this  Article,  the 
available financial means diminish below the target level specified in that paragraph, 
the regular contributions raised in accordance with Article 103 shall resume until the 
target level is reached. Resolution authorities may defer the collection of the regular 
contributions  raised  in  accordance  with  Article  103  for  1  or  more  years  where  the 
amount  to  be  collected  reaches  an  amount  that  is  proportionate  to  the  costs  of  the 
collection process, provided that such deferral does not materially affect the capacity 
of the resolution  authority  to  use the  resolution  financing arrangements pursuant  to 
Article 101. After the target level has been reached for the first time and where the 
available financial means have subsequently been reduced to less than two thirds of 
the target level, those contributions shall be set at a level  allowing for reaching the 
target level within 6 years.’; 

(53) 

Article 103 is amended as follows: 

(a) 

paragraph 3 is replaced by the following: 

‘3. The available financial means to be taken into account in order to reach the 
target  level  specified  in  Article  102  may  include  irrevocable  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 
Article  101(1).  The  share  of  irrevocable  payment  commitments  shall  not 
exceed 50 % of the total amount of contributions raised in accordance with this 
Article. Within that limit, the resolution authority shall determine annually the 
share of irrevocable payment commitments in the total amount of contributions 
to be raised in accordance with this Article.’; 

(b) 

the following paragraph 3a is inserted:  

‘3a.  The  resolution  authority  shall  call  the  irrevocable  payment  commitments 
made  pursuant  to  paragraph  3  of  this  Article  when  the  use  of  the  resolution 
financing arrangements is needed pursuant to Article 101.  

Where  an  entity  stops  being  within  the  scope  of  Article  1  and  is  no  longer 
subject to the obligation to pay contributions in accordance with paragraph 1 of 
this  Article,  the  resolution  authority  shall  call  the  irrevocable  payment 
commitments  made  pursuant  to  paragraph  3  and  still  due.  If  the  contribution 
linked  to  the  irrevocable  payment  commitment  is  duly  paid  at  first  call,  the 
resolution  authority  shall  cancel  the  commitment  and  return  the  collateral.  If 
the contribution is not duly paid at first call, the resolution authority shall seize 
the collateral and cancel the commitment.’; 

(54) 

In Article 104(1), the second subparagraph is replaced by the following: 

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‘Extraordinary ex-post contributions shall not exceed three times 12,5 % of the target 
level specified in Article 102.’; 

(55) 

Article 108 is amended as follows: 

(a) 

paragraph 1 is replaced by the following: 

‘1.  Member  States  shall  ensure  that  in  their  national  laws  governing  normal 
insolvency proceedings the following have the same priority ranking, which is 
higher  than  the  ranking  provided  for  the  claims  of  ordinary  unsecured 
creditors:  

(a) 

deposits;  

(b)  deposits made through branches located outside the Union of institutions 

established within the Union;  

(c) 

deposit  guarantee  schemes  subrogating  to  the  rights  and  obligations  of 
covered depositors in insolvency.’; 

(b) 

the following paragraphs 8 and 9 are added: 

‘8. Where the resolution tools referred to in Article 37(3), point (a) or (b), are 
used  to  transfer  only  part  of  the  assets,  rights  or  liabilities  of  the  institution 
under  resolution,  the  resolution  financing  arrangement  shall  have  a  claim 
against the residual institution or entity  referred  to  in  Article 1(1), points (b), 
(c)  or  (d),  for  any  expense  and  loss  incurred  by  the  resolution  financing 
arrangement  as  a  result  of  any  contributions  made  to  resolution  pursuant  to 
Article  101(1)  in  connection  to  losses  which  creditors  would  have  otherwise 
borne.  

9.  Member  States  shall  ensure  that  the  claims  of  the  resolution  financing 
arrangement referred to in paragraph 8 of this Article and in Article 37(7) have, 
in  their  national  laws  governing  normal  insolvency  proceedings,  a  preferred 
priority ranking, which shall be higher than the ranking provided for the claims 
of  deposits  and  of  deposit  guarantee  schemes  pursuant  to  paragraph  1  of  this 
Article.’; 

(56) 

Article 109 is amended as follows: 

(a) 

paragraphs 1 and 2 are replaced by the following: 

'1.  Member  States  shall  ensure  that,  where  the  resolution  authorities  take 
resolution  action  with  respect  to  a  credit  institution,  and  provided  that  such 
action  ensures  that  depositors  continue  to  have  access  to  their  deposits,  to 
prevent depositors from bearing losses the deposit guarantee scheme to which 
that credit institution is affiliated shall contribute the following amounts: 

(a)  where  the  bail-in  tool  is  applied,  independently  or  in  combination  with 
the  asset  separation  tool,  the  amount  by  which  covered  deposits  would 
have  been  written  down  or  converted  in  order  to  absorb  the  losses  and 
recapitalise the institution under resolution pursuant to Article 46(1), had 
covered deposits been included within the scope of bail-in; 

(b)  where  the  sale  of  business  or  the  bridge  institution  tools  are  applied, 

independently or in combination with other resolution tools: 

(i) 

the amount necessary to cover the difference between the value of 
the covered deposits and of the liabilities with the same or a higher 

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priority  ranking  than  deposits  and  the  value  of  the  assets  of  the 
institution  under  resolution  which  are  to  be  transferred  to  a 
recipient; and 

(ii)  where relevant, an amount necessary to ensure the capital neutrality 

of the recipient following the transfer. 

In the cases referred to in the first subparagraph, point (b), where the transfer to 
the recipient includes deposits that are not covered deposits or other bail-inable 
liabilities and the resolution authority assesses that the circumstances referred 
to  in  Article 44(3)  apply to  those deposits  or liabilities, the deposit  guarantee 
scheme shall contribute: 

(a) 

the  amount  necessary  to  cover  the  difference  between  the  value  of 
deposits,  including  deposits  that  are  not  covered,  and  of  the  liabilities 
with  the  same  or  higher  priority  ranking  than  deposits  and  the  value  of 
the assets of the institution under resolution which are to be transferred to 
a recipient; and 

(b)  where  relevant,  an  amount  necessary  to  ensure  the  capital  neutrality  of 

the transfer for the recipient. 

Member States shall ensure that, once the deposit guarantee scheme has made a 
contribution in the cases referred to in the second subparagraph, the institution 
under resolution refrains from acquiring stakes in other undertakings as well as 
distributions in connection with Common Equity Tier 1 capital or payments on 
Additional  Tier  1  instruments,  or  from  other  activities  that  may  lead  to  an 
outflow of funds.  

In all cases, the cost of the contribution of the deposit guarantee scheme shall 
not be greater than the cost of repaying depositors as calculated by the deposit 
guarantee scheme under Article 11e of Directive 2014/49/EU. 

Where  it  is  determined  by  a  valuation  under  Article  74  that  the  cost  of  the 
deposit  guarantee  scheme’s  contribution  to  resolution  was  greater  than  the 
losses it would have incurred had the institution been wound up under normal 
insolvency  proceedings,  the  deposit  guarantee  scheme  shall  be  entitled  to  the 
payment  of  the  difference  from  the  resolution  financing  arrangement  in 
accordance with Article 75. 

2.  Member  States  shall  ensure  that  the  resolution  authority  determines  the 
amount of the contribution of the deposit guarantee scheme in accordance with 
paragraph  1  after  having  consulted  the  deposit  guarantee  scheme  on  the 
estimated  cost  of  repaying  depositors  pursuant  to  Article  11e  of  Directive 
2014/49/EU and in compliance with the conditions referred to in Article 36 of 
this Directive. 

The  resolution  authority  shall  notify  its  decision  as  referred  to  in  the  first 
subparagraph  to  the  deposit  guarantee  scheme  to  which  the  institution  is 
affiliated. The deposit guarantee scheme shall implement that decision without 
delay.’; 

(b) 

the following paragraphs 2a and 2b are inserted: 

‘2a. Where the funds of the deposit  guarantee scheme are used in accordance 
with  paragraph  1,  first  subparagraph,  point  (a),  to  contribute  to  the 
recapitalisation of the institution under resolution, Member States shall ensure 

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that  the  deposit  guarantee  scheme  transfers  its  holdings  of  shares  or  other 
capital  instruments  in  the  institution  under  resolution  to  the  private  sector  as 
soon as commercial and financial circumstances allow.  

Member  States  shall  ensure  that  the  deposit  guarantee  scheme  markets  the 
shares and other capital instruments referred to in the first subparagraph openly 
and transparently, and that the sale does not misrepresent them or discriminate 
between  potential  purchasers.  Any  such  sale  shall  be  made  on  commercial 
terms. 

2b. The contribution of the deposit guarantee scheme pursuant to paragraph 1, 
second  subparagraph,  shall  count  towards  the  thresholds  laid  down  in  Article 
44(5), point (a), and in Article 44(8), point (a). 

to 

together  with 

the  contribution 

Where the use of the deposit guarantee scheme pursuant to paragraph 1, second 
subparagraph, 
loss  absorption  and 
recapitalisation made by the shareholders and the holders of other instruments 
of ownership, the holders of relevant capital instruments and other bail-inable 
liabilities,  allows  for  the  use  of  the  resolution  financing  arrangement,  the 
contribution  of  the  deposit  guarantee  scheme  shall  be  limited  to  the  amount 
necessary  to  meet  the  thresholds  laid  down  in  Article  44(5),  point  (a),  and  in 
Article  44(8),  point  (a).  Following  the  contribution  of  the  deposit  guarantee 
scheme, the resolution financing arrangement shall be used in accordance with 
the principles governing the use of the resolution financing arrangement set out 
in Articles 44 and 101.  

However, the first and the second subparagraphs shall not apply to institutions 
that have been identified as liquidation entities in the group resolution plan or 
in the resolution plan.’; 

(c) 

paragraph 3 is deleted; 

(d) 

in paragraph 5, the second and third subparagraphs are deleted; 

(57) 

in Article 111(1), the following point (e) is added: 

‘(e)  failure  to  comply  with  the  minimum  requirement  for  own  funds  and  eligible 
liabilities referred to in Article 45e or 45f.’; 

(58) 

Article 128 is amended as follows: 

(a) 

the title is replaced by the following: 

‘Cooperation  and 
authorities’; 

information  exchange  among 

institutions  and 

(b) 

the following paragraph is added: 

‘The  resolution  authorities,  competent  authorities,  the  EBA,  the  Single 
Resolution  Board,  the  ECB  and  other  members  of  the  European  System  of 
Central  Banks  shall  provide  the  Commission,  upon  its  request  and  within  the 
specified timeframe, with any information necessary for the performance of its 
tasks  related  to  policy  development,  including  the  carrying  out  of  impact 
assessments,  the  preparation  of  legislative  proposals,  and  the  participation  in 
the  legislative  process.  The  Commission  and  the  Commission  staff  shall  be 
subject to the requirements of professional secrecy laid down in Article 88  of 
Regulation (EU) No 806/2014 of the European Parliament and of the Council* 
with regard to the information received.’; 

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______________________________ 

* Regulation (EU) No 806/2014 of the European Parliament and of the Council 
of  15  July  2014  establishing  uniform  rules  and  a  uniform  procedure  for  the 
resolution of credit institutions and certain investment firms in the framework 
of a Single Resolution Mechanism and a Single Resolution Fund and amending 
Regulation (EU) No 1093/2010 (OJ L 225, 30.7.2014, p. 1). 

(59) 

the following Article 128a is inserted: 

‘Article 128a 

Crisis management simulations 

1. EBA shall coordinate regular Union-wide exercises to test the application of this 
Directive, Regulation (EU) No 806/2014  and Directive 2014/49/EU in cross-border 
situations on all of the following aspects:  

(a) 

(b) 

cooperation of the competent authorities during recovery planning;  

cooperation among resolution authorities and competent authorities before the 
failure  and  during  the  resolution  of  financial  institutions,  including  in  the 
implementation  of  resolution  schemes  adopted  pursuant  to  Article  18  of 
Regulation (EU) No 806/2014.  

2.  EBA  shall  produce  a  report  setting  out  the  key  findings  and  conclusions  of  the 
exercises. The report shall be made public.’. 

Article 2 

Transposition 

1. 

Member States shall adopt and publish, by … [OP please insert the date = 18 months 
from the date of entry into force of this amending Directive] 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. 

They shall apply those provisions from … [OP please insert the date = 1 day after the 
transposition date of this amending Directive]. 

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. 

2. 

Member States shall communicate to the Commission the text of the main provisions 
of national law which they adopt in the field covered by this Directive. 

Article 3 

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. 

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Article 4 

Addressees 

This Directive is addressed to the Member States. 

Done at Strasbourg, 

For the European Parliament 
The President 

For the Council 
The President 

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