Article 63 General powers
1. Member States shall ensure that the resolution authorities have all the powers necessary to apply the resolution tools to institutions and to entities referred to in points (b), (c) and (d) of Article 1(1) that meet the applicable conditions for resolution. In particular, the resolution authorities shall have the following resolution powers, which they may exercise individually or in any combination: (a) the power to require any person to provide any information required for the resolution authority to decide upon and prepare a resolution action, including updates and supplements of information provided in the resolution plans and including requiring information to be provided through on-site inspections; (b) the power to take control of an institution under resolution and exercise all the rights and powers conferred upon the shareholders, other owners and the management body of the institution under resolution; (c) the power to transfer shares or other instruments of ownership issued by an institution under resolution; (d) the power to transfer to another entity, with the consent of that entity, rights, assets or liabilities of an institution under resolution; (e) the power to reduce, including to reduce to zero, the principal amount of or outstanding amount due in respect of eligible liabilities, of an institution under resolution; (f) the power to convert eligible liabilities of an institution under resolution into ordinary shares or other instruments of ownership of that institution or entity referred to in point (b), (c) or (d) of Article 1(1), a relevant parent institution or a bridge institution to which assets, rights or liabilities of the institution or the entity referred to in point (b), (c) or (d) of Article 1(1) are transferred; (g) the power to cancel debt instruments issued by an institution under resolution except for secured liabilities subject to Article 44(2); (h) the power to reduce, including to reduce to zero, the nominal amount of shares or other instruments of ownership of an institution under resolution and to cancel such shares or other instruments of ownership; (i) the power to require an institution under resolution or a relevant parent institution to issue new shares or other instruments of ownership or other capital instruments, including preference shares and contingent convertible instruments; (j) the power to amend or alter the maturity of debt instruments and other eligible liabilities issued by an institution under resolution or amend the amount of interest payable under such instruments and other eligible liabilities, or the date on which the interest becomes payable, including by suspending payment for a temporary period, except for secured liabilities subject to Article 44(2); (k) the power to close out and terminate financial contracts or derivatives contracts for the purposes of applying Article 49; (l) the power to remove or replace the management body and senior management of an institution under resolution; (m) the power to require the competent authority to assess the buyer 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. 2. Member States shall take all necessary measures to ensure that, when applying the resolution tools and exercising the resolution powers, resolution authorities are not subject to any of the following requirements that would otherwise apply by virtue of national law or contract or otherwise: (a) 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; (b) prior to the exercise of the power, procedural requirements to notify any person including any requirement to publish any notice or prospectus or to file or register any document with any other authority. In particular, Member States shall ensure that resolution authorities can exercise the powers under this Article irrespective of any restriction on, or requirement for consent for, transfer of the financial instruments, rights, assets or liabilities in question that might otherwise apply. Point (b) of the first subparagraph is without prejudice to the requirements laid down in Articles 81 and 83 and any notification requirements under the Union State aid framework. 3. Member States shall ensure that, to the extent that any of the powers listed in paragraph 1 of this Article is not applicable to an entity within the scope of Article 1(1) of this Directive as a result of its specific legal form, resolution authorities shall have powers which are as similar as possible including in terms of their effects. 4. Member States shall ensure that, when resolution authorities exercise the powers pursuant to paragraph 3 the safeguards provided for in this Directive, or safeguards that deliver the same effect, shall be applied to the persons affected, including shareholders, creditors and counterparties.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The proposed amendments to Directive 2014/59/EU (the Bank Recovery and Resolution Directive or BRRD) are part of a legislative package that includes also amendments to Regulation (EU) No 575/2013 (the Capital Requirements Regulation or CRR), to Directive 2013/36/EU (the Capital Requirements Directive or CRD) and to Regulation (EU) 806/2014 (the Single Resolution Mechanism Regulation or SRMR). Over the past years the EU implemented a substantial reform of the financial services regulatory framework to enhance the resilience of financial institutions in the EU, largely based on global standards agreed with the EU’s international partners. In particular, the reform package included Regulation (EU) No 575/2013 (the Capital Requirements Regulation or CRR) and Directive 2013/36/EU (the Capital Requirements Directive or CRD), on prudential requirements for and supervision of institutions, Directive 2014/59/EU (the Bank Recovery and Resolution Directive or BRRD), on recovery and resolution of institutions and Regulation (EU) No 806/2014 on the Single Resolution Mechanism (SRM). These measures were taken in response to the financial crisis that unfolded in 2007-2008.The absence of adequate crisis management and resolution frameworks forced governments around the world to rescue banks following the financial crisis. The subsequent impact on public finances as well as the undesirable incentive of socialising the costs of bank failure have underscored that a different approach is needed to manage bank crises and protect financial stability. Within the Union and in line with the significant steps that have been agreed and taken at international level, Directive 2014/59/EU (Bank Recovery and Resolution Directive (BRRD) 1 and Regulation (EU) No 806/2014 (Single Resolution Mechanism Regulation (SRMR) 2 have established a robust bank resolution framework to effectively manage bank crises and reduce their negative impact on financial stability and public finances. A cornerstone of the new resolution framework is the “bail-in” which consists of writing down debt or converting debt claims or other liabilities into equity according to a pre-defined hierarchy. The tool can be used to absorb losses of and internally recapitalise an institution that is failing or likely to fail, so that its viability is restored. Therefore, shareholders and other creditors will have to bear the burden of an institution's failure instead of taxpayers. In contrast to other jurisdictions, the Union bank recovery and resolution framework has already mandated resolution authorities to set for each credit institution or investment firm ('institution') a minimum requirement for own funds and eligible liabilities ('MREL'), which consist of highly bail-inable liabilities to be used to absorb losses and recapitalise institutions in case of failures. The delegated legislation concerning the practical implementation of this requirement has been adopted recently by the Commission 3 . At the global level, the Financial Stability Board (FSB) has published on 9 November 2015 the Total Loss-absorbing Capacity (TLAC) Term Sheet ('the TLAC standard') that was adopted a week later at the G20 summit in Turkey 4 . The TLAC standard requires global systemically important banks ('G-SIBs'), referred to as global systemically important institutions ('G-SIIs') in the Union legislation, to hold a sufficient amount of highly loss absorbing (bail-inable) liabilities to ensure smooth and fast absorption of losses and recapitalisation in resolution. In its Communication of 24 November 2015 5 , the Commission committed to bring forward a legislative proposal by the end of this year so that the TLAC standard can be implemented by the agreed deadline of 2019. In addition, the Commission committed to review the existing MREL rules with the view to provide full consistency with the internationally agreed TLAC standard by considering the findings of a report that the European Banking Authority (EBA) is required to provide to the Commission under Article 45(19) of the BRRD. An interim version of that report has already been published by the EBA on 19 July 2016 6 and the final report is expected to be submitted in the course of December 2016. While the general BRRD framework remains valid and sound, the main objective of this proposal is to implement the TLAC standard and to integrate the TLAC requirement into the general MREL rules by avoiding duplication by applying two parallel requirements. Although TLAC and MREL pursue the same regulatory objective, there are, nevertheless, some differences between them in the way they are constructed. The scope of application of MREL covers not only G-SIIs, but the entire Union banking industry. Differently from the TLAC standard, which contains a harmonised minimum level, the level of MREL is determined by resolution authorities on the basis of a case-by-case institution specific assessment. Finally, the minimum TLAC requirement should be met in principle with subordinated debt instruments, while for the purposes of MREL, subordination of debt instruments could be required by resolution authorities on a case-by-case basis to the extent it is needed to ensure that in a given case bailed in creditors are not treated worse than in a hypothetical insolvency scenario (which is a scenario that is counterfactual to resolution). In order to achieve a simple and transparent framework providing legal certainty and consistency, the Commission is proposing to integrate the TLAC standard into the existing MREL rules and ensure that both requirements are met with largely similar instruments. This approach requires introducing limited adjustments to the existing MREL rules ensuring technical consistency with the structure of any requirements for G-SIIs. In particular, further appropriate technical amendments to the existing rules on MREL are needed to align them with the TLAC standard as regards inter alia the denominators used for measuring loss-absorbing capacity, the interaction with capital buffer requirements, disclosure of risks to investors and their application in relation to different resolution strategies. While implementing the TLAC standard for G-SIIs, the Commission's approach will not materially affect the burden of institutions which are not G-SIIs to comply with the provisions on MREL. Operationally, the harmonised minimum level of the TLAC standard will be introduced in the Union through amendments to the Capital Requirements Regulation and Directive (CRR and CRD) 7 while the institution specific add-on for G-SIIs and the institution specific MREL for non-G-SIIs will be dealt with through targeted amendments to the BRRD and SRMR. This proposal covers specifically the targeted amendments to the BRRD related to the implementation of the TLAC standard in the Union. As such, this proposal is part of a wider review package of the Union financial legislation aiming at reducing risks in the financial sector (CRR/CRD review) and rendering it more resilient. In addition, based on views expressed by many respondents to the call for evidence to stakeholders published in September 2015 8 , this proposal amends the BRRD with the view to ease compliance costs of banks where their liabilities are governed by the laws of third countries. The current requirement has proven difficult to comply with in practice thus bringing limited added value to the resolvability of banks. It is thus necessary to introduce more flexibility in the contractual relationships of Union banks with third country entities by allowing resolution authorities to waive, subject to certain strict safeguards, the obligation to insert contractual clauses with the aim of recognising in third countries the effects of the bail-in of liabilities governed by the law of these third countries. In practice, the current rules are very difficult to enforce. Furthermore, at the invitation of the ECOFIN in its conclusions of 17 June 2016, this proposal amends the BRRD as regards the application by resolution authorities of moratorium tools in the course of resolution, i.e. powers to suspend the executions of bank commitments towards third parties. Harmonisation of such powers should contribute to the stabilisation by the relevant authorities of an institution in the period before, and possibly after, resolution. 
Revised version (Article 63 General powers):
1. Member States shall ensure that the resolution authorities have all the powers necessary to apply the resolution tools to institutions and to entities referred to in points (b), (c) and (d) of Article 1(1) that meet the applicable conditions for resolution. In particular, the resolution authorities shall have the following resolution powers, which they may exercise individually or in any combination: (a) the power to require any person to provide any information required for the resolution authority to decide upon and prepare a resolution action, including updates and supplements of information provided in the resolution plans and including requiring information to be provided through on-site inspections; (b) the power to take control of an institution under resolution and exercise all the rights and powers conferred upon the shareholders, other owners and the management body of the institution under resolution; (c) the power to transfer shares or other instruments of ownership issued by an institution under resolution; (d) the power to transfer to another entity, with the consent of that entity, rights, assets or liabilities of an institution under resolution; (e) the power to reduce, including to reduce to zero, the principal amount of or outstanding amount due in respect of bail-inable liabilities , of an institution under resolution; (f) the power to convert bail-inable liabilities of an institution under resolution into ordinary shares or other instruments of ownership of that institution or entity referred to in point (b), (c) or (d) of Article 1(1), a relevant parent institution or a bridge institution to which assets, rights or liabilities of the institution or the entity referred to in point (b), (c) or (d) of Article 1(1) are transferred; (g) the power to cancel debt instruments issued by an institution under resolution except for secured liabilities subject to Article 44(2); (h) the power to reduce, including to reduce to zero, the nominal amount of shares or other instruments of ownership of an institution under resolution and to cancel such shares or other instruments of ownership; (i) the power to require an institution under resolution or a relevant parent institution to issue new shares or other instruments of ownership or other capital instruments, including preference shares and contingent convertible instruments; (j) the power to amend or alter the maturity of debt instruments and other bail-inable liabilities issued by an institution under resolution or amend the amount of interest payable under such instruments and other bail-inable liabilities , or the date on which the interest becomes payable, including by suspending payment for a temporary period, except for secured liabilities subject to Article 44(2); (k) the power to close out and terminate financial contracts or derivatives contracts for the purposes of applying Article 49; (l) the power to remove or replace the management body and senior management of an institution under resolution; (m) the power to require the competent authority to assess the buyer 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. 2. Member States shall take all necessary measures to ensure that, when applying the resolution tools and exercising the resolution powers, resolution authorities are not subject to any of the following requirements that would otherwise apply by virtue of national law or contract or otherwise: (a) 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; (b) prior to the exercise of the power, procedural requirements to notify any person including any requirement to publish any notice or prospectus or to file or register any document with any other authority. In particular, Member States shall ensure that resolution authorities can exercise the powers under this Article irrespective of any restriction on, or requirement for consent for, transfer of the financial instruments, rights, assets or liabilities in question that might otherwise apply. Point (b) of the first subparagraph is without prejudice to the requirements laid down in Articles 81 and 83 and any notification requirements under the Union State aid framework. 3. Member States shall ensure that, to the extent that any of the powers listed in paragraph 1 of this Article is not applicable to an entity within the scope of Article 1(1) of this Directive as a result of its specific legal form, resolution authorities shall have powers which are as similar as possible including in terms of their effects. 4. Member States shall ensure that, when resolution authorities exercise the powers pursuant to paragraph 3 the safeguards provided for in this Directive, or safeguards that deliver the same effect, shall be applied to the persons affected, including shareholders, creditors and counterparties.
Article 64 Ancillary powers
1. Member States shall ensure that, when exercising a resolution power, resolution authorities have the power to: (a) subject to Article 78, provide for a transfer to take effect free from any liability or encumbrance affecting the financial instruments, rights, assets or liabilities transferred; for that purpose, any right of compensation in accordance with this Directive shall not be considered to be a liability or an encumbrance; (b) remove rights to acquire further shares or other instruments of ownership; (c) require the relevant authority to discontinue or suspend the admission to trading on a regulated market or the official listing of financial instruments pursuant to Directive 2001/34/EC of the European Parliament and of the Council ( 33 ) ; (d) provide for the recipient to be treated as if it were the institution under resolution for the purposes of any rights or obligations of, or actions taken by, the institution under resolution, including, subject to Articles 38 and 40, any rights or obligations relating to participation in a market infrastructure; (e) require the institution under resolution or the recipient to provide the other with information and assistance; and (f) cancel or modify the terms of a contract to which the institution under resolution is a party or substitute a recipient as a party. 2. Resolution authorities shall exercise the powers specified in paragraph 1 where it is considered by the resolution authority to be appropriate to help to ensure that a resolution action is effective or to achieve one or more resolution objectives. 3. Member States shall ensure that, when exercising a resolution power, resolution authorities have the power to provide for continuity arrangements necessary to ensure that the resolution action is effective and, where relevant, the business transferred may be operated by the recipient. Such continuity arrangements shall include, in particular: (a) the continuity of contracts entered into by the institution under resolution, so that the recipient assumes the rights and liabilities of the institution under resolution relating to any financial instrument, right, asset or liability that has been transferred and is substituted for the institution under resolution, expressly or implicitly in all relevant contractual documents; (b) the substitution of the recipient for the institution under resolution in any legal proceedings relating to any financial instrument, right, asset or liability that has been transferred. 4. The powers in point (d) of paragraph 1 and point (b) of paragraph 3 shall not affect the following: (a) the right of an employee of the institution under resolution to terminate a contract of employment; (b) subject to Articles 69, 70 and 71, any right of a party to a contract to exercise rights under the contract, including the right to terminate, where entitled to do so in accordance with the terms of the contract by virtue of an act or omission by the institution under resolution prior to the relevant transfer, or by the recipient after the relevant transfer.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal Regulation (EU) No 575/2013 of the European Parliament and of the Council 1 (the Capital Requirements Regulation or CRR) establishes together with Directive 2013/36/EU of the European Parliament and of the Council 2 (the Capital Requirements Directive or CRD) the prudential regulatory framework for credit institutions operating in the Union. The CRR and the CRD were adopted in the aftermath of the 2008-2009 financial crisis to enhance the resilience of institutions operating in the EU financial sector, largely based on global standards agreed with the EU’s international partners, in particular the Basel Committee on Banking Supervision (BCBS). The CRR has been subsequently amended to tackle remaining weaknesses in the regulatory framework and to implement some outstanding elements of the global financial services reform that are essential to ensure institutions' resilience. A major revision was brought by t he ‘Risk Reduction Measures Package’ , which was adopted by the European Parliament and the Council on 20 May 2019 and published in the Official Journal on 7 June 2019. Th at package include d inter alia changes to the Union bank resolution framework through Directive (EU) 2019/879 of the European Parliament an d of the Council 3 , amending Directive 2014/59/EU of the European P arliament and of the Council 4 (Bank Recovery and Resolution Directive or BRRD) , Regulation (EU) 2019/87 7 of the European Parliament and of the Council 5 , amending Regulation (EU) No 806/2014 of the European Parliament and of the Council 6 (Single Resolution Mechanism Regulation or SRMR) and Regulation (EU) 2019/87 6 of the European Parliament and of the Council 7 , amending the CRR . This reform implement ed in the Union the international Total Loss-Absorbing Capacity (TLAC) standard for global systemically important institutions (G-SIIs) adopted by the Financial Stability Board (FSB) in November 2015 8 and enhanced the application of the minimum requirement for own funds and eligible liabilities (MREL) for all institutions established in the Union. The TLAC standard requires G-SIIs to hold a sufficient amount of highly loss-absorbing (bail-inable) liabilities to ensure smooth and fast absorption of losses and recapitalisation in the event of resolution. The implementation of the TLAC standard in Union law, namely through amendments to the CRR, took into account the existing institution-specific minimum requirement for own funds and eligible liabilities (MREL), set out in the BRRD. 9 Moreover, both sets of rules are closely interconnected, particularly through cross-references from the BRRD and the SRMR to the CRR. For instance, the BRRD and the SRMR generally rel y on the total exposure measure and the total risk exposure amount as calculated under the CRR for calculating and expressing MREL . The refore, the two requirements should be understood as complementary elements of a common framework. 10 Th at revised framework should better ensure that ins t itutions’ loss absorption and recapitalisation occur s through private means once those institutions get into financial difficulties and are subsequently placed in resolution. TLAC and MREL are thus essential to effectively manage bank crises and reduce their negative impact on financial stability and public finances. TLAC and the revised rules on MREL became applicable in the Union on 2 7 June 2019 and 28 December 2020, respectively. In line with international standards , Union law recognises both the Single Point of Entry (SPE) resolution strategy and the Multiple Point of Entry (MPE) resolution strategy. 11 Under the SPE resolution strategy, only one group entity , typically the parent undertaking, is resolved (‘resolution entity’) , whereas o ther group entities, usually operating subsidiaries, are not subject to resolution action . Instead, the losses of those subsidiaries are transferred to the resolution entity and capital is down streamed to the subsidiary . This ensures that the subsidiaries can continue to operate smoothly even after they have reach ed the point of non-viability . Each resolution entity forms a ‘resolution group’ t ogether with the subsidiaries that belong to it and that are not themselves resolution entities . Under the MPE resolution strategy, more than one entity of the banking group may be resolved . C onsequently , more than one resolution entity and thus more than one resolution group may exist within the banking group . The underlying principle of the MPE resolution approach is to enable the resolution of a given resolution group in a feasible and credible way without undermining the resolvability of other resolution entities and resolution groups in the same consolidated banking group. The revised bank resolution framework provides that MREL for resolution entities should be set at the consolidated level of a resolution group ( ‘ external MREL ’ ). 12 In addition, that framework envisages how the loss absorption and recapitalisation capacity should be allocated within resolution groups ( ‘ internal MREL ’ ) 13 . According to the BRRD, as a rule, financial instruments that are eligible for internal MREL must be held by the resolution entity , i.e. typically the parent undertaking 14 . The rationale of this rule is to ensure that t he loss-absorbing and recapitalisation capacity of a subsidiary is provided by its parent, i.e. by the resolution entity . That parent may hold internal MREL eligible instruments either directly or indirectly through other entities in the same resolution group (see illustration below) . The possibility for instruments to be also indirectly subscribed by the parent through intermediate entities was justified by the fact that the obligation to comply with i nternal MREL should not unnecessarily alter the existing funding channels of banking groups where the funding for acquiring such instruments is structured around the chains of ownership and distributed to the s ubsidiaries across the group through intermediate entities and not directly by ultimate parents (resolution entities). Illustration: Subscription of internal MREL eligible instruments (directly or indirectly) To operationalise the approach of indirect subscription of internal MREL eligible instruments within resolution groups , also referred to as the ‘daisy chain’ approach, and to ensure that it i s prudentially sound, the co-legislators mandated the E uropean B anking A uthority (EBA) to develop draft regulatory technical standards (RTS) and the Commission to adopt on that basis a delegated act to specify a methodology for such an indirect issuance of eligible instruments . 15 According to the BRRD mandate that methodology should: · permit a proper transfer of losses from subsidiaries to their ultimate parent (resolution entity) and a proper transfer of capital from that parent to subsidiaries; · ensure that the loss-absorbing capacity of the subsidiary is not also counted for the purposes of compliance with internal MREL by the intermediate parent ; and · ensure that its outcome is equivalent to that of a direct subscription by the ultimate parent (resolution entity) of eligible instruments issued by subsidiaries. Since early 2020, t he EBA has been working on that draft RTS on the basis of a deduction regime , in line with the mandate set out in the BRRD and the recommend ations in the relevant international standards . 16 The deduction regime developed by the EBA envisages that i nternal MREL eligible instruments issued by subsidiaries to the resolution entity via an intermediate parent would have to be fully deducted from the amount of the intermediate parent’s own i nternal MREL capacity. Such a deduction approach was considered as the most consistent with the conditions set out in the BRRD mandate and conducive to the operationalisation of the i nternal MREL framework . 17 Th e methodology developed by the EBA was subject to a public consultation. 18 The consultation feedback showed general support to the draft RTS, but highlighted several inconsistencies of the requirements for the delegation laid down in the BRRD with the existing prudential rules laid down in the CRR. Hence, in a letter to the European Commission dated 25 January 2021 19 , the EBA outlined that the interactions between the BRRD and the CRR would not allow the application of the prudential treatment needed for the mandate to be fulfilled as originally intended. More precisely, the EBA noted that the CRR did not allow for the deduction of internal MREL eligible instruments and , subsequently, for the application of an appropriate risk weight of zero percent in all the cases relevant for the mandate under the BRRD . Similar issues were identified in the area of the CRR leverage ratio requirement. T his situation would not only generate an inconsistency between the prudential and resolution framework but would also go against the requirement of the BRRD mandate to generate an outcome equivalent to that of a direct subscription , according to the EBA. It was concluded that the BRRD requirements could not be fulfilled without additional provisions that the RTS could not bear on its own but need ed rather to rely on the Level 1 text to specify. Apart from the need to operationalise the indirect subscription of instruments eligible for internal MREL, some other resolution related issues have been identified since the revised TLAC/MREL framework bec a me applicable in 2019. 20 Those issues mainly relate to the regulatory tr eatment of G-SII groups with a n MPE resolution strategy, including those MPE groups that have subsidiaries in third countries . For instance, the CRR currently does not specify whether the various adjustments to TLAC 21 for G-SIIs with an MPE resolution strategy also cover those subsidiaries of a G-SII that are located in a third country . In addition, the formula 22 for the calculation of the TLAC/MREL surplus of a subsidiary in the context of the general deduction regime applicable to G-SIIs with an MPE resolution strategy relies on the risk-based TLAC/MREL requirement of the subsidiary only, while it was omitted to also take into account the non-risked - based TLAC/MREL. Further issues include some contradictions within the Level 1 text, notably with regard to the interplay of provisions in the CRR and the BRRD 23 that are relevant to address potential inconsistencies between SPE and MPE requirements . Lastly, some issues have been observed with regard to the criteria 24 for instruments to be eligible for compliance with the internal TLAC requirement, which is of relevance when addressing the failure of EU subsidiaries of non-EU global systemically important institutions (G-SIIs). Some targeted changes to specific resolution related aspects of the CRR are necessary to address the above issues. In particular, the regulatory treatment of G-SII groups with an MPE resolution strategy, including of those MPE groups that have subsidiaries in third countries, needs to be better aligned with the treatment outlined in the TLAC standard. This would help to ensure that, in case of resolution, each resolution entity and group belonging to those G-SIIs can continue to perform critical functions without the risk of contagion. The amendments proposed would not alter the overall architecture of the framework but would ensure the proper application of TLAC and MREL. First, it is necessary to incorporate directly into the CRR a dedicated prudential treatment related to the indirect subscription of instruments eligible for internal MREL (daisy chain approach). The proposed modifications to the CRR would address the identified inconsistencies between the CRR and the BRRD, which were outlined in the EBA’s letter to the European Commission dated 25 January 2021. More precisely, the deduction regime, which was developed by the EBA in the context of the draft RTS under the BRRD, would be incorporated directly into the CRR. This would ensure a proper functioning of the indirect subscription of internal MREL within resolution groups with several layers of ownership, in line with the political agreement reached during the negotiations of Directive (EU) 2019/879. In addition, the revisions would ensure that the treatment of holdings of internal MREL eligible instruments remains aligned in both the resolution and the prudential framework, thus enabling the operationalisation of the deduction methodology developed by the EBA and, at the same time, avoiding the introduction of undue complexity in the treatment of those exposures. Second , the CRR provisions on the comparison between the sum of the actual TLAC requirement s of all the resolution groups within a G-SII group with a n MPE resolution strategy with the theoretical SPE requirement of that G-SII group need to be clarified . 25 The changes proposed are needed to clarify the extent to which resolution authorities can address the potential inconsistencies between SPE and MPE requirements. This would be achieved by aligning the CRR treatment with the one envisaged under the BRRD 26 and the TLAC standard 27 . Th ird , it is necessary to amend th e formula for the calculation of the TLAC/MREL surplus of a subsidiary in the context of the general deduction regime applicable to G-SIIs with an MPE resolution strategy 28 to ensure that that formula takes into account both the risk-based and the non- risk- based TLAC/MREL requirement s of the subsidiary, in line with the TLAC standard. This would avoid that the TLAC/MREL surplus of a given subsidiary is overestimated. Fourth, some CRR provisions applicable to G-SIIs with an MPE resolution strategy should be clarified to allow for the consideration of subsidiaries established outside of the Union. This would align the CRR with the corresponding TLAC principle agreed internationally, which is applicable with respect to subsidiaries established in all FSB jurisdictions. Fifth, some targeted clarifications in the context of the r equirement for own funds and eligible liabilities for i nstitutions that are material subsidiaries of non-EU G-SIIs ( ‘ internal TLAC ’ ) are needed to ensure that debt instruments issued by those institutions could meet all eligibility criteria for eligible liabilities instruments . The reason for this change is that currently the eligibility criteria for eligible liabilities instruments are based on the assumption that those instruments are issued by a resolution entity, and not by subsidiaries subject to an internal TLAC requirement. The gap would be addressed by clarifying that the same eligibility conditions applicable to resolution entities apply also to non-resolution entities, mutatis mutandis . This, in turn, would enable those institutions to me e t their internal TLAC requirement inter alia with eligible liabilities, as originally intended by the co-legislators . 29 These proposed amendments to the CRR can play an essential role in improving an institution’s resolvability . Given that the corresponding provisions are already applicable in the Union, the proposed modifications would need to be made in a timely manner . The need for an expedited adoption is further amplified by the fact that banking groups need clarity on the daisy chain mechanism to decide how best to preposition their internal MREL capacity in view of the general MREL compliance deadline that is set to 1 January 2024 , with binding intermediate targets needing to be complied with by 1 January 2022 . 
Revised version (Article 64 Ancillary powers):
1. Member States shall ensure that, when exercising a resolution power, resolution authorities have the power to: (a) subject to Article 78, provide for a transfer to take effect free from any liability or encumbrance affecting the financial instruments, rights, assets or liabilities transferred; for that purpose, any right of compensation in accordance with this Directive shall not be considered to be a liability or an encumbrance; (b) remove rights to acquire further shares or other instruments of ownership; (c) require the relevant authority to discontinue or suspend the admission to trading on a regulated market or the official listing of financial instruments pursuant to Directive 2001/34/EC of the European Parliament and of the Council ( 12 ); (d) provide for the recipient to be treated as if it were the institution under resolution for the purposes of any rights or obligations of, or actions taken by, the institution under resolution, including, subject to Articles 38 and 40, any rights or obligations relating to participation in a market infrastructure; (e) require the institution under resolution or the recipient to provide the other with information and assistance; and (f) cancel or modify the terms of a contract to which the institution under resolution is a party or substitute a recipient as a party. 2. Resolution authorities shall exercise the powers specified in paragraph 1 where it is considered by the resolution authority to be appropriate to help to ensure that a resolution action is effective or to achieve one or more resolution objectives. 3. Member States shall ensure that, when exercising a resolution power, resolution authorities have the power to provide for continuity arrangements necessary to ensure that the resolution action is effective and, where relevant, the business transferred may be operated by the recipient. Such continuity arrangements shall include, in particular: (a) the continuity of contracts entered into by the institution under resolution, so that the recipient assumes the rights and liabilities of the institution under resolution relating to any financial instrument, right, asset or liability that has been transferred and is substituted for the institution under resolution, expressly or implicitly in all relevant contractual documents; (b) the substitution of the recipient for the institution under resolution in any legal proceedings relating to any financial instrument, right, asset or liability that has been transferred. Member States shall ensure that, when exercising a resolution power, resolution authorities have the power to provide for continuity arrangements necessary to ensure that the resolution action is effective and, where relevant, the business transferred may be operated by the recipient. Such continuity arrangements shall include, in particular: (a) the continuity of contracts entered into by the institution under resolution, so that the recipient assumes the rights and liabilities of the institution under resolution relating to any financial instrument, right, asset or liability that has been transferred and is substituted for the institution under resolution, expressly or implicitly in all relevant contractual documents; (b) the substitution of the recipient for the institution under resolution in any legal proceedings relating to any financial instrument, right, asset or liability that has been transferred. The powers in point (d) of paragraph 1 and point (b) of paragraph 3 shall not affect the following: (a) the right of an employee of the institution under resolution to terminate a contract of employment; (b) subject to Articles 69, 70 and 71, any right of a party to a contract to exercise rights under the contract, including the right to terminate, where entitled to do so in accordance with the terms of the contract by virtue of an act or omission by the institution under resolution prior to the relevant transfer, or by the recipient after the relevant transfer.
Article 65 Power to require the provision of services and facilities
1. Member States shall ensure that resolution authorities have the power to require an institution under resolution, or any of its group entities, to provide any services or facilities that are necessary to enable a recipient to operate effectively the business transferred to it. The first subparagraph shall apply including where the institution under resolution or relevant group entity has entered into normal insolvency proceedings. 2. Member States shall ensure that their resolution authorities have powers to enforce obligations imposed, pursuant to paragraph 1, on group entities established in their territory by resolution authorities in other Member States. 3. The services and facilities referred to in paragraphs 1 and 2 are restricted to operational services and facilities and do not include any form of financial support. 4. The services and facilities provided in accordance with paragraphs 1 and 2 shall be on the following terms: (a) where the services and facilities were provided under an agreement to the institution under resolution immediately before the resolution action was taken and for the duration of that agreement, on the same terms; (b) where there is no agreement or where the agreement has expired, on reasonable terms. 5. EBA shall, by 3 July 2015, issue guidelines in accordance with Article 16 of Regulation (EU) No 1093/2010 to specify the minimum list of services or facilities that are necessary to enable a recipient to effectively operate a business transferred to it.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal Regulation (EU) No 575/2013 of the European Parliament and of the Council 1 (the Capital Requirements Regulation or CRR) establishes together with Directive 2013/36/EU of the European Parliament and of the Council 2 (the Capital Requirements Directive or CRD) the prudential regulatory framework for credit institutions operating in the Union. The CRR and the CRD were adopted in the aftermath of the 2008-2009 financial crisis to enhance the resilience of institutions operating in the EU financial sector, largely based on global standards agreed with the EU’s international partners, in particular the Basel Committee on Banking Supervision (BCBS). The CRR has been subsequently amended to tackle remaining weaknesses in the regulatory framework and to implement some outstanding elements of the global financial services reform that are essential to ensure institutions' resilience. A major revision was brought by t he ‘Risk Reduction Measures Package’ , which was adopted by the European Parliament and the Council on 20 May 2019 and published in the Official Journal on 7 June 2019. Th at package include d inter alia changes to the Union bank resolution framework through Directive (EU) 2019/879 of the European Parliament an d of the Council 3 , amending Directive 2014/59/EU of the European P arliament and of the Council 4 (Bank Recovery and Resolution Directive or BRRD) , Regulation (EU) 2019/87 7 of the European Parliament and of the Council 5 , amending Regulation (EU) No 806/2014 of the European Parliament and of the Council 6 (Single Resolution Mechanism Regulation or SRMR) and Regulation (EU) 2019/87 6 of the European Parliament and of the Council 7 , amending the CRR . This reform implement ed in the Union the international Total Loss-Absorbing Capacity (TLAC) standard for global systemically important institutions (G-SIIs) adopted by the Financial Stability Board (FSB) in November 2015 8 and enhanced the application of the minimum requirement for own funds and eligible liabilities (MREL) for all institutions established in the Union. The TLAC standard requires G-SIIs to hold a sufficient amount of highly loss-absorbing (bail-inable) liabilities to ensure smooth and fast absorption of losses and recapitalisation in the event of resolution. The implementation of the TLAC standard in Union law, namely through amendments to the CRR, took into account the existing institution-specific minimum requirement for own funds and eligible liabilities (MREL), set out in the BRRD. 9 Moreover, both sets of rules are closely interconnected, particularly through cross-references from the BRRD and the SRMR to the CRR. For instance, the BRRD and the SRMR generally rel y on the total exposure measure and the total risk exposure amount as calculated under the CRR for calculating and expressing MREL . The refore, the two requirements should be understood as complementary elements of a common framework. 10 Th at revised framework should better ensure that ins t itutions’ loss absorption and recapitalisation occur s through private means once those institutions get into financial difficulties and are subsequently placed in resolution. TLAC and MREL are thus essential to effectively manage bank crises and reduce their negative impact on financial stability and public finances. TLAC and the revised rules on MREL became applicable in the Union on 2 7 June 2019 and 28 December 2020, respectively. In line with international standards , Union law recognises both the Single Point of Entry (SPE) resolution strategy and the Multiple Point of Entry (MPE) resolution strategy. 11 Under the SPE resolution strategy, only one group entity , typically the parent undertaking, is resolved (‘resolution entity’) , whereas o ther group entities, usually operating subsidiaries, are not subject to resolution action . Instead, the losses of those subsidiaries are transferred to the resolution entity and capital is down streamed to the subsidiary . This ensures that the subsidiaries can continue to operate smoothly even after they have reach ed the point of non-viability . Each resolution entity forms a ‘resolution group’ t ogether with the subsidiaries that belong to it and that are not themselves resolution entities . Under the MPE resolution strategy, more than one entity of the banking group may be resolved . C onsequently , more than one resolution entity and thus more than one resolution group may exist within the banking group . The underlying principle of the MPE resolution approach is to enable the resolution of a given resolution group in a feasible and credible way without undermining the resolvability of other resolution entities and resolution groups in the same consolidated banking group. The revised bank resolution framework provides that MREL for resolution entities should be set at the consolidated level of a resolution group ( ‘ external MREL ’ ). 12 In addition, that framework envisages how the loss absorption and recapitalisation capacity should be allocated within resolution groups ( ‘ internal MREL ’ ) 13 . According to the BRRD, as a rule, financial instruments that are eligible for internal MREL must be held by the resolution entity , i.e. typically the parent undertaking 14 . The rationale of this rule is to ensure that t he loss-absorbing and recapitalisation capacity of a subsidiary is provided by its parent, i.e. by the resolution entity . That parent may hold internal MREL eligible instruments either directly or indirectly through other entities in the same resolution group (see illustration below) . The possibility for instruments to be also indirectly subscribed by the parent through intermediate entities was justified by the fact that the obligation to comply with i nternal MREL should not unnecessarily alter the existing funding channels of banking groups where the funding for acquiring such instruments is structured around the chains of ownership and distributed to the s ubsidiaries across the group through intermediate entities and not directly by ultimate parents (resolution entities). Illustration: Subscription of internal MREL eligible instruments (directly or indirectly) To operationalise the approach of indirect subscription of internal MREL eligible instruments within resolution groups , also referred to as the ‘daisy chain’ approach, and to ensure that it i s prudentially sound, the co-legislators mandated the E uropean B anking A uthority (EBA) to develop draft regulatory technical standards (RTS) and the Commission to adopt on that basis a delegated act to specify a methodology for such an indirect issuance of eligible instruments . 15 According to the BRRD mandate that methodology should: · permit a proper transfer of losses from subsidiaries to their ultimate parent (resolution entity) and a proper transfer of capital from that parent to subsidiaries; · ensure that the loss-absorbing capacity of the subsidiary is not also counted for the purposes of compliance with internal MREL by the intermediate parent ; and · ensure that its outcome is equivalent to that of a direct subscription by the ultimate parent (resolution entity) of eligible instruments issued by subsidiaries. Since early 2020, t he EBA has been working on that draft RTS on the basis of a deduction regime , in line with the mandate set out in the BRRD and the recommend ations in the relevant international standards . 16 The deduction regime developed by the EBA envisages that i nternal MREL eligible instruments issued by subsidiaries to the resolution entity via an intermediate parent would have to be fully deducted from the amount of the intermediate parent’s own i nternal MREL capacity. Such a deduction approach was considered as the most consistent with the conditions set out in the BRRD mandate and conducive to the operationalisation of the i nternal MREL framework . 17 Th e methodology developed by the EBA was subject to a public consultation. 18 The consultation feedback showed general support to the draft RTS, but highlighted several inconsistencies of the requirements for the delegation laid down in the BRRD with the existing prudential rules laid down in the CRR. Hence, in a letter to the European Commission dated 25 January 2021 19 , the EBA outlined that the interactions between the BRRD and the CRR would not allow the application of the prudential treatment needed for the mandate to be fulfilled as originally intended. More precisely, the EBA noted that the CRR did not allow for the deduction of internal MREL eligible instruments and , subsequently, for the application of an appropriate risk weight of zero percent in all the cases relevant for the mandate under the BRRD . Similar issues were identified in the area of the CRR leverage ratio requirement. T his situation would not only generate an inconsistency between the prudential and resolution framework but would also go against the requirement of the BRRD mandate to generate an outcome equivalent to that of a direct subscription , according to the EBA. It was concluded that the BRRD requirements could not be fulfilled without additional provisions that the RTS could not bear on its own but need ed rather to rely on the Level 1 text to specify. Apart from the need to operationalise the indirect subscription of instruments eligible for internal MREL, some other resolution related issues have been identified since the revised TLAC/MREL framework bec a me applicable in 2019. 20 Those issues mainly relate to the regulatory tr eatment of G-SII groups with a n MPE resolution strategy, including those MPE groups that have subsidiaries in third countries . For instance, the CRR currently does not specify whether the various adjustments to TLAC 21 for G-SIIs with an MPE resolution strategy also cover those subsidiaries of a G-SII that are located in a third country . In addition, the formula 22 for the calculation of the TLAC/MREL surplus of a subsidiary in the context of the general deduction regime applicable to G-SIIs with an MPE resolution strategy relies on the risk-based TLAC/MREL requirement of the subsidiary only, while it was omitted to also take into account the non-risked - based TLAC/MREL. Further issues include some contradictions within the Level 1 text, notably with regard to the interplay of provisions in the CRR and the BRRD 23 that are relevant to address potential inconsistencies between SPE and MPE requirements . Lastly, some issues have been observed with regard to the criteria 24 for instruments to be eligible for compliance with the internal TLAC requirement, which is of relevance when addressing the failure of EU subsidiaries of non-EU global systemically important institutions (G-SIIs). Some targeted changes to specific resolution related aspects of the CRR are necessary to address the above issues. In particular, the regulatory treatment of G-SII groups with an MPE resolution strategy, including of those MPE groups that have subsidiaries in third countries, needs to be better aligned with the treatment outlined in the TLAC standard. This would help to ensure that, in case of resolution, each resolution entity and group belonging to those G-SIIs can continue to perform critical functions without the risk of contagion. The amendments proposed would not alter the overall architecture of the framework but would ensure the proper application of TLAC and MREL. First, it is necessary to incorporate directly into the CRR a dedicated prudential treatment related to the indirect subscription of instruments eligible for internal MREL (daisy chain approach). The proposed modifications to the CRR would address the identified inconsistencies between the CRR and the BRRD, which were outlined in the EBA’s letter to the European Commission dated 25 January 2021. More precisely, the deduction regime, which was developed by the EBA in the context of the draft RTS under the BRRD, would be incorporated directly into the CRR. This would ensure a proper functioning of the indirect subscription of internal MREL within resolution groups with several layers of ownership, in line with the political agreement reached during the negotiations of Directive (EU) 2019/879. In addition, the revisions would ensure that the treatment of holdings of internal MREL eligible instruments remains aligned in both the resolution and the prudential framework, thus enabling the operationalisation of the deduction methodology developed by the EBA and, at the same time, avoiding the introduction of undue complexity in the treatment of those exposures. Second , the CRR provisions on the comparison between the sum of the actual TLAC requirement s of all the resolution groups within a G-SII group with a n MPE resolution strategy with the theoretical SPE requirement of that G-SII group need to be clarified . 25 The changes proposed are needed to clarify the extent to which resolution authorities can address the potential inconsistencies between SPE and MPE requirements. This would be achieved by aligning the CRR treatment with the one envisaged under the BRRD 26 and the TLAC standard 27 . Th ird , it is necessary to amend th e formula for the calculation of the TLAC/MREL surplus of a subsidiary in the context of the general deduction regime applicable to G-SIIs with an MPE resolution strategy 28 to ensure that that formula takes into account both the risk-based and the non- risk- based TLAC/MREL requirement s of the subsidiary, in line with the TLAC standard. This would avoid that the TLAC/MREL surplus of a given subsidiary is overestimated. Fourth, some CRR provisions applicable to G-SIIs with an MPE resolution strategy should be clarified to allow for the consideration of subsidiaries established outside of the Union. This would align the CRR with the corresponding TLAC principle agreed internationally, which is applicable with respect to subsidiaries established in all FSB jurisdictions. Fifth, some targeted clarifications in the context of the r equirement for own funds and eligible liabilities for i nstitutions that are material subsidiaries of non-EU G-SIIs ( ‘ internal TLAC ’ ) are needed to ensure that debt instruments issued by those institutions could meet all eligibility criteria for eligible liabilities instruments . The reason for this change is that currently the eligibility criteria for eligible liabilities instruments are based on the assumption that those instruments are issued by a resolution entity, and not by subsidiaries subject to an internal TLAC requirement. The gap would be addressed by clarifying that the same eligibility conditions applicable to resolution entities apply also to non-resolution entities, mutatis mutandis . This, in turn, would enable those institutions to me e t their internal TLAC requirement inter alia with eligible liabilities, as originally intended by the co-legislators . 29 These proposed amendments to the CRR can play an essential role in improving an institution’s resolvability . Given that the corresponding provisions are already applicable in the Union, the proposed modifications would need to be made in a timely manner . The need for an expedited adoption is further amplified by the fact that banking groups need clarity on the daisy chain mechanism to decide how best to preposition their internal MREL capacity in view of the general MREL compliance deadline that is set to 1 January 2024 , with binding intermediate targets needing to be complied with by 1 January 2022 . 
Revised version (Article 65 Power to require the provision of services and facilities):
1. Member States shall ensure that resolution authorities have the power to require an institution under resolution, or any of its group entities, to provide any services or facilities that are necessary to enable a recipient to operate effectively the business transferred to it. The first subparagraph shall apply including where the institution under resolution or relevant group entity has entered into normal insolvency proceedings. 2. Member States shall ensure that their resolution authorities have powers to enforce obligations imposed, pursuant to paragraph 1, on group entities established in their territory by resolution authorities in other Member States. 3. The services and facilities referred to in paragraphs 1 and 2 are restricted to operational services and facilities and do not include any form of financial support. 4. The services and facilities provided in accordance with paragraphs 1 and 2 shall be on the following terms: (a) where the services and facilities were provided under an agreement to the institution under resolution immediately before the resolution action was taken and for the duration of that agreement, on the same terms; (b) where there is no agreement or where the agreement has expired, on reasonable terms. The services and facilities provided in accordance with paragraphs 1 and 2 shall be on the following terms: (a) where the services and facilities were provided under an agreement to the institution under resolution immediately before the resolution action was taken and for the duration of that agreement, on the same terms; (b) where there is no agreement or where the agreement has expired, on reasonable terms. 5. EBA shall, by 3 July 2015, issue guidelines in accordance with Article 16 of Regulation (EU) No 1093/2010 to specify the minimum list of services or facilities that are necessary to enable a recipient to effectively operate a business transferred to it.
Article 66 Power to enforce crisis management measures or crisis prevention measures by other Member States
1. Member States shall ensure that, where a transfer of shares, other instruments of ownership, or assets, rights or liabilities includes assets that are located in a Member State other than the State of the resolution authority or rights or liabilities under the law of a Member State other than the State of the resolution authority, the transfer has effect in or under the law of that other Member State. 2. Member States shall provide the resolution authority that has made or intends to make the transfer with all reasonable assistance to ensure that the shares or other instruments of ownership or assets, rights or liabilities are transferred to the recipient in accordance with any applicable requirements of national law. 3. Member States shall ensure that shareholders, creditors and third parties that are affected by the transfer of shares, other instruments of ownership, assets, rights or liabilities referred to in paragraph 1 are not entitled to prevent, challenge, or set aside the transfer under any provision of law of the Member State where the assets are located or of the law governing the shares, other instruments of ownership, rights or liabilities. 4. Where a resolution authority of a Member State (Member State A) exercises the write-down or conversion powers, including in relation to capital instruments in accordance with Article 59, and the eligible liabilities or relevant capital instruments of the institution under resolution include the following: (a) instruments or liabilities that are governed by the law of a Member State other than the State of the resolution authority that exercised the write down or conversion powers (Member State B); (b) liabilities owed to creditors located in Member State B. Member State B shall ensure that the principal amount of those liabilities or instruments is reduced, or liabilities or instruments are converted, in accordance with the exercise of the write-down or conversion powers by the resolution authority of Member State A, 5. Member States shall ensure that creditors that are affected by the exercise of write-down or conversion powers referred to in paragraph 4 are not entitled to challenge the reduction of the principal amount of the instrument or liability or its conversion, as the case may be, under any provision of law of Member State B. 6. Each Member State shall ensure that the following are determined in accordance with the law of the Member State of the resolution authority: (a) the right for shareholders, creditors and third parties to challenge, by way of appeal pursuant to Article 85, a transfer of shares, other instruments of ownership, assets, rights or liabilities referred to in paragraph 1 of this Article; (b) the right for creditors to challenge, by way of appeal pursuant to Article 85, the reduction of the principal amount, or the conversion, of an instrument or liability covered by points (a) or (b) of paragraph 4 of this Article; (c) the safeguards for partial transfers, as referred to in Chapter VII, in relation to assets, rights or liabilities referred to in paragraph 1.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal Regulation (EU) No 575/2013 of the European Parliament and of the Council 1 (the Capital Requirements Regulation or CRR) establishes together with Directive 2013/36/EU of the European Parliament and of the Council 2 (the Capital Requirements Directive or CRD) the prudential regulatory framework for credit institutions operating in the Union. The CRR and the CRD were adopted in the aftermath of the 2008-2009 financial crisis to enhance the resilience of institutions operating in the EU financial sector, largely based on global standards agreed with the EU’s international partners, in particular the Basel Committee on Banking Supervision (BCBS). The CRR has been subsequently amended to tackle remaining weaknesses in the regulatory framework and to implement some outstanding elements of the global financial services reform that are essential to ensure institutions' resilience. A major revision was brought by t he ‘Risk Reduction Measures Package’ , which was adopted by the European Parliament and the Council on 20 May 2019 and published in the Official Journal on 7 June 2019. Th at package include d inter alia changes to the Union bank resolution framework through Directive (EU) 2019/879 of the European Parliament an d of the Council 3 , amending Directive 2014/59/EU of the European P arliament and of the Council 4 (Bank Recovery and Resolution Directive or BRRD) , Regulation (EU) 2019/87 7 of the European Parliament and of the Council 5 , amending Regulation (EU) No 806/2014 of the European Parliament and of the Council 6 (Single Resolution Mechanism Regulation or SRMR) and Regulation (EU) 2019/87 6 of the European Parliament and of the Council 7 , amending the CRR . This reform implement ed in the Union the international Total Loss-Absorbing Capacity (TLAC) standard for global systemically important institutions (G-SIIs) adopted by the Financial Stability Board (FSB) in November 2015 8 and enhanced the application of the minimum requirement for own funds and eligible liabilities (MREL) for all institutions established in the Union. The TLAC standard requires G-SIIs to hold a sufficient amount of highly loss-absorbing (bail-inable) liabilities to ensure smooth and fast absorption of losses and recapitalisation in the event of resolution. The implementation of the TLAC standard in Union law, namely through amendments to the CRR, took into account the existing institution-specific minimum requirement for own funds and eligible liabilities (MREL), set out in the BRRD. 9 Moreover, both sets of rules are closely interconnected, particularly through cross-references from the BRRD and the SRMR to the CRR. For instance, the BRRD and the SRMR generally rel y on the total exposure measure and the total risk exposure amount as calculated under the CRR for calculating and expressing MREL . The refore, the two requirements should be understood as complementary elements of a common framework. 10 Th at revised framework should better ensure that ins t itutions’ loss absorption and recapitalisation occur s through private means once those institutions get into financial difficulties and are subsequently placed in resolution. TLAC and MREL are thus essential to effectively manage bank crises and reduce their negative impact on financial stability and public finances. TLAC and the revised rules on MREL became applicable in the Union on 2 7 June 2019 and 28 December 2020, respectively. In line with international standards , Union law recognises both the Single Point of Entry (SPE) resolution strategy and the Multiple Point of Entry (MPE) resolution strategy. 11 Under the SPE resolution strategy, only one group entity , typically the parent undertaking, is resolved (‘resolution entity’) , whereas o ther group entities, usually operating subsidiaries, are not subject to resolution action . Instead, the losses of those subsidiaries are transferred to the resolution entity and capital is down streamed to the subsidiary . This ensures that the subsidiaries can continue to operate smoothly even after they have reach ed the point of non-viability . Each resolution entity forms a ‘resolution group’ t ogether with the subsidiaries that belong to it and that are not themselves resolution entities . Under the MPE resolution strategy, more than one entity of the banking group may be resolved . C onsequently , more than one resolution entity and thus more than one resolution group may exist within the banking group . The underlying principle of the MPE resolution approach is to enable the resolution of a given resolution group in a feasible and credible way without undermining the resolvability of other resolution entities and resolution groups in the same consolidated banking group. The revised bank resolution framework provides that MREL for resolution entities should be set at the consolidated level of a resolution group ( ‘ external MREL ’ ). 12 In addition, that framework envisages how the loss absorption and recapitalisation capacity should be allocated within resolution groups ( ‘ internal MREL ’ ) 13 . According to the BRRD, as a rule, financial instruments that are eligible for internal MREL must be held by the resolution entity , i.e. typically the parent undertaking 14 . The rationale of this rule is to ensure that t he loss-absorbing and recapitalisation capacity of a subsidiary is provided by its parent, i.e. by the resolution entity . That parent may hold internal MREL eligible instruments either directly or indirectly through other entities in the same resolution group (see illustration below) . The possibility for instruments to be also indirectly subscribed by the parent through intermediate entities was justified by the fact that the obligation to comply with i nternal MREL should not unnecessarily alter the existing funding channels of banking groups where the funding for acquiring such instruments is structured around the chains of ownership and distributed to the s ubsidiaries across the group through intermediate entities and not directly by ultimate parents (resolution entities). Illustration: Subscription of internal MREL eligible instruments (directly or indirectly) To operationalise the approach of indirect subscription of internal MREL eligible instruments within resolution groups , also referred to as the ‘daisy chain’ approach, and to ensure that it i s prudentially sound, the co-legislators mandated the E uropean B anking A uthority (EBA) to develop draft regulatory technical standards (RTS) and the Commission to adopt on that basis a delegated act to specify a methodology for such an indirect issuance of eligible instruments . 15 According to the BRRD mandate that methodology should: · permit a proper transfer of losses from subsidiaries to their ultimate parent (resolution entity) and a proper transfer of capital from that parent to subsidiaries; · ensure that the loss-absorbing capacity of the subsidiary is not also counted for the purposes of compliance with internal MREL by the intermediate parent ; and · ensure that its outcome is equivalent to that of a direct subscription by the ultimate parent (resolution entity) of eligible instruments issued by subsidiaries. Since early 2020, t he EBA has been working on that draft RTS on the basis of a deduction regime , in line with the mandate set out in the BRRD and the recommend ations in the relevant international standards . 16 The deduction regime developed by the EBA envisages that i nternal MREL eligible instruments issued by subsidiaries to the resolution entity via an intermediate parent would have to be fully deducted from the amount of the intermediate parent’s own i nternal MREL capacity. Such a deduction approach was considered as the most consistent with the conditions set out in the BRRD mandate and conducive to the operationalisation of the i nternal MREL framework . 17 Th e methodology developed by the EBA was subject to a public consultation. 18 The consultation feedback showed general support to the draft RTS, but highlighted several inconsistencies of the requirements for the delegation laid down in the BRRD with the existing prudential rules laid down in the CRR. Hence, in a letter to the European Commission dated 25 January 2021 19 , the EBA outlined that the interactions between the BRRD and the CRR would not allow the application of the prudential treatment needed for the mandate to be fulfilled as originally intended. More precisely, the EBA noted that the CRR did not allow for the deduction of internal MREL eligible instruments and , subsequently, for the application of an appropriate risk weight of zero percent in all the cases relevant for the mandate under the BRRD . Similar issues were identified in the area of the CRR leverage ratio requirement. T his situation would not only generate an inconsistency between the prudential and resolution framework but would also go against the requirement of the BRRD mandate to generate an outcome equivalent to that of a direct subscription , according to the EBA. It was concluded that the BRRD requirements could not be fulfilled without additional provisions that the RTS could not bear on its own but need ed rather to rely on the Level 1 text to specify. Apart from the need to operationalise the indirect subscription of instruments eligible for internal MREL, some other resolution related issues have been identified since the revised TLAC/MREL framework bec a me applicable in 2019. 20 Those issues mainly relate to the regulatory tr eatment of G-SII groups with a n MPE resolution strategy, including those MPE groups that have subsidiaries in third countries . For instance, the CRR currently does not specify whether the various adjustments to TLAC 21 for G-SIIs with an MPE resolution strategy also cover those subsidiaries of a G-SII that are located in a third country . In addition, the formula 22 for the calculation of the TLAC/MREL surplus of a subsidiary in the context of the general deduction regime applicable to G-SIIs with an MPE resolution strategy relies on the risk-based TLAC/MREL requirement of the subsidiary only, while it was omitted to also take into account the non-risked - based TLAC/MREL. Further issues include some contradictions within the Level 1 text, notably with regard to the interplay of provisions in the CRR and the BRRD 23 that are relevant to address potential inconsistencies between SPE and MPE requirements . Lastly, some issues have been observed with regard to the criteria 24 for instruments to be eligible for compliance with the internal TLAC requirement, which is of relevance when addressing the failure of EU subsidiaries of non-EU global systemically important institutions (G-SIIs). Some targeted changes to specific resolution related aspects of the CRR are necessary to address the above issues. In particular, the regulatory treatment of G-SII groups with an MPE resolution strategy, including of those MPE groups that have subsidiaries in third countries, needs to be better aligned with the treatment outlined in the TLAC standard. This would help to ensure that, in case of resolution, each resolution entity and group belonging to those G-SIIs can continue to perform critical functions without the risk of contagion. The amendments proposed would not alter the overall architecture of the framework but would ensure the proper application of TLAC and MREL. First, it is necessary to incorporate directly into the CRR a dedicated prudential treatment related to the indirect subscription of instruments eligible for internal MREL (daisy chain approach). The proposed modifications to the CRR would address the identified inconsistencies between the CRR and the BRRD, which were outlined in the EBA’s letter to the European Commission dated 25 January 2021. More precisely, the deduction regime, which was developed by the EBA in the context of the draft RTS under the BRRD, would be incorporated directly into the CRR. This would ensure a proper functioning of the indirect subscription of internal MREL within resolution groups with several layers of ownership, in line with the political agreement reached during the negotiations of Directive (EU) 2019/879. In addition, the revisions would ensure that the treatment of holdings of internal MREL eligible instruments remains aligned in both the resolution and the prudential framework, thus enabling the operationalisation of the deduction methodology developed by the EBA and, at the same time, avoiding the introduction of undue complexity in the treatment of those exposures. Second , the CRR provisions on the comparison between the sum of the actual TLAC requirement s of all the resolution groups within a G-SII group with a n MPE resolution strategy with the theoretical SPE requirement of that G-SII group need to be clarified . 25 The changes proposed are needed to clarify the extent to which resolution authorities can address the potential inconsistencies between SPE and MPE requirements. This would be achieved by aligning the CRR treatment with the one envisaged under the BRRD 26 and the TLAC standard 27 . Th ird , it is necessary to amend th e formula for the calculation of the TLAC/MREL surplus of a subsidiary in the context of the general deduction regime applicable to G-SIIs with an MPE resolution strategy 28 to ensure that that formula takes into account both the risk-based and the non- risk- based TLAC/MREL requirement s of the subsidiary, in line with the TLAC standard. This would avoid that the TLAC/MREL surplus of a given subsidiary is overestimated. Fourth, some CRR provisions applicable to G-SIIs with an MPE resolution strategy should be clarified to allow for the consideration of subsidiaries established outside of the Union. This would align the CRR with the corresponding TLAC principle agreed internationally, which is applicable with respect to subsidiaries established in all FSB jurisdictions. Fifth, some targeted clarifications in the context of the r equirement for own funds and eligible liabilities for i nstitutions that are material subsidiaries of non-EU G-SIIs ( ‘ internal TLAC ’ ) are needed to ensure that debt instruments issued by those institutions could meet all eligibility criteria for eligible liabilities instruments . The reason for this change is that currently the eligibility criteria for eligible liabilities instruments are based on the assumption that those instruments are issued by a resolution entity, and not by subsidiaries subject to an internal TLAC requirement. The gap would be addressed by clarifying that the same eligibility conditions applicable to resolution entities apply also to non-resolution entities, mutatis mutandis . This, in turn, would enable those institutions to me e t their internal TLAC requirement inter alia with eligible liabilities, as originally intended by the co-legislators . 29 These proposed amendments to the CRR can play an essential role in improving an institution’s resolvability . Given that the corresponding provisions are already applicable in the Union, the proposed modifications would need to be made in a timely manner . The need for an expedited adoption is further amplified by the fact that banking groups need clarity on the daisy chain mechanism to decide how best to preposition their internal MREL capacity in view of the general MREL compliance deadline that is set to 1 January 2024 , with binding intermediate targets needing to be complied with by 1 January 2022 . 
Revised version (Article 66 Power to enforce crisis management measures or crisis prevention measures by other Member States):
1. Member States shall ensure that, where a transfer of shares, other instruments of ownership, or assets, rights or liabilities includes assets that are located in a Member State other than the State of the resolution authority or rights or liabilities under the law of a Member State other than the State of the resolution authority, the transfer has effect in or under the law of that other Member State. 2. Member States shall provide the resolution authority that has made or intends to make the transfer with all reasonable assistance to ensure that the shares or other instruments of ownership or assets, rights or liabilities are transferred to the recipient in accordance with any applicable requirements of national law. 3. Member States shall ensure that shareholders, creditors and third parties that are affected by the transfer of shares, other instruments of ownership, assets, rights or liabilities referred to in paragraph 1 are not entitled to prevent, challenge, or set aside the transfer under any provision of law of the Member State where the assets are located or of the law governing the shares, other instruments of ownership, rights or liabilities. 4. Where a resolution authority of a Member State (Member State A) exercises the write-down or conversion powers, including in relation to capital instruments in accordance with Article 59, and the bail-inable liabilities or relevant capital instruments of the institution under resolution include the following: (a) instruments or liabilities that are governed by the law of a Member State other than the State of the resolution authority that exercised the write down or conversion powers (Member State B); (b) liabilities owed to creditors located in Member State B. Where a resolution authority of a Member State (Member State A) exercises the write-down or conversion powers, including in relation to capital instruments in accordance with Article 59, and the bail-inable liabilities or relevant capital instruments of the institution under resolution include the following: (a) instruments or liabilities that are governed by the law of a Member State other than the State of the resolution authority that exercised the write down or conversion powers (Member State B); (b) liabilities owed to creditors located in Member State B. Member State B shall ensure that the principal amount of those liabilities or instruments is reduced, or liabilities or instruments are converted, in accordance with the exercise of the write-down or conversion powers by the resolution authority of Member State A, 5. Member States shall ensure that creditors that are affected by the exercise of write-down or conversion powers referred to in paragraph 4 are not entitled to challenge the reduction of the principal amount of the instrument or liability or its conversion, as the case may be, under any provision of law of Member State B. Each Member State shall ensure that the following are determined in accordance with the law of the Member State of the resolution authority: (a) the right for shareholders, creditors and third parties to challenge, by way of appeal pursuant to Article 85, a transfer of shares, other instruments of ownership, assets, rights or liabilities referred to in paragraph 1 of this Article; the right for creditors to challenge, by way of appeal pursuant to Article 85, the reduction of the principal amount, or the conversion, of an instrument or liability covered by points (a) or (b) of paragraph 4 of this Article; (c) the safeguards for partial transfers, as referred to in Chapter VII, in relation to assets, rights or liabilities referred to in paragraph 1.
Article 67 Power in respect of assets, rights, liabilities, shares and other instruments of ownership located in third countries
1. Member States shall provide that, in cases in which resolution action involves action taken in respect of assets located in a third country or shares, other instruments of ownership, rights or liabilities governed by the law of a third country, resolution authorities may require that: (a) the administrator, receiver or other person exercising control of the institution under resolution and the recipient take all necessary steps to ensure that the transfer, write down, conversion or action becomes effective; (b) the administrator, receiver or other person exercising control of the institution under resolution hold the shares, other instruments of ownership, assets or rights or discharge the liabilities on behalf of the recipient until the transfer, write down, conversion or action becomes effective; (c) the reasonable expenses of the recipient properly incurred in carrying out any action required under points (a) and (b) of this paragraph are met in any of the ways referred to in Article 37(7). 2. Where the resolution authority assesses that, in spite of all the necessary steps taken by the administrator, receiver or other person in accordance with paragraph 1(a), it is highly unlikely that the transfer, conversion or action will become effective in relation to certain assets located in a third country or certain shares, other instruments of ownership, rights or liabilities under the law of a third country, the resolution authority shall not proceed with the transfer, write down, conversion or action. If it has already ordered the transfer, write down, conversion or action, that order shall be void in relation to the assets, shares, instruments of ownership, rights or liabilities concerned.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The establishment of a European Single Access Point (ESAP) by 2024 is a flagship action of the Capital Markets Union (CMU) Action Plan adopted by the European Commission in September 2020 1 . ESAP will contribute to the achievement of the CMU’s objectives by providing EU-wide access to information published by entities that is relevant to capital markets, financial services and sustainable finance, i.e. mainly information about their economic activities and products. ESAP will provide access to this information in an efficient and non-discriminatory manner. Information about entities’ activities and products is essential for decision-making by providers of capital. ESAP will contribute to further integrating the financial services and capital markets in the single market, to allocating capital more efficiently across the EU and promoting the development of smaller national capital markets and economies by giving them greater visibility. ESAP will also allow non-listed entities including Small and Medium-Sized enterprises (SMEs) to make available information on a voluntary basis. This will facilitate their access to capital. This proposal is part of a package comprised of: · a proposal for a Regulation establishing a European Single Access Point; · a proposal for a Directive amending certain Directives (this proposal); and · a proposal for a Regulation amending certain Regulations. Amendments to certain Directives are necessary to achieve the above objectives to contribute to the integration of the single market, particularly as regards the collection of information to be made available to ESAP. 
Revised version (Article 67 Power in respect of assets, rights, liabilities, shares and other instruments of ownership located in third countries):
2. Where the resolution authority assesses that, in spite of all the necessary steps taken by the administrator, receiver or other person in accordance with paragraph 1(a), it is highly unlikely that the transfer, conversion or action will become effective in relation to certain assets located in a third country or certain shares, other instruments of ownership, rights or liabilities under the law of a third country, the resolution authority shall not proceed with the transfer, write down, conversion or action. If it has already ordered the transfer, write down, conversion or action, that order shall be void in relation to the assets, shares, instruments of ownership, rights or liabilities concerned.
Article 68 Exclusion of certain contractual terms in early intervention and resolution
1. A crisis prevention measure or a crisis management measure taken in relation to an entity in accordance with this Directive, including the occurrence of any event directly linked to the application of such a measure, shall not, per se, under a contract entered into by the entity, be deemed to be an enforcement event within the meaning of Directive 2002/47/EC or as insolvency proceedings within the meaning of Directive 98/26/EC provided that the substantive obligations under the contract, including payment and delivery obligations and the provision of collateral, continue to be performed. In addition, a crisis prevention measure or crisis management measure shall not, per se, be deemed to be an enforcement event or insolvency proceedings under a contract entered into by: (a) a subsidiary, the obligations under which are guaranteed or otherwise supported by the parent undertaking or by any group entity; or (b) any entity of a group which includes cross-default provisions. 2. Where third country resolution proceedings are recognised pursuant to Article 94, or otherwise where a resolution authority so decides, such proceedings shall for the purposes of this Article constitute a crisis management measure. 3. Provided that the substantive obligations under the contract, including payment and delivery obligations, and provision of collateral, continue to be performed, a crisis prevention measure or a crisis management measure, including the occurrence of any event directly linked to the application of such a measure, shall not, per se, make it possible for anyone to: (a) exercise any termination, suspension, modification, netting or set-off rights, including in relation to a contract entered into by: (i) a subsidiary, the obligations under which are guaranteed or otherwise supported by a group entity; (ii) any group entity which includes cross-default provisions; (b) obtain possession, exercise control or enforce any security over any property of the institution or the entity referred to in point (b), (c) or (d) of Article 1(1) concerned or any group entity in relation to a contract which includes cross-default provisions; (c) affect any contractual rights of the institution or the entity referred to in point (b), (c) or (d) of Article 1(1) concerned or any group entity in relation to a contract which includes cross-default provisions. 4. This Article shall not affect the right of a person to take an action referred to in paragraph 3 where that right arises by virtue of an event other than the crisis prevention measure, the crisis management measure or the occurrence of any event directly linked to the application of such a measure. 5. A suspension or restriction under Article 69, 70 or 71 shall not constitute non-performance of a contractual obligation for the purposes of paragraphs 1 and 2 of this Article. 6. The provisions contained in this Article shall be considered to be overriding mandatory provisions within the meaning of Article 9 of Regulation (EC) No 593/2008 of the European Parliament and of the Council ( 34 ) .
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The proposed amendments to Directive 2014/59/EU (the Bank Recovery and Resolution Directive or BRRD) are part of a legislative package that includes also amendments to Regulation (EU) No 575/2013 (the Capital Requirements Regulation or CRR), to Directive 2013/36/EU (the Capital Requirements Directive or CRD) and to Regulation (EU) 806/2014 (the Single Resolution Mechanism Regulation or SRMR). Over the past years the EU implemented a substantial reform of the financial services regulatory framework to enhance the resilience of financial institutions in the EU, largely based on global standards agreed with the EU’s international partners. In particular, the reform package included Regulation (EU) No 575/2013 (the Capital Requirements Regulation or CRR) and Directive 2013/36/EU (the Capital Requirements Directive or CRD), on prudential requirements for and supervision of institutions, Directive 2014/59/EU (the Bank Recovery and Resolution Directive or BRRD), on recovery and resolution of institutions and Regulation (EU) No 806/2014 on the Single Resolution Mechanism (SRM). These measures were taken in response to the financial crisis that unfolded in 2007-2008.The absence of adequate crisis management and resolution frameworks forced governments around the world to rescue banks following the financial crisis. The subsequent impact on public finances as well as the undesirable incentive of socialising the costs of bank failure have underscored that a different approach is needed to manage bank crises and protect financial stability. Within the Union and in line with the significant steps that have been agreed and taken at international level, Directive 2014/59/EU (Bank Recovery and Resolution Directive (BRRD) 1 and Regulation (EU) No 806/2014 (Single Resolution Mechanism Regulation (SRMR) 2 have established a robust bank resolution framework to effectively manage bank crises and reduce their negative impact on financial stability and public finances. A cornerstone of the new resolution framework is the “bail-in” which consists of writing down debt or converting debt claims or other liabilities into equity according to a pre-defined hierarchy. The tool can be used to absorb losses of and internally recapitalise an institution that is failing or likely to fail, so that its viability is restored. Therefore, shareholders and other creditors will have to bear the burden of an institution's failure instead of taxpayers. In contrast to other jurisdictions, the Union bank recovery and resolution framework has already mandated resolution authorities to set for each credit institution or investment firm ('institution') a minimum requirement for own funds and eligible liabilities ('MREL'), which consist of highly bail-inable liabilities to be used to absorb losses and recapitalise institutions in case of failures. The delegated legislation concerning the practical implementation of this requirement has been adopted recently by the Commission 3 . At the global level, the Financial Stability Board (FSB) has published on 9 November 2015 the Total Loss-absorbing Capacity (TLAC) Term Sheet ('the TLAC standard') that was adopted a week later at the G20 summit in Turkey 4 . The TLAC standard requires global systemically important banks ('G-SIBs'), referred to as global systemically important institutions ('G-SIIs') in the Union legislation, to hold a sufficient amount of highly loss absorbing (bail-inable) liabilities to ensure smooth and fast absorption of losses and recapitalisation in resolution. In its Communication of 24 November 2015 5 , the Commission committed to bring forward a legislative proposal by the end of this year so that the TLAC standard can be implemented by the agreed deadline of 2019. In addition, the Commission committed to review the existing MREL rules with the view to provide full consistency with the internationally agreed TLAC standard by considering the findings of a report that the European Banking Authority (EBA) is required to provide to the Commission under Article 45(19) of the BRRD. An interim version of that report has already been published by the EBA on 19 July 2016 6 and the final report is expected to be submitted in the course of December 2016. While the general BRRD framework remains valid and sound, the main objective of this proposal is to implement the TLAC standard and to integrate the TLAC requirement into the general MREL rules by avoiding duplication by applying two parallel requirements. Although TLAC and MREL pursue the same regulatory objective, there are, nevertheless, some differences between them in the way they are constructed. The scope of application of MREL covers not only G-SIIs, but the entire Union banking industry. Differently from the TLAC standard, which contains a harmonised minimum level, the level of MREL is determined by resolution authorities on the basis of a case-by-case institution specific assessment. Finally, the minimum TLAC requirement should be met in principle with subordinated debt instruments, while for the purposes of MREL, subordination of debt instruments could be required by resolution authorities on a case-by-case basis to the extent it is needed to ensure that in a given case bailed in creditors are not treated worse than in a hypothetical insolvency scenario (which is a scenario that is counterfactual to resolution). In order to achieve a simple and transparent framework providing legal certainty and consistency, the Commission is proposing to integrate the TLAC standard into the existing MREL rules and ensure that both requirements are met with largely similar instruments. This approach requires introducing limited adjustments to the existing MREL rules ensuring technical consistency with the structure of any requirements for G-SIIs. In particular, further appropriate technical amendments to the existing rules on MREL are needed to align them with the TLAC standard as regards inter alia the denominators used for measuring loss-absorbing capacity, the interaction with capital buffer requirements, disclosure of risks to investors and their application in relation to different resolution strategies. While implementing the TLAC standard for G-SIIs, the Commission's approach will not materially affect the burden of institutions which are not G-SIIs to comply with the provisions on MREL. Operationally, the harmonised minimum level of the TLAC standard will be introduced in the Union through amendments to the Capital Requirements Regulation and Directive (CRR and CRD) 7 while the institution specific add-on for G-SIIs and the institution specific MREL for non-G-SIIs will be dealt with through targeted amendments to the BRRD and SRMR. This proposal covers specifically the targeted amendments to the BRRD related to the implementation of the TLAC standard in the Union. As such, this proposal is part of a wider review package of the Union financial legislation aiming at reducing risks in the financial sector (CRR/CRD review) and rendering it more resilient. In addition, based on views expressed by many respondents to the call for evidence to stakeholders published in September 2015 8 , this proposal amends the BRRD with the view to ease compliance costs of banks where their liabilities are governed by the laws of third countries. The current requirement has proven difficult to comply with in practice thus bringing limited added value to the resolvability of banks. It is thus necessary to introduce more flexibility in the contractual relationships of Union banks with third country entities by allowing resolution authorities to waive, subject to certain strict safeguards, the obligation to insert contractual clauses with the aim of recognising in third countries the effects of the bail-in of liabilities governed by the law of these third countries. In practice, the current rules are very difficult to enforce. Furthermore, at the invitation of the ECOFIN in its conclusions of 17 June 2016, this proposal amends the BRRD as regards the application by resolution authorities of moratorium tools in the course of resolution, i.e. powers to suspend the executions of bank commitments towards third parties. Harmonisation of such powers should contribute to the stabilisation by the relevant authorities of an institution in the period before, and possibly after, resolution. 
Revised version (Article 68 Exclusion of certain contractual terms in early intervention and resolution):
1. A crisis prevention measure or a crisis management measure taken in relation to an entity in accordance with this Directive, including the occurrence of any event directly linked to the application of such a measure, shall not, per se, under a contract entered into by the entity, be deemed to be an enforcement event within the meaning of Directive 2002/47/EC or as insolvency proceedings within the meaning of Directive 98/26/EC provided that the substantive obligations under the contract, including payment and delivery obligations and the provision of collateral, continue to be performed. In addition, a crisis prevention measure or crisis management measure shall not, per se, be deemed to be an enforcement event or insolvency proceedings under a contract entered into by: (a) a subsidiary, the obligations under which are guaranteed or otherwise supported by the parent undertaking or by any group entity; or (b) any entity of a group which includes cross-default provisions. 2. Where third country resolution proceedings are recognised pursuant to Article 94, or otherwise where a resolution authority so decides, such proceedings shall for the purposes of this Article constitute a crisis management measure. 3. Provided that the substantive obligations under the contract, including payment and delivery obligations, and provision of collateral, continue to be performed, a crisis prevention measure, a suspension of obligation under Article 33a or a crisis management measure, including the occurrence of any event directly linked to the application of such a measure, shall not, per se, make it possible for anyone to: (a) exercise any termination, suspension, modification, netting or set-off rights, including in relation to a contract entered into by: (i) a subsidiary, the obligations under which are guaranteed or otherwise supported by a group entity; (ii) any group entity which includes cross-default provisions; (b) obtain possession, exercise control or enforce any security over any property of the institution or the entity referred to in point (b), (c) or (d) of Article 1(1) concerned or any group entity in relation to a contract which includes cross-default provisions; (c) affect any contractual rights of the institution or the entity referred to in point (b), (c) or (d) of Article 1(1) concerned or any group entity in relation to a contract which includes cross-default provisions. 4. This Article shall not affect the right of a person to take an action referred to in paragraph 3 where that right arises by virtue of an event other than the crisis prevention measure, the crisis management measure or the occurrence of any event directly linked to the application of such a measure. 5. A suspension or restriction under Articles 33a, 69, or 70 shall not constitute non-performance of a contractual obligation for the purposes of paragraphs 1 and 3 of this Article and of Article 71(1). 6. The provisions contained in this Article shall be considered to be overriding mandatory provisions within the meaning of Article 9 of Regulation (EC) No 593/2008 of the European Parliament and of the Council ( 10 ).
Article 69 Power to suspend certain obligations
1. Member States shall ensure that resolution authorities have the power to suspend any payment or delivery obligations pursuant to any contract to which an institution under resolution is a party from the publication of a notice of the suspension in accordance with Article 83(4) until midnight in the Member State of the resolution authority of the institution under resolution at the end of the business day following that publication. 2. When a payment or delivery obligation would have been due during the suspension period the payment or delivery obligation shall be due immediately upon expiry of the suspension period. 3. If an institution under resolution’s payment or delivery obligations under a contract are suspended under paragraph 1, the payment or delivery obligations of the institution under resolution’s counterparties under that contract shall be suspended for the same period of time. 4. Any suspension under paragraph 1 shall not apply to: (a) eligible deposits; (b) payment and delivery obligations owed to systems or operators of systems designated for the purposes of Directive 98/26/EC, central counterparties, and central banks; (c) eligible claims for the purpose of Directive 97/9/EC. 5. When exercising a power under this Article, resolution authorities shall have regard to the impact the exercise of that power might have on the orderly functioning of financial markets.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The proposed amendments to Directive 2014/59/EU (the Bank Recovery and Resolution Directive or BRRD) are part of a legislative package that includes also amendments to Regulation (EU) No 575/2013 (the Capital Requirements Regulation or CRR), to Directive 2013/36/EU (the Capital Requirements Directive or CRD) and to Regulation (EU) 806/2014 (the Single Resolution Mechanism Regulation or SRMR). Over the past years the EU implemented a substantial reform of the financial services regulatory framework to enhance the resilience of financial institutions in the EU, largely based on global standards agreed with the EU’s international partners. In particular, the reform package included Regulation (EU) No 575/2013 (the Capital Requirements Regulation or CRR) and Directive 2013/36/EU (the Capital Requirements Directive or CRD), on prudential requirements for and supervision of institutions, Directive 2014/59/EU (the Bank Recovery and Resolution Directive or BRRD), on recovery and resolution of institutions and Regulation (EU) No 806/2014 on the Single Resolution Mechanism (SRM). These measures were taken in response to the financial crisis that unfolded in 2007-2008.The absence of adequate crisis management and resolution frameworks forced governments around the world to rescue banks following the financial crisis. The subsequent impact on public finances as well as the undesirable incentive of socialising the costs of bank failure have underscored that a different approach is needed to manage bank crises and protect financial stability. Within the Union and in line with the significant steps that have been agreed and taken at international level, Directive 2014/59/EU (Bank Recovery and Resolution Directive (BRRD) 1 and Regulation (EU) No 806/2014 (Single Resolution Mechanism Regulation (SRMR) 2 have established a robust bank resolution framework to effectively manage bank crises and reduce their negative impact on financial stability and public finances. A cornerstone of the new resolution framework is the “bail-in” which consists of writing down debt or converting debt claims or other liabilities into equity according to a pre-defined hierarchy. The tool can be used to absorb losses of and internally recapitalise an institution that is failing or likely to fail, so that its viability is restored. Therefore, shareholders and other creditors will have to bear the burden of an institution's failure instead of taxpayers. In contrast to other jurisdictions, the Union bank recovery and resolution framework has already mandated resolution authorities to set for each credit institution or investment firm ('institution') a minimum requirement for own funds and eligible liabilities ('MREL'), which consist of highly bail-inable liabilities to be used to absorb losses and recapitalise institutions in case of failures. The delegated legislation concerning the practical implementation of this requirement has been adopted recently by the Commission 3 . At the global level, the Financial Stability Board (FSB) has published on 9 November 2015 the Total Loss-absorbing Capacity (TLAC) Term Sheet ('the TLAC standard') that was adopted a week later at the G20 summit in Turkey 4 . The TLAC standard requires global systemically important banks ('G-SIBs'), referred to as global systemically important institutions ('G-SIIs') in the Union legislation, to hold a sufficient amount of highly loss absorbing (bail-inable) liabilities to ensure smooth and fast absorption of losses and recapitalisation in resolution. In its Communication of 24 November 2015 5 , the Commission committed to bring forward a legislative proposal by the end of this year so that the TLAC standard can be implemented by the agreed deadline of 2019. In addition, the Commission committed to review the existing MREL rules with the view to provide full consistency with the internationally agreed TLAC standard by considering the findings of a report that the European Banking Authority (EBA) is required to provide to the Commission under Article 45(19) of the BRRD. An interim version of that report has already been published by the EBA on 19 July 2016 6 and the final report is expected to be submitted in the course of December 2016. While the general BRRD framework remains valid and sound, the main objective of this proposal is to implement the TLAC standard and to integrate the TLAC requirement into the general MREL rules by avoiding duplication by applying two parallel requirements. Although TLAC and MREL pursue the same regulatory objective, there are, nevertheless, some differences between them in the way they are constructed. The scope of application of MREL covers not only G-SIIs, but the entire Union banking industry. Differently from the TLAC standard, which contains a harmonised minimum level, the level of MREL is determined by resolution authorities on the basis of a case-by-case institution specific assessment. Finally, the minimum TLAC requirement should be met in principle with subordinated debt instruments, while for the purposes of MREL, subordination of debt instruments could be required by resolution authorities on a case-by-case basis to the extent it is needed to ensure that in a given case bailed in creditors are not treated worse than in a hypothetical insolvency scenario (which is a scenario that is counterfactual to resolution). In order to achieve a simple and transparent framework providing legal certainty and consistency, the Commission is proposing to integrate the TLAC standard into the existing MREL rules and ensure that both requirements are met with largely similar instruments. This approach requires introducing limited adjustments to the existing MREL rules ensuring technical consistency with the structure of any requirements for G-SIIs. In particular, further appropriate technical amendments to the existing rules on MREL are needed to align them with the TLAC standard as regards inter alia the denominators used for measuring loss-absorbing capacity, the interaction with capital buffer requirements, disclosure of risks to investors and their application in relation to different resolution strategies. While implementing the TLAC standard for G-SIIs, the Commission's approach will not materially affect the burden of institutions which are not G-SIIs to comply with the provisions on MREL. Operationally, the harmonised minimum level of the TLAC standard will be introduced in the Union through amendments to the Capital Requirements Regulation and Directive (CRR and CRD) 7 while the institution specific add-on for G-SIIs and the institution specific MREL for non-G-SIIs will be dealt with through targeted amendments to the BRRD and SRMR. This proposal covers specifically the targeted amendments to the BRRD related to the implementation of the TLAC standard in the Union. As such, this proposal is part of a wider review package of the Union financial legislation aiming at reducing risks in the financial sector (CRR/CRD review) and rendering it more resilient. In addition, based on views expressed by many respondents to the call for evidence to stakeholders published in September 2015 8 , this proposal amends the BRRD with the view to ease compliance costs of banks where their liabilities are governed by the laws of third countries. The current requirement has proven difficult to comply with in practice thus bringing limited added value to the resolvability of banks. It is thus necessary to introduce more flexibility in the contractual relationships of Union banks with third country entities by allowing resolution authorities to waive, subject to certain strict safeguards, the obligation to insert contractual clauses with the aim of recognising in third countries the effects of the bail-in of liabilities governed by the law of these third countries. In practice, the current rules are very difficult to enforce. Furthermore, at the invitation of the ECOFIN in its conclusions of 17 June 2016, this proposal amends the BRRD as regards the application by resolution authorities of moratorium tools in the course of resolution, i.e. powers to suspend the executions of bank commitments towards third parties. Harmonisation of such powers should contribute to the stabilisation by the relevant authorities of an institution in the period before, and possibly after, resolution. 
Revised version (Article 69 Power to suspend certain obligations):
1. Member States shall ensure that resolution authorities have the power to suspend any payment or delivery obligations pursuant to any contract to which an institution under resolution is a party from the publication of a notice of the suspension in accordance with Article 83(4) until midnight in the Member State of the resolution authority of the institution under resolution at the end of the business day following that publication. 2. When a payment or delivery obligation would have been due during the suspension period the payment or delivery obligation shall be due immediately upon expiry of the suspension period. 3. If an institution under resolution’s payment or delivery obligations under a contract are suspended under paragraph 1, the payment or delivery obligations of the institution under resolution’s counterparties under that contract shall be suspended for the same period of time. 4. Any suspension under paragraph 1 shall not apply to payment and delivery obligations owed to the following: (a) systems and operators of systems designated in accordance with Directive 98/26/EC; (b) CCPs authorised in the Union pursuant to Article 14 of Regulation (EU) No 648/2012 and third-country CCPs recognised by ESMA pursuant to Article 25 of that Regulation; (c) central banks. 5. When exercising a power under this Article, resolution authorities shall have regard to the impact the exercise of that power might have on the orderly functioning of financial markets. The resolution authorities shall set the scope of that power having regard to the circumstances of each case. In particular, resolution authorities shall carefully assess the appropriateness of extending the suspension to eligible deposits as defined in point (4) of Article 2(1) of Directive 2014/49/EU, especially to covered deposits held by natural persons and micro, small and medium-sized enterprises. Member States may provide that, where the power to suspend payment or delivery obligations is exercised in respect of eligible deposits, resolution authorities ensure that depositors have access to an appropriate daily amount from those deposits.
Article 70 Power to restrict the enforcement of security interests
1. Member States shall ensure that resolution authorities have the power to restrict secured creditors of an institution under resolution from enforcing security interests in relation to any assets of that institution under resolution from the publication of a notice of the restriction in accordance with Article 83(4) until midnight in the Member State of the resolution authority of the institution under resolution at the end of the business day following that publication. 2. Resolution authorities shall not exercise the power referred to in paragraph 1 in relation to any security interest of systems or operators of systems designated for the purposes of Directive 98/26/EC, central counterparties, and central banks over assets pledged or provided by way of margin or collateral by the institution under resolution. 3. Where Article 80 applies, resolution authorities shall ensure that any restrictions imposed pursuant to the power referred to in paragraph 1 of this Article are consistent for all group entities in relation to which a resolution action is taken. 4. When exercising a power under this Article, resolution authorities shall have regard to the impact the exercise of that power might have on the orderly functioning of financial markets.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The proposed amendments to Directive 2014/59/EU (the Bank Recovery and Resolution Directive or BRRD) are part of a legislative package that includes also amendments to Regulation (EU) No 575/2013 (the Capital Requirements Regulation or CRR), to Directive 2013/36/EU (the Capital Requirements Directive or CRD) and to Regulation (EU) 806/2014 (the Single Resolution Mechanism Regulation or SRMR). Over the past years the EU implemented a substantial reform of the financial services regulatory framework to enhance the resilience of financial institutions in the EU, largely based on global standards agreed with the EU’s international partners. In particular, the reform package included Regulation (EU) No 575/2013 (the Capital Requirements Regulation or CRR) and Directive 2013/36/EU (the Capital Requirements Directive or CRD), on prudential requirements for and supervision of institutions, Directive 2014/59/EU (the Bank Recovery and Resolution Directive or BRRD), on recovery and resolution of institutions and Regulation (EU) No 806/2014 on the Single Resolution Mechanism (SRM). These measures were taken in response to the financial crisis that unfolded in 2007-2008.The absence of adequate crisis management and resolution frameworks forced governments around the world to rescue banks following the financial crisis. The subsequent impact on public finances as well as the undesirable incentive of socialising the costs of bank failure have underscored that a different approach is needed to manage bank crises and protect financial stability. Within the Union and in line with the significant steps that have been agreed and taken at international level, Directive 2014/59/EU (Bank Recovery and Resolution Directive (BRRD) 1 and Regulation (EU) No 806/2014 (Single Resolution Mechanism Regulation (SRMR) 2 have established a robust bank resolution framework to effectively manage bank crises and reduce their negative impact on financial stability and public finances. A cornerstone of the new resolution framework is the “bail-in” which consists of writing down debt or converting debt claims or other liabilities into equity according to a pre-defined hierarchy. The tool can be used to absorb losses of and internally recapitalise an institution that is failing or likely to fail, so that its viability is restored. Therefore, shareholders and other creditors will have to bear the burden of an institution's failure instead of taxpayers. In contrast to other jurisdictions, the Union bank recovery and resolution framework has already mandated resolution authorities to set for each credit institution or investment firm ('institution') a minimum requirement for own funds and eligible liabilities ('MREL'), which consist of highly bail-inable liabilities to be used to absorb losses and recapitalise institutions in case of failures. The delegated legislation concerning the practical implementation of this requirement has been adopted recently by the Commission 3 . At the global level, the Financial Stability Board (FSB) has published on 9 November 2015 the Total Loss-absorbing Capacity (TLAC) Term Sheet ('the TLAC standard') that was adopted a week later at the G20 summit in Turkey 4 . The TLAC standard requires global systemically important banks ('G-SIBs'), referred to as global systemically important institutions ('G-SIIs') in the Union legislation, to hold a sufficient amount of highly loss absorbing (bail-inable) liabilities to ensure smooth and fast absorption of losses and recapitalisation in resolution. In its Communication of 24 November 2015 5 , the Commission committed to bring forward a legislative proposal by the end of this year so that the TLAC standard can be implemented by the agreed deadline of 2019. In addition, the Commission committed to review the existing MREL rules with the view to provide full consistency with the internationally agreed TLAC standard by considering the findings of a report that the European Banking Authority (EBA) is required to provide to the Commission under Article 45(19) of the BRRD. An interim version of that report has already been published by the EBA on 19 July 2016 6 and the final report is expected to be submitted in the course of December 2016. While the general BRRD framework remains valid and sound, the main objective of this proposal is to implement the TLAC standard and to integrate the TLAC requirement into the general MREL rules by avoiding duplication by applying two parallel requirements. Although TLAC and MREL pursue the same regulatory objective, there are, nevertheless, some differences between them in the way they are constructed. The scope of application of MREL covers not only G-SIIs, but the entire Union banking industry. Differently from the TLAC standard, which contains a harmonised minimum level, the level of MREL is determined by resolution authorities on the basis of a case-by-case institution specific assessment. Finally, the minimum TLAC requirement should be met in principle with subordinated debt instruments, while for the purposes of MREL, subordination of debt instruments could be required by resolution authorities on a case-by-case basis to the extent it is needed to ensure that in a given case bailed in creditors are not treated worse than in a hypothetical insolvency scenario (which is a scenario that is counterfactual to resolution). In order to achieve a simple and transparent framework providing legal certainty and consistency, the Commission is proposing to integrate the TLAC standard into the existing MREL rules and ensure that both requirements are met with largely similar instruments. This approach requires introducing limited adjustments to the existing MREL rules ensuring technical consistency with the structure of any requirements for G-SIIs. In particular, further appropriate technical amendments to the existing rules on MREL are needed to align them with the TLAC standard as regards inter alia the denominators used for measuring loss-absorbing capacity, the interaction with capital buffer requirements, disclosure of risks to investors and their application in relation to different resolution strategies. While implementing the TLAC standard for G-SIIs, the Commission's approach will not materially affect the burden of institutions which are not G-SIIs to comply with the provisions on MREL. Operationally, the harmonised minimum level of the TLAC standard will be introduced in the Union through amendments to the Capital Requirements Regulation and Directive (CRR and CRD) 7 while the institution specific add-on for G-SIIs and the institution specific MREL for non-G-SIIs will be dealt with through targeted amendments to the BRRD and SRMR. This proposal covers specifically the targeted amendments to the BRRD related to the implementation of the TLAC standard in the Union. As such, this proposal is part of a wider review package of the Union financial legislation aiming at reducing risks in the financial sector (CRR/CRD review) and rendering it more resilient. In addition, based on views expressed by many respondents to the call for evidence to stakeholders published in September 2015 8 , this proposal amends the BRRD with the view to ease compliance costs of banks where their liabilities are governed by the laws of third countries. The current requirement has proven difficult to comply with in practice thus bringing limited added value to the resolvability of banks. It is thus necessary to introduce more flexibility in the contractual relationships of Union banks with third country entities by allowing resolution authorities to waive, subject to certain strict safeguards, the obligation to insert contractual clauses with the aim of recognising in third countries the effects of the bail-in of liabilities governed by the law of these third countries. In practice, the current rules are very difficult to enforce. Furthermore, at the invitation of the ECOFIN in its conclusions of 17 June 2016, this proposal amends the BRRD as regards the application by resolution authorities of moratorium tools in the course of resolution, i.e. powers to suspend the executions of bank commitments towards third parties. Harmonisation of such powers should contribute to the stabilisation by the relevant authorities of an institution in the period before, and possibly after, resolution. 
Revised version (Article 70 Power to restrict the enforcement of security interests):
1. Member States shall ensure that resolution authorities have the power to restrict secured creditors of an institution under resolution from enforcing security interests in relation to any assets of that institution under resolution from the publication of a notice of the restriction in accordance with Article 83(4) until midnight in the Member State of the resolution authority of the institution under resolution at the end of the business day following that publication. 2. Resolution authorities shall not exercise the power referred to in paragraph 1 of this Article in relation to any of the following: (a) security interest of systems or operators of systems designated for the purposes of Directive 98/26/EC; (b) central counterparties authorised in the Union pursuant to Article 14 of Regulation (EU) No 648/2012 and third-country central counterparties recognised by ESMA pursuant to Article 25 of Regulation (EU) No 648/2012; and (c) central banks, over assets pledged or provided by way of margin or collateral by the institution under resolution. 3. Where Article 80 applies, resolution authorities shall ensure that any restrictions imposed pursuant to the power referred to in paragraph 1 of this Article are consistent for all group entities in relation to which a resolution action is taken. 4. When exercising a power under this Article, resolution authorities shall have regard to the impact the exercise of that power might have on the orderly functioning of financial markets.
Article 71 Power to temporarily suspend termination rights
1. Member States shall ensure that resolution authorities have the power to suspend the termination rights of any party to a contract with an institution under resolution from the publication of the notice pursuant to Article 83(4) until midnight in the Member State of the resolution authority of the institution under resolution at the end of the business day following that publication, provided that the payment and delivery obligations and the provision of collateral continue to be performed. 2. Member States shall ensure that resolution authorities have the power to suspend the termination rights of any party to a contract with a subsidiary of an institution under resolution where: (a) the obligations under that contract are guaranteed or are otherwise supported by the institution under resolution; (b) the termination rights under that contract are based solely on the insolvency or financial condition of the institution under resolution; and (c) in the case of a transfer power that has been or may be exercised in relation to the institution under resolution, either: (i) all the assets and liabilities of the subsidiary relating to that contract have been or may be transferred to and assumed by the recipient; or (ii) the resolution authority provides in any other way adequate protection for such obligations. The suspension shall take effect from the publication of the notice pursuant to Article 83(4) until midnight in the Member State where the subsidiary of the institution under resolution is established on the business day following that publication. 3. Any suspension under paragraph 1 or 2 shall not apply to systems or operators of systems designated for the purposes of Directive 98/26/EC, central counterparties, or central banks. 4. A person may exercise a termination right under a contract before the end of the period referred to in paragraph 1 or 2 if that person receives notice from the resolution authority that the rights and liabilities covered by the contract shall not be: (a) transferred to another entity; or (b) subject to write down or conversion on the application of the bail-in tool in accordance with point (a) of Article 43(2). 5. Where a resolution authority exercises the power specified in paragraph 1 or 2 of this Article to suspend termination rights, and where no notice has been given pursuant to paragraph 4 of this Article, those rights may be exercised on the expiry of the period of suspension, subject to Article 68, as follows: (a) if the rights and liabilities covered by the contract have been transferred to another entity, a counterparty may exercise termination rights in accordance with the terms of that contract only on the occurrence of any continuing or subsequent enforcement event by the recipient entity; (b) if the rights and liabilities covered by the contract remain with the institution under resolution and the resolution authority has not applied the bail-in tool in accordance with Article 43(2)(a)to that contract, a counterparty may exercise termination rights in accordance with the terms of that contract on the expiry of a suspension under paragraph 1. 6. When exercising a power under this Article, resolution authorities shall have regard to the impact the exercise of that power might have on the orderly functioning of the financial markets. 7. Competent authorities or resolution authorities may require an institution or an entity referred to in point (b), (c) or (d) of Article 1(1) to maintain detailed records of financial contracts. Upon the request of a competent authority or a resolution authority, a trade repository shall make the necessary information available to competent authorities or resolution authorities to enable them to fulfil their respective responsibilities and mandates in accordance with Article 81 of Regulation (EU) No 648/2012. 8. EBA shall develop draft regulatory technical standards specifying the following elements for the purposes of paragraph 7: (a) a minimum set of the information on financial contracts that should be contained in the detailed records; and (b) the circumstances in which the requirement should be imposed. EBA shall submit those draft regulatory technical standards to the Commission by 3 July 2015. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The proposed amendments to Directive 2014/59/EU (the Bank Recovery and Resolution Directive or BRRD) are part of a legislative package that includes also amendments to Regulation (EU) No 575/2013 (the Capital Requirements Regulation or CRR), to Directive 2013/36/EU (the Capital Requirements Directive or CRD) and to Regulation (EU) 806/2014 (the Single Resolution Mechanism Regulation or SRMR). Over the past years the EU implemented a substantial reform of the financial services regulatory framework to enhance the resilience of financial institutions in the EU, largely based on global standards agreed with the EU’s international partners. In particular, the reform package included Regulation (EU) No 575/2013 (the Capital Requirements Regulation or CRR) and Directive 2013/36/EU (the Capital Requirements Directive or CRD), on prudential requirements for and supervision of institutions, Directive 2014/59/EU (the Bank Recovery and Resolution Directive or BRRD), on recovery and resolution of institutions and Regulation (EU) No 806/2014 on the Single Resolution Mechanism (SRM). These measures were taken in response to the financial crisis that unfolded in 2007-2008.The absence of adequate crisis management and resolution frameworks forced governments around the world to rescue banks following the financial crisis. The subsequent impact on public finances as well as the undesirable incentive of socialising the costs of bank failure have underscored that a different approach is needed to manage bank crises and protect financial stability. Within the Union and in line with the significant steps that have been agreed and taken at international level, Directive 2014/59/EU (Bank Recovery and Resolution Directive (BRRD) 1 and Regulation (EU) No 806/2014 (Single Resolution Mechanism Regulation (SRMR) 2 have established a robust bank resolution framework to effectively manage bank crises and reduce their negative impact on financial stability and public finances. A cornerstone of the new resolution framework is the “bail-in” which consists of writing down debt or converting debt claims or other liabilities into equity according to a pre-defined hierarchy. The tool can be used to absorb losses of and internally recapitalise an institution that is failing or likely to fail, so that its viability is restored. Therefore, shareholders and other creditors will have to bear the burden of an institution's failure instead of taxpayers. In contrast to other jurisdictions, the Union bank recovery and resolution framework has already mandated resolution authorities to set for each credit institution or investment firm ('institution') a minimum requirement for own funds and eligible liabilities ('MREL'), which consist of highly bail-inable liabilities to be used to absorb losses and recapitalise institutions in case of failures. The delegated legislation concerning the practical implementation of this requirement has been adopted recently by the Commission 3 . At the global level, the Financial Stability Board (FSB) has published on 9 November 2015 the Total Loss-absorbing Capacity (TLAC) Term Sheet ('the TLAC standard') that was adopted a week later at the G20 summit in Turkey 4 . The TLAC standard requires global systemically important banks ('G-SIBs'), referred to as global systemically important institutions ('G-SIIs') in the Union legislation, to hold a sufficient amount of highly loss absorbing (bail-inable) liabilities to ensure smooth and fast absorption of losses and recapitalisation in resolution. In its Communication of 24 November 2015 5 , the Commission committed to bring forward a legislative proposal by the end of this year so that the TLAC standard can be implemented by the agreed deadline of 2019. In addition, the Commission committed to review the existing MREL rules with the view to provide full consistency with the internationally agreed TLAC standard by considering the findings of a report that the European Banking Authority (EBA) is required to provide to the Commission under Article 45(19) of the BRRD. An interim version of that report has already been published by the EBA on 19 July 2016 6 and the final report is expected to be submitted in the course of December 2016. While the general BRRD framework remains valid and sound, the main objective of this proposal is to implement the TLAC standard and to integrate the TLAC requirement into the general MREL rules by avoiding duplication by applying two parallel requirements. Although TLAC and MREL pursue the same regulatory objective, there are, nevertheless, some differences between them in the way they are constructed. The scope of application of MREL covers not only G-SIIs, but the entire Union banking industry. Differently from the TLAC standard, which contains a harmonised minimum level, the level of MREL is determined by resolution authorities on the basis of a case-by-case institution specific assessment. Finally, the minimum TLAC requirement should be met in principle with subordinated debt instruments, while for the purposes of MREL, subordination of debt instruments could be required by resolution authorities on a case-by-case basis to the extent it is needed to ensure that in a given case bailed in creditors are not treated worse than in a hypothetical insolvency scenario (which is a scenario that is counterfactual to resolution). In order to achieve a simple and transparent framework providing legal certainty and consistency, the Commission is proposing to integrate the TLAC standard into the existing MREL rules and ensure that both requirements are met with largely similar instruments. This approach requires introducing limited adjustments to the existing MREL rules ensuring technical consistency with the structure of any requirements for G-SIIs. In particular, further appropriate technical amendments to the existing rules on MREL are needed to align them with the TLAC standard as regards inter alia the denominators used for measuring loss-absorbing capacity, the interaction with capital buffer requirements, disclosure of risks to investors and their application in relation to different resolution strategies. While implementing the TLAC standard for G-SIIs, the Commission's approach will not materially affect the burden of institutions which are not G-SIIs to comply with the provisions on MREL. Operationally, the harmonised minimum level of the TLAC standard will be introduced in the Union through amendments to the Capital Requirements Regulation and Directive (CRR and CRD) 7 while the institution specific add-on for G-SIIs and the institution specific MREL for non-G-SIIs will be dealt with through targeted amendments to the BRRD and SRMR. This proposal covers specifically the targeted amendments to the BRRD related to the implementation of the TLAC standard in the Union. As such, this proposal is part of a wider review package of the Union financial legislation aiming at reducing risks in the financial sector (CRR/CRD review) and rendering it more resilient. In addition, based on views expressed by many respondents to the call for evidence to stakeholders published in September 2015 8 , this proposal amends the BRRD with the view to ease compliance costs of banks where their liabilities are governed by the laws of third countries. The current requirement has proven difficult to comply with in practice thus bringing limited added value to the resolvability of banks. It is thus necessary to introduce more flexibility in the contractual relationships of Union banks with third country entities by allowing resolution authorities to waive, subject to certain strict safeguards, the obligation to insert contractual clauses with the aim of recognising in third countries the effects of the bail-in of liabilities governed by the law of these third countries. In practice, the current rules are very difficult to enforce. Furthermore, at the invitation of the ECOFIN in its conclusions of 17 June 2016, this proposal amends the BRRD as regards the application by resolution authorities of moratorium tools in the course of resolution, i.e. powers to suspend the executions of bank commitments towards third parties. Harmonisation of such powers should contribute to the stabilisation by the relevant authorities of an institution in the period before, and possibly after, resolution. 
Revised version (Article 71 Power to temporarily suspend termination rights):
1. Member States shall ensure that resolution authorities have the power to suspend the termination rights of any party to a contract with an institution under resolution from the publication of the notice pursuant to Article 83(4) until midnight in the Member State of the resolution authority of the institution under resolution at the end of the business day following that publication, provided that the payment and delivery obligations and the provision of collateral continue to be performed. 2. Member States shall ensure that resolution authorities have the power to suspend the termination rights of any party to a contract with a subsidiary of an institution under resolution where: (a) the obligations under that contract are guaranteed or are otherwise supported by the institution under resolution; (b) the termination rights under that contract are based solely on the insolvency or financial condition of the institution under resolution; and (c) in the case of a transfer power that has been or may be exercised in relation to the institution under resolution, either: (i) all the assets and liabilities of the subsidiary relating to that contract have been or may be transferred to and assumed by the recipient; or (ii) the resolution authority provides in any other way adequate protection for such obligations. The suspension shall take effect from the publication of the notice pursuant to Article 83(4) until midnight in the Member State where the subsidiary of the institution under resolution is established on the business day following that publication. 3. Any suspension under paragraph 1 or 2 shall not apply to: (a) systems or operators of systems designated for the purposes of Directive 98/26/EC; (b) central counterparties authorised in the Union pursuant to Article 14 of Regulation (EU) No 648/2012 and third-country central counterparties recognised by ESMA pursuant to Article 25 of Regulation (EU) No 648/2012; or (c) central banks. 4. A person may exercise a termination right under a contract before the end of the period referred to in paragraph 1 or 2 if that person receives notice from the resolution authority that the rights and liabilities covered by the contract shall not be: (a) transferred to another entity; or (b) subject to write down or conversion on the application of the bail-in tool in accordance with point (a) of Article 43(2). 5. Where a resolution authority exercises the power specified in paragraph 1 or 2 of this Article to suspend termination rights, and where no notice has been given pursuant to paragraph 4 of this Article, those rights may be exercised on the expiry of the period of suspension, subject to Article 68, as follows: (a) if the rights and liabilities covered by the contract have been transferred to another entity, a counterparty may exercise termination rights in accordance with the terms of that contract only on the occurrence of any continuing or subsequent enforcement event by the recipient entity; (b) if the rights and liabilities covered by the contract remain with the institution under resolution and the resolution authority has not applied the bail-in tool in accordance with Article 43(2)(a)to that contract, a counterparty may exercise termination rights in accordance with the terms of that contract on the expiry of a suspension under paragraph 1. 6. When exercising a power under this Article, resolution authorities shall have regard to the impact the exercise of that power might have on the orderly functioning of the financial markets. 7. Competent authorities or resolution authorities may require an institution or an entity referred to in point (b), (c) or (d) of Article 1(1) to maintain detailed records of financial contracts. Upon the request of a competent authority or a resolution authority, a trade repository shall make the necessary information available to competent authorities or resolution authorities to enable them to fulfil their respective responsibilities and mandates in accordance with Article 81 of Regulation (EU) No 648/2012. 8. EBA shall develop draft regulatory technical standards specifying the following elements for the purposes of paragraph 7: (a) a minimum set of the information on financial contracts that should be contained in the detailed records; and (b) the circumstances in which the requirement should be imposed. EBA shall submit those draft regulatory technical standards to the Commission by 3 July 2015. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 72 Exercise of the resolution powers
1. Member States shall ensure that, in order to take a resolution action, resolution authorities are able to exercise control over the institution under resolution, so as to: (a) operate and conduct the activities and services of the institution under resolution with all the powers of its shareholders and management body; and (b) manage and dispose of the assets and property of the institution under resolution. The control referred to in the first subparagraph may be exercised directly by the resolution authority or indirectly by a person or persons appointed by the resolution authority. Member States shall ensure that voting rights conferred by shares or other instruments of ownership of the institution under resolution cannot be exercised during the period of resolution. 2. Subject to Article 85(1), Member States shall ensure that resolution authorities are able to take a resolution action through executive order in accordance with national administrative competences and procedures, without exercising control over the institution under resolution. 3. Resolution authorities shall decide in each particular case whether it is appropriate to carry out the resolution action through the means specified in paragraph 1 or in paragraph 2, having regard to the resolution objectives and the general principles governing resolution, the specific circumstances of the institution under resolution in question and the need to facilitate the effective resolution of cross-border groups. 4. Resolution authorities shall not be deemed to be shadow directors or de facto directors under national law.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal Regulation (EU) No 575/2013 of the European Parliament and of the Council 1 (the Capital Requirements Regulation or CRR) establishes together with Directive 2013/36/EU of the European Parliament and of the Council 2 (the Capital Requirements Directive or CRD) the prudential regulatory framework for credit institutions operating in the Union. The CRR and the CRD were adopted in the aftermath of the 2008-2009 financial crisis to enhance the resilience of institutions operating in the EU financial sector, largely based on global standards agreed with the EU’s international partners, in particular the Basel Committee on Banking Supervision (BCBS). The CRR has been subsequently amended to tackle remaining weaknesses in the regulatory framework and to implement some outstanding elements of the global financial services reform that are essential to ensure institutions' resilience. A major revision was brought by t he ‘Risk Reduction Measures Package’ , which was adopted by the European Parliament and the Council on 20 May 2019 and published in the Official Journal on 7 June 2019. Th at package include d inter alia changes to the Union bank resolution framework through Directive (EU) 2019/879 of the European Parliament an d of the Council 3 , amending Directive 2014/59/EU of the European P arliament and of the Council 4 (Bank Recovery and Resolution Directive or BRRD) , Regulation (EU) 2019/87 7 of the European Parliament and of the Council 5 , amending Regulation (EU) No 806/2014 of the European Parliament and of the Council 6 (Single Resolution Mechanism Regulation or SRMR) and Regulation (EU) 2019/87 6 of the European Parliament and of the Council 7 , amending the CRR . This reform implement ed in the Union the international Total Loss-Absorbing Capacity (TLAC) standard for global systemically important institutions (G-SIIs) adopted by the Financial Stability Board (FSB) in November 2015 8 and enhanced the application of the minimum requirement for own funds and eligible liabilities (MREL) for all institutions established in the Union. The TLAC standard requires G-SIIs to hold a sufficient amount of highly loss-absorbing (bail-inable) liabilities to ensure smooth and fast absorption of losses and recapitalisation in the event of resolution. The implementation of the TLAC standard in Union law, namely through amendments to the CRR, took into account the existing institution-specific minimum requirement for own funds and eligible liabilities (MREL), set out in the BRRD. 9 Moreover, both sets of rules are closely interconnected, particularly through cross-references from the BRRD and the SRMR to the CRR. For instance, the BRRD and the SRMR generally rel y on the total exposure measure and the total risk exposure amount as calculated under the CRR for calculating and expressing MREL . The refore, the two requirements should be understood as complementary elements of a common framework. 10 Th at revised framework should better ensure that ins t itutions’ loss absorption and recapitalisation occur s through private means once those institutions get into financial difficulties and are subsequently placed in resolution. TLAC and MREL are thus essential to effectively manage bank crises and reduce their negative impact on financial stability and public finances. TLAC and the revised rules on MREL became applicable in the Union on 2 7 June 2019 and 28 December 2020, respectively. In line with international standards , Union law recognises both the Single Point of Entry (SPE) resolution strategy and the Multiple Point of Entry (MPE) resolution strategy. 11 Under the SPE resolution strategy, only one group entity , typically the parent undertaking, is resolved (‘resolution entity’) , whereas o ther group entities, usually operating subsidiaries, are not subject to resolution action . Instead, the losses of those subsidiaries are transferred to the resolution entity and capital is down streamed to the subsidiary . This ensures that the subsidiaries can continue to operate smoothly even after they have reach ed the point of non-viability . Each resolution entity forms a ‘resolution group’ t ogether with the subsidiaries that belong to it and that are not themselves resolution entities . Under the MPE resolution strategy, more than one entity of the banking group may be resolved . C onsequently , more than one resolution entity and thus more than one resolution group may exist within the banking group . The underlying principle of the MPE resolution approach is to enable the resolution of a given resolution group in a feasible and credible way without undermining the resolvability of other resolution entities and resolution groups in the same consolidated banking group. The revised bank resolution framework provides that MREL for resolution entities should be set at the consolidated level of a resolution group ( ‘ external MREL ’ ). 12 In addition, that framework envisages how the loss absorption and recapitalisation capacity should be allocated within resolution groups ( ‘ internal MREL ’ ) 13 . According to the BRRD, as a rule, financial instruments that are eligible for internal MREL must be held by the resolution entity , i.e. typically the parent undertaking 14 . The rationale of this rule is to ensure that t he loss-absorbing and recapitalisation capacity of a subsidiary is provided by its parent, i.e. by the resolution entity . That parent may hold internal MREL eligible instruments either directly or indirectly through other entities in the same resolution group (see illustration below) . The possibility for instruments to be also indirectly subscribed by the parent through intermediate entities was justified by the fact that the obligation to comply with i nternal MREL should not unnecessarily alter the existing funding channels of banking groups where the funding for acquiring such instruments is structured around the chains of ownership and distributed to the s ubsidiaries across the group through intermediate entities and not directly by ultimate parents (resolution entities). Illustration: Subscription of internal MREL eligible instruments (directly or indirectly) To operationalise the approach of indirect subscription of internal MREL eligible instruments within resolution groups , also referred to as the ‘daisy chain’ approach, and to ensure that it i s prudentially sound, the co-legislators mandated the E uropean B anking A uthority (EBA) to develop draft regulatory technical standards (RTS) and the Commission to adopt on that basis a delegated act to specify a methodology for such an indirect issuance of eligible instruments . 15 According to the BRRD mandate that methodology should: · permit a proper transfer of losses from subsidiaries to their ultimate parent (resolution entity) and a proper transfer of capital from that parent to subsidiaries; · ensure that the loss-absorbing capacity of the subsidiary is not also counted for the purposes of compliance with internal MREL by the intermediate parent ; and · ensure that its outcome is equivalent to that of a direct subscription by the ultimate parent (resolution entity) of eligible instruments issued by subsidiaries. Since early 2020, t he EBA has been working on that draft RTS on the basis of a deduction regime , in line with the mandate set out in the BRRD and the recommend ations in the relevant international standards . 16 The deduction regime developed by the EBA envisages that i nternal MREL eligible instruments issued by subsidiaries to the resolution entity via an intermediate parent would have to be fully deducted from the amount of the intermediate parent’s own i nternal MREL capacity. Such a deduction approach was considered as the most consistent with the conditions set out in the BRRD mandate and conducive to the operationalisation of the i nternal MREL framework . 17 Th e methodology developed by the EBA was subject to a public consultation. 18 The consultation feedback showed general support to the draft RTS, but highlighted several inconsistencies of the requirements for the delegation laid down in the BRRD with the existing prudential rules laid down in the CRR. Hence, in a letter to the European Commission dated 25 January 2021 19 , the EBA outlined that the interactions between the BRRD and the CRR would not allow the application of the prudential treatment needed for the mandate to be fulfilled as originally intended. More precisely, the EBA noted that the CRR did not allow for the deduction of internal MREL eligible instruments and , subsequently, for the application of an appropriate risk weight of zero percent in all the cases relevant for the mandate under the BRRD . Similar issues were identified in the area of the CRR leverage ratio requirement. T his situation would not only generate an inconsistency between the prudential and resolution framework but would also go against the requirement of the BRRD mandate to generate an outcome equivalent to that of a direct subscription , according to the EBA. It was concluded that the BRRD requirements could not be fulfilled without additional provisions that the RTS could not bear on its own but need ed rather to rely on the Level 1 text to specify. Apart from the need to operationalise the indirect subscription of instruments eligible for internal MREL, some other resolution related issues have been identified since the revised TLAC/MREL framework bec a me applicable in 2019. 20 Those issues mainly relate to the regulatory tr eatment of G-SII groups with a n MPE resolution strategy, including those MPE groups that have subsidiaries in third countries . For instance, the CRR currently does not specify whether the various adjustments to TLAC 21 for G-SIIs with an MPE resolution strategy also cover those subsidiaries of a G-SII that are located in a third country . In addition, the formula 22 for the calculation of the TLAC/MREL surplus of a subsidiary in the context of the general deduction regime applicable to G-SIIs with an MPE resolution strategy relies on the risk-based TLAC/MREL requirement of the subsidiary only, while it was omitted to also take into account the non-risked - based TLAC/MREL. Further issues include some contradictions within the Level 1 text, notably with regard to the interplay of provisions in the CRR and the BRRD 23 that are relevant to address potential inconsistencies between SPE and MPE requirements . Lastly, some issues have been observed with regard to the criteria 24 for instruments to be eligible for compliance with the internal TLAC requirement, which is of relevance when addressing the failure of EU subsidiaries of non-EU global systemically important institutions (G-SIIs). Some targeted changes to specific resolution related aspects of the CRR are necessary to address the above issues. In particular, the regulatory treatment of G-SII groups with an MPE resolution strategy, including of those MPE groups that have subsidiaries in third countries, needs to be better aligned with the treatment outlined in the TLAC standard. This would help to ensure that, in case of resolution, each resolution entity and group belonging to those G-SIIs can continue to perform critical functions without the risk of contagion. The amendments proposed would not alter the overall architecture of the framework but would ensure the proper application of TLAC and MREL. First, it is necessary to incorporate directly into the CRR a dedicated prudential treatment related to the indirect subscription of instruments eligible for internal MREL (daisy chain approach). The proposed modifications to the CRR would address the identified inconsistencies between the CRR and the BRRD, which were outlined in the EBA’s letter to the European Commission dated 25 January 2021. More precisely, the deduction regime, which was developed by the EBA in the context of the draft RTS under the BRRD, would be incorporated directly into the CRR. This would ensure a proper functioning of the indirect subscription of internal MREL within resolution groups with several layers of ownership, in line with the political agreement reached during the negotiations of Directive (EU) 2019/879. In addition, the revisions would ensure that the treatment of holdings of internal MREL eligible instruments remains aligned in both the resolution and the prudential framework, thus enabling the operationalisation of the deduction methodology developed by the EBA and, at the same time, avoiding the introduction of undue complexity in the treatment of those exposures. Second , the CRR provisions on the comparison between the sum of the actual TLAC requirement s of all the resolution groups within a G-SII group with a n MPE resolution strategy with the theoretical SPE requirement of that G-SII group need to be clarified . 25 The changes proposed are needed to clarify the extent to which resolution authorities can address the potential inconsistencies between SPE and MPE requirements. This would be achieved by aligning the CRR treatment with the one envisaged under the BRRD 26 and the TLAC standard 27 . Th ird , it is necessary to amend th e formula for the calculation of the TLAC/MREL surplus of a subsidiary in the context of the general deduction regime applicable to G-SIIs with an MPE resolution strategy 28 to ensure that that formula takes into account both the risk-based and the non- risk- based TLAC/MREL requirement s of the subsidiary, in line with the TLAC standard. This would avoid that the TLAC/MREL surplus of a given subsidiary is overestimated. Fourth, some CRR provisions applicable to G-SIIs with an MPE resolution strategy should be clarified to allow for the consideration of subsidiaries established outside of the Union. This would align the CRR with the corresponding TLAC principle agreed internationally, which is applicable with respect to subsidiaries established in all FSB jurisdictions. Fifth, some targeted clarifications in the context of the r equirement for own funds and eligible liabilities for i nstitutions that are material subsidiaries of non-EU G-SIIs ( ‘ internal TLAC ’ ) are needed to ensure that debt instruments issued by those institutions could meet all eligibility criteria for eligible liabilities instruments . The reason for this change is that currently the eligibility criteria for eligible liabilities instruments are based on the assumption that those instruments are issued by a resolution entity, and not by subsidiaries subject to an internal TLAC requirement. The gap would be addressed by clarifying that the same eligibility conditions applicable to resolution entities apply also to non-resolution entities, mutatis mutandis . This, in turn, would enable those institutions to me e t their internal TLAC requirement inter alia with eligible liabilities, as originally intended by the co-legislators . 29 These proposed amendments to the CRR can play an essential role in improving an institution’s resolvability . Given that the corresponding provisions are already applicable in the Union, the proposed modifications would need to be made in a timely manner . The need for an expedited adoption is further amplified by the fact that banking groups need clarity on the daisy chain mechanism to decide how best to preposition their internal MREL capacity in view of the general MREL compliance deadline that is set to 1 January 2024 , with binding intermediate targets needing to be complied with by 1 January 2022 . 
Revised version (Article 72 Exercise of the resolution powers):
1. Member States shall ensure that, in order to take a resolution action, resolution authorities are able to exercise control over the institution under resolution, so as to: (a) operate and conduct the activities and services of the institution under resolution with all the powers of its shareholders and management body; and (b) manage and dispose of the assets and property of the institution under resolution. Member States shall ensure that, in order to take a resolution action, resolution authorities are able to exercise control over the institution under resolution, so as to: (a) operate and conduct the activities and services of the institution under resolution with all the powers of its shareholders and management body; and (b) manage and dispose of the assets and property of the institution under resolution. The control referred to in the first subparagraph may be exercised directly by the resolution authority or indirectly by a person or persons appointed by the resolution authority. Member States shall ensure that voting rights conferred by shares or other instruments of ownership of the institution under resolution cannot be exercised during the period of resolution. 2. Subject to Article 85(1), Member States shall ensure that resolution authorities are able to take a resolution action through executive order in accordance with national administrative competences and procedures, without exercising control over the institution under resolution. 3. Resolution authorities shall decide in each particular case whether it is appropriate to carry out the resolution action through the means specified in paragraph 1 or in paragraph 2, having regard to the resolution objectives and the general principles governing resolution, the specific circumstances of the institution under resolution in question and the need to facilitate the effective resolution of cross-border groups. 4. Resolution authorities shall not be deemed to be shadow directors or de facto directors under national law.
Article 73 Treatment of shareholders and creditors in the case of partial transfers and application of the bail-in tool
Member States shall ensure that, where one or more resolution tools have been applied and, in particular for the purposes of Article 75: (a) except where point (b) applies, where resolution authorities transfer only parts of the rights, assets and liabilities of the institution under resolution, the shareholders and those creditors whose claims have not been transferred, receive in satisfaction of their claims at least as much as what they would have received if the institution under resolution had been wound up under normal insolvency proceedings at the time when the decision referred to in Article 82 was taken; (b) where resolution authorities apply the bail-in tool, the shareholders and creditors whose claims have been written down or converted to equity do not incur greater losses than they would have incurred if the institution under resolution had been wound up under normal insolvency proceedings immediately at the time when the decision referred to in Article 82 was taken.
Article 74 Valuation of difference in treatment
1. For the purposes of assessing whether shareholders and creditors would have received better treatment if the institution under resolution had entered into normal insolvency proceedings, including but not limited to for the purpose of Article 73, Member States shall ensure that a valuation is carried out by an independent person as soon as possible after the resolution action or actions have been effected. That valuation shall be distinct from the valuation carried out under Article 36. 2. The valuation in paragraph 1 shall determine: (a) the treatment that shareholders and creditors, or the relevant deposit guarantee schemes, would have received if the institution under resolution with respect to which the resolution action or actions have been effected had entered normal insolvency proceedings at the time when the decision referred to in Article 82 was taken; (b) the actual treatment that shareholders and creditors have received, in the resolution of the institution under resolution; and (c) if there is any difference between the treatment referred to in point (a) and the treatment referred to in point (b). 3. The valuation shall: (a) assume that the institution under resolution with respect to which the resolution action or actions have been effected, would have entered normal insolvency proceedings at the time when the decision referred to in Article 82 was taken; (b) assume that the resolution action or actions had not been effected; (c) disregard any provision of extraordinary public financial support to the institution under resolution. 4. EBA may develop draft regulatory technical standards specifying the methodology for carrying out the valuation in this Article, in particular the methodology for assessing the treatment that shareholders and creditors would have received if the institution under resolution had entered insolvency proceedings at the time when the decision referred to in Article 82 was taken. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The establishment of a European Single Access Point (ESAP) by 2024 is a flagship action of the Capital Markets Union (CMU) Action Plan adopted by the European Commission in September 2020 1 . ESAP will contribute to the achievement of the CMU’s objectives by providing EU-wide access to information published by entities that is relevant to capital markets, financial services and sustainable finance, i.e. mainly information about their economic activities and products. ESAP will provide access to this information in an efficient and non-discriminatory manner. Information about entities’ activities and products is essential for decision-making by providers of capital. ESAP will contribute to further integrating the financial services and capital markets in the single market, to allocating capital more efficiently across the EU and promoting the development of smaller national capital markets and economies by giving them greater visibility. ESAP will also allow non-listed entities including Small and Medium-Sized enterprises (SMEs) to make available information on a voluntary basis. This will facilitate their access to capital. This proposal is part of a package comprised of: · a proposal for a Regulation establishing a European Single Access Point; · a proposal for a Directive amending certain Directives (this proposal); and · a proposal for a Regulation amending certain Regulations. Amendments to certain Directives are necessary to achieve the above objectives to contribute to the integration of the single market, particularly as regards the collection of information to be made available to ESAP. 
Revised version (Article 74 Valuation of difference in treatment):
1. For the purposes of assessing whether shareholders and creditors would have received better treatment if the institution under resolution had entered into normal insolvency proceedings, including but not limited to for the purpose of Article 73, Member States shall ensure that a valuation is carried out by an independent person as soon as possible after the resolution action or actions have been effected. That valuation shall be distinct from the valuation carried out under Article 36. 4. EBA may develop draft regulatory technical standards specifying the methodology for carrying out the valuation in this Article, in particular the methodology for assessing the treatment that shareholders and creditors would have received if the institution under resolution had entered insolvency proceedings at the time when the decision referred to in Article 82 was taken. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 75 Safeguard for shareholders and creditors
Member States shall ensure that if the valuation carried out under Article 74 determines that any shareholder or creditor referred to in Article 73, or the deposit guarantee scheme in accordance with Article 109(1), has incurred greater losses than it would have incurred in a winding up under normal insolvency proceedings, it is entitled to the payment of the difference from the resolution financing arrangements.
Article 76 Safeguard for counterparties in partial transfers
1. Member States shall ensure that the protections specified in paragraph 2 apply in the following circumstances: (a) a resolution authority transfers some but not all of the assets, rights or liabilities of an institution under resolution to another entity or, in the exercise of a resolution tool, from a bridge institution or asset management vehicle to another person; (b) a resolution authority exercises the powers specified in point (f) of Article 64(1). 2. Member States shall ensure appropriate protection of the following arrangements and of the counterparties to the following arrangements: (a) security arrangements, under which a person has by way of security an actual or contingent interest in the assets or rights that are subject to transfer, irrespective of whether that interest is secured by specific assets or rights or by way of a floating charge or similar arrangement; (b) title transfer financial collateral arrangements under which collateral to secure or cover the performance of specified obligations is provided by a transfer of full ownership of assets from the collateral provider to the collateral taker, on terms providing for the collateral taker to transfer assets if those specified obligations are performed; (c) set-off arrangements under which two or more claims or obligations owed between the institution under resolution and a counterparty can be set off against each other; (d) netting arrangements; (e) covered bonds; (f) structured finance arrangements, including securitisations and instruments used for hedging purposes which form an integral part of the cover pool and which according to national law are secured in a way similar to the covered bonds, which involve the granting and holding of security by a party to the arrangement or a trustee, agent or nominee. The form of protection that is appropriate, for the classes of arrangements specified in points (a) to (f) of this paragraph is further specified in Articles 77 to 80, and shall be subject to the restrictions specified in Articles 68 to 71. 3. The requirement under paragraph 2 applies irrespective of the number of parties involved in the arrangements and of whether the arrangements: (a) are created by contract, trusts or other means, or arise automatically by operation of law; (b) arise under or are governed in whole or in part by the law of another Member State or of a third country. 4. The Commission shall adopt delegated acts in accordance with Article 115 further specifying the classes of arrangement that fall within the scope of points (a) to (f) of paragraph 2 of this Article.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal Regulation (EU) No 575/2013 of the European Parliament and of the Council 1 (the Capital Requirements Regulation or CRR) establishes together with Directive 2013/36/EU of the European Parliament and of the Council 2 (the Capital Requirements Directive or CRD) the prudential regulatory framework for credit institutions operating in the Union. The CRR and the CRD were adopted in the aftermath of the 2008-2009 financial crisis to enhance the resilience of institutions operating in the EU financial sector, largely based on global standards agreed with the EU’s international partners, in particular the Basel Committee on Banking Supervision (BCBS). The CRR has been subsequently amended to tackle remaining weaknesses in the regulatory framework and to implement some outstanding elements of the global financial services reform that are essential to ensure institutions' resilience. A major revision was brought by t he ‘Risk Reduction Measures Package’ , which was adopted by the European Parliament and the Council on 20 May 2019 and published in the Official Journal on 7 June 2019. Th at package include d inter alia changes to the Union bank resolution framework through Directive (EU) 2019/879 of the European Parliament an d of the Council 3 , amending Directive 2014/59/EU of the European P arliament and of the Council 4 (Bank Recovery and Resolution Directive or BRRD) , Regulation (EU) 2019/87 7 of the European Parliament and of the Council 5 , amending Regulation (EU) No 806/2014 of the European Parliament and of the Council 6 (Single Resolution Mechanism Regulation or SRMR) and Regulation (EU) 2019/87 6 of the European Parliament and of the Council 7 , amending the CRR . This reform implement ed in the Union the international Total Loss-Absorbing Capacity (TLAC) standard for global systemically important institutions (G-SIIs) adopted by the Financial Stability Board (FSB) in November 2015 8 and enhanced the application of the minimum requirement for own funds and eligible liabilities (MREL) for all institutions established in the Union. The TLAC standard requires G-SIIs to hold a sufficient amount of highly loss-absorbing (bail-inable) liabilities to ensure smooth and fast absorption of losses and recapitalisation in the event of resolution. The implementation of the TLAC standard in Union law, namely through amendments to the CRR, took into account the existing institution-specific minimum requirement for own funds and eligible liabilities (MREL), set out in the BRRD. 9 Moreover, both sets of rules are closely interconnected, particularly through cross-references from the BRRD and the SRMR to the CRR. For instance, the BRRD and the SRMR generally rel y on the total exposure measure and the total risk exposure amount as calculated under the CRR for calculating and expressing MREL . The refore, the two requirements should be understood as complementary elements of a common framework. 10 Th at revised framework should better ensure that ins t itutions’ loss absorption and recapitalisation occur s through private means once those institutions get into financial difficulties and are subsequently placed in resolution. TLAC and MREL are thus essential to effectively manage bank crises and reduce their negative impact on financial stability and public finances. TLAC and the revised rules on MREL became applicable in the Union on 2 7 June 2019 and 28 December 2020, respectively. In line with international standards , Union law recognises both the Single Point of Entry (SPE) resolution strategy and the Multiple Point of Entry (MPE) resolution strategy. 11 Under the SPE resolution strategy, only one group entity , typically the parent undertaking, is resolved (‘resolution entity’) , whereas o ther group entities, usually operating subsidiaries, are not subject to resolution action . Instead, the losses of those subsidiaries are transferred to the resolution entity and capital is down streamed to the subsidiary . This ensures that the subsidiaries can continue to operate smoothly even after they have reach ed the point of non-viability . Each resolution entity forms a ‘resolution group’ t ogether with the subsidiaries that belong to it and that are not themselves resolution entities . Under the MPE resolution strategy, more than one entity of the banking group may be resolved . C onsequently , more than one resolution entity and thus more than one resolution group may exist within the banking group . The underlying principle of the MPE resolution approach is to enable the resolution of a given resolution group in a feasible and credible way without undermining the resolvability of other resolution entities and resolution groups in the same consolidated banking group. The revised bank resolution framework provides that MREL for resolution entities should be set at the consolidated level of a resolution group ( ‘ external MREL ’ ). 12 In addition, that framework envisages how the loss absorption and recapitalisation capacity should be allocated within resolution groups ( ‘ internal MREL ’ ) 13 . According to the BRRD, as a rule, financial instruments that are eligible for internal MREL must be held by the resolution entity , i.e. typically the parent undertaking 14 . The rationale of this rule is to ensure that t he loss-absorbing and recapitalisation capacity of a subsidiary is provided by its parent, i.e. by the resolution entity . That parent may hold internal MREL eligible instruments either directly or indirectly through other entities in the same resolution group (see illustration below) . The possibility for instruments to be also indirectly subscribed by the parent through intermediate entities was justified by the fact that the obligation to comply with i nternal MREL should not unnecessarily alter the existing funding channels of banking groups where the funding for acquiring such instruments is structured around the chains of ownership and distributed to the s ubsidiaries across the group through intermediate entities and not directly by ultimate parents (resolution entities). Illustration: Subscription of internal MREL eligible instruments (directly or indirectly) To operationalise the approach of indirect subscription of internal MREL eligible instruments within resolution groups , also referred to as the ‘daisy chain’ approach, and to ensure that it i s prudentially sound, the co-legislators mandated the E uropean B anking A uthority (EBA) to develop draft regulatory technical standards (RTS) and the Commission to adopt on that basis a delegated act to specify a methodology for such an indirect issuance of eligible instruments . 15 According to the BRRD mandate that methodology should: · permit a proper transfer of losses from subsidiaries to their ultimate parent (resolution entity) and a proper transfer of capital from that parent to subsidiaries; · ensure that the loss-absorbing capacity of the subsidiary is not also counted for the purposes of compliance with internal MREL by the intermediate parent ; and · ensure that its outcome is equivalent to that of a direct subscription by the ultimate parent (resolution entity) of eligible instruments issued by subsidiaries. Since early 2020, t he EBA has been working on that draft RTS on the basis of a deduction regime , in line with the mandate set out in the BRRD and the recommend ations in the relevant international standards . 16 The deduction regime developed by the EBA envisages that i nternal MREL eligible instruments issued by subsidiaries to the resolution entity via an intermediate parent would have to be fully deducted from the amount of the intermediate parent’s own i nternal MREL capacity. Such a deduction approach was considered as the most consistent with the conditions set out in the BRRD mandate and conducive to the operationalisation of the i nternal MREL framework . 17 Th e methodology developed by the EBA was subject to a public consultation. 18 The consultation feedback showed general support to the draft RTS, but highlighted several inconsistencies of the requirements for the delegation laid down in the BRRD with the existing prudential rules laid down in the CRR. Hence, in a letter to the European Commission dated 25 January 2021 19 , the EBA outlined that the interactions between the BRRD and the CRR would not allow the application of the prudential treatment needed for the mandate to be fulfilled as originally intended. More precisely, the EBA noted that the CRR did not allow for the deduction of internal MREL eligible instruments and , subsequently, for the application of an appropriate risk weight of zero percent in all the cases relevant for the mandate under the BRRD . Similar issues were identified in the area of the CRR leverage ratio requirement. T his situation would not only generate an inconsistency between the prudential and resolution framework but would also go against the requirement of the BRRD mandate to generate an outcome equivalent to that of a direct subscription , according to the EBA. It was concluded that the BRRD requirements could not be fulfilled without additional provisions that the RTS could not bear on its own but need ed rather to rely on the Level 1 text to specify. Apart from the need to operationalise the indirect subscription of instruments eligible for internal MREL, some other resolution related issues have been identified since the revised TLAC/MREL framework bec a me applicable in 2019. 20 Those issues mainly relate to the regulatory tr eatment of G-SII groups with a n MPE resolution strategy, including those MPE groups that have subsidiaries in third countries . For instance, the CRR currently does not specify whether the various adjustments to TLAC 21 for G-SIIs with an MPE resolution strategy also cover those subsidiaries of a G-SII that are located in a third country . In addition, the formula 22 for the calculation of the TLAC/MREL surplus of a subsidiary in the context of the general deduction regime applicable to G-SIIs with an MPE resolution strategy relies on the risk-based TLAC/MREL requirement of the subsidiary only, while it was omitted to also take into account the non-risked - based TLAC/MREL. Further issues include some contradictions within the Level 1 text, notably with regard to the interplay of provisions in the CRR and the BRRD 23 that are relevant to address potential inconsistencies between SPE and MPE requirements . Lastly, some issues have been observed with regard to the criteria 24 for instruments to be eligible for compliance with the internal TLAC requirement, which is of relevance when addressing the failure of EU subsidiaries of non-EU global systemically important institutions (G-SIIs). Some targeted changes to specific resolution related aspects of the CRR are necessary to address the above issues. In particular, the regulatory treatment of G-SII groups with an MPE resolution strategy, including of those MPE groups that have subsidiaries in third countries, needs to be better aligned with the treatment outlined in the TLAC standard. This would help to ensure that, in case of resolution, each resolution entity and group belonging to those G-SIIs can continue to perform critical functions without the risk of contagion. The amendments proposed would not alter the overall architecture of the framework but would ensure the proper application of TLAC and MREL. First, it is necessary to incorporate directly into the CRR a dedicated prudential treatment related to the indirect subscription of instruments eligible for internal MREL (daisy chain approach). The proposed modifications to the CRR would address the identified inconsistencies between the CRR and the BRRD, which were outlined in the EBA’s letter to the European Commission dated 25 January 2021. More precisely, the deduction regime, which was developed by the EBA in the context of the draft RTS under the BRRD, would be incorporated directly into the CRR. This would ensure a proper functioning of the indirect subscription of internal MREL within resolution groups with several layers of ownership, in line with the political agreement reached during the negotiations of Directive (EU) 2019/879. In addition, the revisions would ensure that the treatment of holdings of internal MREL eligible instruments remains aligned in both the resolution and the prudential framework, thus enabling the operationalisation of the deduction methodology developed by the EBA and, at the same time, avoiding the introduction of undue complexity in the treatment of those exposures. Second , the CRR provisions on the comparison between the sum of the actual TLAC requirement s of all the resolution groups within a G-SII group with a n MPE resolution strategy with the theoretical SPE requirement of that G-SII group need to be clarified . 25 The changes proposed are needed to clarify the extent to which resolution authorities can address the potential inconsistencies between SPE and MPE requirements. This would be achieved by aligning the CRR treatment with the one envisaged under the BRRD 26 and the TLAC standard 27 . Th ird , it is necessary to amend th e formula for the calculation of the TLAC/MREL surplus of a subsidiary in the context of the general deduction regime applicable to G-SIIs with an MPE resolution strategy 28 to ensure that that formula takes into account both the risk-based and the non- risk- based TLAC/MREL requirement s of the subsidiary, in line with the TLAC standard. This would avoid that the TLAC/MREL surplus of a given subsidiary is overestimated. Fourth, some CRR provisions applicable to G-SIIs with an MPE resolution strategy should be clarified to allow for the consideration of subsidiaries established outside of the Union. This would align the CRR with the corresponding TLAC principle agreed internationally, which is applicable with respect to subsidiaries established in all FSB jurisdictions. Fifth, some targeted clarifications in the context of the r equirement for own funds and eligible liabilities for i nstitutions that are material subsidiaries of non-EU G-SIIs ( ‘ internal TLAC ’ ) are needed to ensure that debt instruments issued by those institutions could meet all eligibility criteria for eligible liabilities instruments . The reason for this change is that currently the eligibility criteria for eligible liabilities instruments are based on the assumption that those instruments are issued by a resolution entity, and not by subsidiaries subject to an internal TLAC requirement. The gap would be addressed by clarifying that the same eligibility conditions applicable to resolution entities apply also to non-resolution entities, mutatis mutandis . This, in turn, would enable those institutions to me e t their internal TLAC requirement inter alia with eligible liabilities, as originally intended by the co-legislators . 29 These proposed amendments to the CRR can play an essential role in improving an institution’s resolvability . Given that the corresponding provisions are already applicable in the Union, the proposed modifications would need to be made in a timely manner . The need for an expedited adoption is further amplified by the fact that banking groups need clarity on the daisy chain mechanism to decide how best to preposition their internal MREL capacity in view of the general MREL compliance deadline that is set to 1 January 2024 , with binding intermediate targets needing to be complied with by 1 January 2022 . 
Revised version (Article 76 Safeguard for counterparties in partial transfers):
1. Member States shall ensure that the protections specified in paragraph 2 apply in the following circumstances: (a) a resolution authority transfers some but not all of the assets, rights or liabilities of an institution under resolution to another entity or, in the exercise of a resolution tool, from a bridge institution or asset management vehicle to another person; a resolution authority exercises the powers specified in point (f) of Article 64(1). 2. Member States shall ensure appropriate protection of the following arrangements and of the counterparties to the following arrangements: (a) security arrangements, under which a person has by way of security an actual or contingent interest in the assets or rights that are subject to transfer, irrespective of whether that interest is secured by specific assets or rights or by way of a floating charge or similar arrangement; (b) title transfer financial collateral arrangements under which collateral to secure or cover the performance of specified obligations is provided by a transfer of full ownership of assets from the collateral provider to the collateral taker, on terms providing for the collateral taker to transfer assets if those specified obligations are performed;