Article 87 General principles regarding decision-making involving more than one Member State
Member States shall ensure that, when making decisions or taking action pursuant to this Directive which may have an impact in one or more other Member States, their authorities have regard to the following general principles: (a) the imperatives of efficacy of decision-making and of keeping resolution costs as low as possible when taking resolution action; (b) that decisions are made and action is taken in a timely manner and with due urgency when required; (c) that resolution authorities, competent authorities and other authorities cooperate with each other to ensure that decisions are made and action is taken in a coordinated and efficient manner; (d) that the roles and responsibilities of relevant authorities within each Member State are e defined clearly; (e) that due consideration is given to the interests of the Member States where the Union parent undertakings are established, in particular the impact of any decision or action or inaction on the financial stability, fiscal resources, resolution fund, deposit guarantee scheme or investor compensation scheme of those Member States; (f) that due consideration is given to the interests of each individual Member State where a subsidiary is established, in particular the impact of any decision or action or inaction on the financial stability, fiscal resources, resolution fund, deposit guarantee scheme or investor compensation scheme of those Member States; (g) that due consideration is given to the interests of each Member State where significant branches are located, in particular the impact of any decision or action or inaction on the financial stability of those Member States; (h) that due consideration is given to the objectives of balancing the interests of the various Member States involved and of avoiding unfairly prejudicing or unfairly protecting the interests of particular Member States, including avoiding unfair burden allocation across Member States; (i) that any obligation under this Directive to consult an authority before any decision or action is taken implies at least that such an obligation to consult that authority on those elements of the proposed decision or action which have or which are likely to have: (i) an effect on the Union parent undertaking, the subsidiary or the branch,; and (ii) an impact on the stability of the Member State where the Union parent undertaking, the subsidiary or the branch, is established or located; (j) that resolution authorities, when taking resolution actions, take into account and follow the resolution plans referred to in Article 13 unless the resolution authorities consider, taking into account the circumstances of the case, that the resolution objectives will be achieved more effectively by taking actions which are not provided for in the resolution plans; (k) that the requirement for transparency whenever a proposed decision or action is likely to have implications on the financial stability, fiscal resources, resolution fund, deposit guarantee scheme or investor compensation scheme of any relevant Member State; and (l) recognition that coordination and cooperation are most likely to achieve a result which lowers the overall cost of resolution.
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 87 General principles regarding decision-making involving more than one Member State):
Member States shall ensure that, when making decisions or taking action pursuant to this Directive which may have an impact in one or more other Member States, their authorities have regard to the following general principles: (a) the imperatives of efficacy of decision-making and of keeping resolution costs as low as possible when taking resolution action; (b) that decisions are made and action is taken in a timely manner and with due urgency when required; (c) that resolution authorities, competent authorities and other authorities cooperate with each other to ensure that decisions are made and action is taken in a coordinated and efficient manner; (d) that the roles and responsibilities of relevant authorities within each Member State are e defined clearly; (e) that due consideration is given to the interests of the Member States where the Union parent undertakings are established, in particular the impact of any decision or action or inaction on the financial stability, fiscal resources, resolution fund, deposit guarantee scheme or investor compensation scheme of those Member States; (f) that due consideration is given to the interests of each individual Member State where a subsidiary is established, in particular the impact of any decision or action or inaction on the financial stability, fiscal resources, resolution fund, deposit guarantee scheme or investor compensation scheme of those Member States; (g) that due consideration is given to the interests of each Member State where significant branches are located, in particular the impact of any decision or action or inaction on the financial stability of those Member States; (h) that due consideration is given to the objectives of balancing the interests of the various Member States involved and of avoiding unfairly prejudicing or unfairly protecting the interests of particular Member States, including avoiding unfair burden allocation across Member States; that any obligation under this Directive to consult an authority before any decision or action is taken implies at least that such an obligation to consult that authority on those elements of the proposed decision or action which have or which are likely to have: (i) an effect on the Union parent undertaking, the subsidiary or the branch,; and (ii) an impact on the stability of the Member State where the Union parent undertaking, the subsidiary or the branch, is established or located; that any obligation under this Directive to consult an authority before any decision or action is taken implies at least that such an obligation to consult that authority on those elements of the proposed decision or action which have or which are likely to have: (i) an effect on the Union parent undertaking, the subsidiary or the branch,; and (ii) an impact on the stability of the Member State where the Union parent undertaking, the subsidiary or the branch, is established or located; (j) that resolution authorities, when taking resolution actions, take into account and follow the resolution plans referred to in Article 13 unless the resolution authorities consider, taking into account the circumstances of the case, that the resolution objectives will be achieved more effectively by taking actions which are not provided for in the resolution plans; (k) that the requirement for transparency whenever a proposed decision or action is likely to have implications on the financial stability, fiscal resources, resolution fund, deposit guarantee scheme or investor compensation scheme of any relevant Member State; and (l) recognition that coordination and cooperation are most likely to achieve a result which lowers the overall cost of resolution.
Article 88 Resolution colleges
1. Group-level resolution authorities shall establish resolution colleges to carry out the tasks referred to in Articles 12, 13, 16, 18, 45, 91 and 92, and, where appropriate, to ensure cooperation and coordination with third-country resolution authorities. In particular, resolution colleges shall provide a framework for the group-level resolution authority, the other resolution authorities and, where appropriate, competent authorities and consolidating supervisors concerned to perform the following tasks: (a) exchanging information relevant for the development of group resolution plans, for the application to groups of preparatory and preventative powers and for group resolution; (b) developing group resolution plans pursuant to Articles 12 and 13; (c) assessing the resolvability of groups pursuant to Article 16; (d) exercising powers to address or remove impediments to the resolvability of groups pursuant to Article 18; (e) deciding on the need to establish a group resolution scheme as referred to in Article 91 or 92; (f) reaching the agreement on a group resolution scheme proposed in accordance with Article 91 or 92; (g) coordinating public communication of group resolution strategies and schemes; (h) coordinating the use of financing arrangements established under Title VII; (i) setting the minimum requirements for groups at consolidated and subsidiary level under Article 45. In addition, resolution colleges may be used as a forum to discuss any issues relating to cross-border group resolution. 2. The following shall be members of the resolution college: (a) the group-level resolution authority; (b) the resolution authorities of each Member State in which a subsidiary covered by consolidated supervision is established; (c) the resolution authorities of Member States where a parent undertaking of one or more institutions of the group, that is an entity referred to in point (d) of Article 1(1), are established; (d) the resolution authorities of Member States in which significant branches are located; (e) the consolidating supervisor and the competent authorities of the Member States where the resolution authority is a member of the resolution college. Where the competent authority of a Member State is not the Member State’s central bank, the competent authority may decide to be accompanied by a representative from the Member State’s central bank; (f) the competent ministries, where the resolution authorities which are members of the resolution college are not the competent ministries; (g) the authority that is responsible for the deposit guarantee scheme of a Member State, where the resolution authority of that Member State is a member of a resolution college; (h) EBA, subject to paragraph 4. 3. The resolution authorities of third countries where a parent undertaking or an institution established in the Union has a subsidiary institution or a branch that would be considered to be significant were it located in the Union may, at their request, be invited to participate in the resolution college as observers, provided that they are subject to confidentiality requirements equivalent, in the opinion of the group-level resolution authority, to those established by Article 98. 4. EBA shall contribute to promoting and monitoring the efficient, effective and consistent functioning of resolution colleges, taking into account international standards. EBA shall be invited to attend the meetings of the resolution college for that purpose. EBA shall not have any voting rights to the extent that any voting takes place within the framework of resolution colleges. 5. The group-level resolution authority shall be the chair of the resolution college. In that capacity it shall: (a) establish written arrangements and procedures for the functioning of the resolution college, after consulting the other members of the resolution college; (b) coordinate all activities of the resolution college; (c) convene and chair all its meetings and keep all members of the resolution college fully informed in advance of the organisation of meetings of the resolution college, of the main issues to be discussed and of the items to be considered; (d) notify the members of the resolution college of any planned meetings so that they can request to participate; (e) decide which members and observers shall be invited to attend particular meetings of the resolution college, on the basis of specific needs, taking into account the relevance of the issue to be discussed for those members and observers, in particular the potential impact on financial stability in the Member States concerned; (f) keep all of the members of the college informed, in a timely manner, of the decisions and outcomes of those meetings. The members participating in the resolution college shall cooperate closely. Notwithstanding point (e), resolution authorities shall be entitled to participate in resolution college meetings whenever matters subject to joint decision-making or relating to a group entity located in their Member State are on the agenda. 6. Group-level resolution authorities are not obliged to establish a resolution college if other groups or colleges perform the same functions and carry out the same tasks specified in this Article and comply with all the conditions and procedures, including those covering membership and participation in resolution colleges, established in this Article and in Article 90. In such a case, all references to resolution colleges in this Directive shall also be understood as references to those other groups or colleges. 7. EBA shall, taking into account international standards, develop draft regulatory standards in order to specify the operational functioning of the resolution colleges for the performance of the tasks referred to in paragraph 1. 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 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 88 Resolution colleges):
1. Subject to Article 89, group-level resolution authorities shall establish resolution colleges to carry out the tasks referred to in Articles 12, 13, 16, 18, 45 to 45h, 91 and 92, and, where appropriate, to ensure cooperation and coordination with third-country resolution authorities. In particular, resolution colleges shall provide a framework for the group-level resolution authority, the other resolution authorities and, where appropriate, competent authorities and consolidating supervisors concerned to perform the following tasks: (a) exchanging information relevant for the development of group resolution plans, for the application to groups of preparatory and preventative powers and for group resolution; (b) developing group resolution plans pursuant to Articles 12 and 13; (c) assessing the resolvability of groups pursuant to Article 16; (d) exercising powers to address or remove impediments to the resolvability of groups pursuant to Article 18; (e) deciding on the need to establish a group resolution scheme as referred to in Article 91 or 92; (f) reaching the agreement on a group resolution scheme proposed in accordance with Article 91 or 92; (g) coordinating public communication of group resolution strategies and schemes; (h) coordinating the use of financing arrangements established under Title VII; (i) setting the minimum requirements for groups at consolidated and subsidiary level under Articles 45 to 45h . In addition, resolution colleges may be used as a forum to discuss any issues relating to cross-border group resolution. 3. The resolution authorities of third countries where a parent undertaking or an institution established in the Union has a subsidiary institution or a branch that would be considered to be significant were it located in the Union may, at their request, be invited to participate in the resolution college as observers, provided that they are subject to confidentiality requirements equivalent, in the opinion of the group-level resolution authority, to those established by Article 98. 4. EBA shall contribute to promoting and monitoring the efficient, effective and consistent functioning of resolution colleges, taking into account international standards. EBA shall be invited to attend the meetings of the resolution college for that purpose. EBA shall not have any voting rights to the extent that any voting takes place within the framework of resolution colleges. The members participating in the resolution college shall cooperate closely. Notwithstanding point (e), resolution authorities shall be entitled to participate in resolution college meetings whenever matters subject to joint decision-making or relating to a group entity located in their Member State are on the agenda. 6. Group-level resolution authorities are not obliged to establish a resolution college if other groups or colleges perform the same functions and carry out the same tasks specified in this Article and comply with all the conditions and procedures, including those covering membership and participation in resolution colleges, established in this Article and in Article 90. In such a case, all references to resolution colleges in this Directive shall also be understood as references to those other groups or colleges. 7. EBA shall, taking into account international standards, develop draft regulatory standards in order to specify the operational functioning of the resolution colleges for the performance of the tasks referred to in paragraph 1. 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 standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 89 European resolution colleges
1. Where a third country institution or third country parent undertaking has Union subsidiaries established in two or more Member States, or two or more Union branches that are regarded as significant by two or more Member States, the resolution authorities of Member States where those Union subsidiaries are established or where those significant branches are located shall establish a European resolution college. 2. The European resolution college shall perform the functions and carry out the tasks specified in Article 88 with respect to the subsidiary institutions and, in so far as those tasks are relevant, to branches. 3. Where the Union subsidiaries are held by, or the significant branches are of, a financial holding company established within the Union in accordance with the third subparagraph of Article 127(3) of Directive 2013/36/EU, the European resolution college shall be chaired by the resolution authority of the Member State where the consolidating supervisor is located for the purposes of consolidated supervision under that Directive. Where the first subparagraph does not apply, the members of the European resolution college shall nominate and agree the chair. 4. Member States may, by mutual agreement of all the relevant parties, waive the requirement to establish a European resolution college if other groups or colleges, including a resolution college established under Article 88, perform the same functions and carry out the same tasks specified in this Article and comply with all the conditions and procedures, including those covering membership and participation in European resolution colleges, established in this Article and in Article 90. In such a case, all references to European resolution colleges in this Directive shall also be understood as references to those other groups or colleges. 5. Subject to paragraphs 3 and 4 of this Article, the European resolution college shall otherwise function in accordance with Article 88.
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 89 European resolution colleges):
1. Where a third-country institution or third-country parent undertaking has subsidiaries established in the Union or Union parent undertakings, established in two or more Member States, or two or more Union branches that are regarded as significant by two or more Member States, the resolution authorities of Member States where those entities are established or where those significant branches are located shall establish one single European resolution college. 2. The European resolution college referred to in paragraph 1 of this Article shall perform the functions and carry out the tasks specified in Article 88 with respect to the entities referred in paragraph 1 of this Article and, in so far as those tasks are relevant, to their branches. The tasks referred to in the first subparagraph of this paragraph shall include the setting of the requirement referred to in Articles 45 to 45h. When setting the requirement referred to in Articles 45 to 45h, members of the European resolution college shall take into consideration the global resolution strategy, if any, adopted by third-country authorities. Where, in accordance with the global resolution strategy, subsidiaries established in the Union or a Union parent undertaking and its subsidiary institutions are not resolution entities and the members of the European resolution college agree with that strategy, subsidiaries established in the Union or, on a consolidated basis, the Union parent undertaking shall comply with the requirement of Article 45f(1) by issuing instruments referred to in points (a) and (b) of Article 45f(2) to their ultimate parent undertaking established in a third country, or to the subsidiaries of that ultimate parent undertaking that are established in the same third country or to other entities under the conditions set out in points (a)(i) and (b)(ii) of Article 45f(2). 3. Where only one Union parent undertaking holds all Union subsidiaries of a third-country institution or third-country parent undertaking, the European resolution college shall be chaired by the resolution authority of the Member State where the Union parent undertaking is established. Where the first subparagraph does not apply, the resolution authority of a Union parent undertaking or a Union subsidiary with the highest value of total on-balance sheet assets held shall chair the European resolution college. 4. Member States may, by mutual agreement of all of the relevant parties, waive the requirement to establish a European resolution college if another group or college performs the same functions and carries out the same tasks specified in this Article and complies with all of the conditions and procedures, including those covering membership and participation in European resolution colleges, established in this Article and in Article 90. In such a case, all references to European resolution colleges in this Directive shall also be understood as references to those other groups or colleges. 5. Subject to paragraphs 3 and 4 of this Article, the European resolution college shall otherwise function in accordance with Article 88.
Article 90 Information exchange
1. Subject to Article 84, resolution authorities and competent authorities shall provide one another on request with all the information relevant for the exercise of the other authorities’ tasks under this Directive. 2. The group-level resolution authority shall coordinate the flow of all relevant information between resolution authorities. In particular, the group-level resolution authority shall provide the resolution authorities in other Member States with all the relevant information in a timely manner with a view to facilitating the exercise of the tasks referred to in points (b) to (i) of the second subparagraph of Article 88(1). 3. Upon a request for information which has been provided by a third-country resolution authority, the resolution authority shall seek the consent of the third-country resolution authority for the onward transmission of that information, save where the third-country resolution authority has already consented to the onward transmission of that information. Resolution authorities shall not be obliged to transmit information provided from a third-country resolution authority if the third-country resolution authority has not consented to its onward transmission. 4. Resolution authorities shall share information with the competent ministry when it relates to a decision or matter which requires notification, consultation or consent of the competent ministry or which may have implications for public funds.
Article 91 Group resolution involving a subsidiary of the group
1. Where a resolution authority decides that an institution or any entity referred to in point (b), (c) or (d) of Article 1(1) that is a subsidiary in a group meets the conditions referred to in Article 32 or 33, that authority shall notify the following information without delay to the group-level resolution authority, if different, to the consolidating supervisor, and to the members of the resolution college for the group in question: (a) the decision that the institution or entity referred to in point (b), (c) or (d) of Article 1(1) meets the conditions referred to in Article 32 or 33; (b) the resolution actions or insolvency measures that the resolution authority considers to be appropriate for that institution or that entity referred to in point (b), (c) or (d) of Article 1(1). 2. On receiving a notification under paragraph 1, the group-level resolution authority, after consulting the other members of the relevant resolution college, shall assess the likely impact of the resolution actions or other measures notified in accordance with point (b) of paragraph 1, on the group and on group entities in other Member States, and, in particular, whether the resolution actions or other measures would make it likely that the conditions for resolution would be satisfied in relation to a group entity in another Member State. 3. If the group-level resolution authority, after consulting the other members of the resolution college, assesses that the resolution actions or other measures notified in accordance with point (b) of paragraph 1, would not make it likely that the conditions laid down in Article 32 or 33 would be satisfied in relation to a group entity in another Member State, the resolution authority responsible for that institution or that entity referred to in point (b), (c) or (d) of Article 1(1) may take the resolution actions or other measures that it notified in accordance with point (b) of paragraph 1 of this Article. 4. If the group-level resolution authority, after consulting the other members of the resolution college, assesses that the resolution actions or other measures notified in accordance with point (b) of paragraph 1 of this Article, would make it likely that the conditions laid down in Article 32 or 33 would be satisfied in relation to a group entity in another Member State, the group-level resolution authority shall, no later than 24 hours after receiving the notification under paragraph 1, propose a group resolution scheme and submit it to the resolution college. That 24-hour period may be extended with the consent of the resolution authority which made the notification referred to in paragraph 1 of this Article. 5. In the absence of an assessment by the group-level resolution authority within 24 hours, or a longer period that has been agreed, after receiving the notification under paragraph 1, the resolution authority which made the notification referred to in paragraph 1 may take the resolution actions or other measures that it notified in accordance with point (b) of that paragraph. 6. A group resolution scheme required under paragraph 4 shall: (a) take into account and follow the resolution plans as referred to in Article 13 unless resolution authorities assess, taking into account circumstances of the case, that resolution objectives will be achieved more effectively by taking actions which are not provided for in the resolution plans; (b) outline the resolution actions that should be taken by the relevant resolution authorities in relation to the Union parent undertaking or particular group entities with the aim of meeting the resolution objectives and principles referred to in Articles 31 and 34; (c) specify how those resolution actions should be coordinated; (d) establish a financing plan which takes into account the group resolution plan, principles for sharing responsibility as established in accordance with point (f) of Article 12(3) and the mutualisation as referred to in Article 107. 7. Subject to paragraph 8, the group resolution scheme shall take the form of a joint decision of the group-level resolution authority and the resolution authorities responsible for the subsidiaries that are covered by the group resolution scheme. EBA may, at the request of a resolution authority, assist the resolution authorities in reaching a joint decision in accordance with Article 31(c) of Regulation (EU) No 1093/2010. 8. If any resolution authority disagrees with or departs from the group resolution scheme proposed by the group-level resolution authority or considers that it needs to take independent resolution actions or measures other than those proposed in the scheme in relation to an institution or an entity referred to in point (b), (c) or (d) of Article 1(1) for reasons of financial stability, it shall set out in detail the reasons for the disagreement or the reasons to depart from the group resolution scheme, notify the group-level resolution authority and the other resolution authorities that are covered by the group resolution scheme of the reasons and inform them about the actions or measures it will take. When setting out the reasons for its disagreement, that resolution authority shall take into consideration the resolution plans as referred to in Article 13, the potential impact on financial stability in the Member States concerned as well as the potential effect of the actions or measures on other parts of the group. 9. The resolution authorities which did not disagree under paragraph 8 may reach a joint decision on a group resolution scheme covering group entities in their Member State. 10. The joint decision referred to in paragraph 7 or 9 and the decisions taken by the resolution authorities in the absence of a joint decision referred to in paragraph 8 shall be recognised as conclusive and applied by the resolution authorities in the Member States concerned. 11. Authorities shall perform all actions under this Article without delay, and with due regard to the urgency of the situation. 12. In any case where a group resolution scheme is not implemented and resolution authorities take resolution actions in relation to any group entity, those resolution authorities shall cooperate closely within the resolution college with a view to achieving a coordinated resolution strategy for all the group entities that are failing or likely to fail. 13. Resolution authorities that take any resolution action in relation to any group entity shall inform the members of the resolution college regularly and fully about those actions or measures and their on-going progress.
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 91 Group resolution involving a subsidiary of the group):
1. (a) 2. On receiving a notification under paragraph 1, the group-level resolution authority, after consulting the other members of the relevant resolution college, shall assess the likely impact of the resolution actions or other measures notified in accordance with point (b) of paragraph 1, on the group and on group entities in other Member States, and, in particular, whether the resolution actions or other measures would make it likely that the conditions for resolution would be satisfied in relation to a group entity in another Member State. 4. If the group-level resolution authority, after consulting the other members of the resolution college, assesses that the resolution actions or other measures notified in accordance with point (b) of paragraph 1 of this Article, would make it likely that the conditions laid down in Article 32 or 33 would be satisfied in relation to a group entity in another Member State, the group-level resolution authority shall, no later than 24 hours after receiving the notification under paragraph 1, propose a group resolution scheme and submit it to the resolution college. That 24-hour period may be extended with the consent of the resolution authority which made the notification referred to in paragraph 1 of this Article. 5. In the absence of an assessment by the group-level resolution authority within 24 hours, or a longer period that has been agreed, after receiving the notification under paragraph 1, the resolution authority which made the notification referred to in paragraph 1 may take the resolution actions or other measures that it notified in accordance with point (b) of that paragraph. A group resolution scheme required under paragraph 4 shall: (a) take into account and follow the resolution plans as referred to in Article 13 unless resolution authorities assess, taking into account circumstances of the case, that resolution objectives will be achieved more effectively by taking actions which are not provided for in the resolution plans; (b) outline the resolution actions that should be taken by the relevant resolution authorities in relation to the Union parent undertaking or particular group entities with the aim of meeting the resolution objectives and principles referred to in Articles 31 and 34; (c) specify how those resolution actions should be coordinated; (d) establish a financing plan which takes into account the group resolution plan, principles for sharing responsibility as established in accordance with point (f) of Article 12(3) and the mutualisation as referred to in Article 107. 7. Subject to paragraph 8, the group resolution scheme shall take the form of a joint decision of the group-level resolution authority and the resolution authorities responsible for the subsidiaries that are covered by the group resolution scheme. EBA may, at the request of a resolution authority, assist the resolution authorities in reaching a joint decision in accordance with Article 31(c) of Regulation (EU) No 1093/2010. 8. If any resolution authority disagrees with or departs from the group resolution scheme proposed by the group-level resolution authority or considers that it needs to take independent resolution actions or measures other than those proposed in the scheme in relation to an institution or an entity referred to in point (b), (c) or (d) of Article 1(1) for reasons of financial stability, it shall set out in detail the reasons for the disagreement or the reasons to depart from the group resolution scheme, notify the group-level resolution authority and the other resolution authorities that are covered by the group resolution scheme of the reasons and inform them about the actions or measures it will take. When setting out the reasons for its disagreement, that resolution authority shall take into consideration the resolution plans as referred to in Article 13, the potential impact on financial stability in the Member States concerned as well as the potential effect of the actions or measures on other parts of the group. 9. The resolution authorities which did not disagree under paragraph 8 may reach a joint decision on a group resolution scheme covering group entities in their Member State. 10. The joint decision referred to in paragraph 7 or 9 and the decisions taken by the resolution authorities in the absence of a joint decision referred to in paragraph 8 shall be recognised as conclusive and applied by the resolution authorities in the Member States concerned. 11. Authorities shall perform all actions under this Article without delay, and with due regard to the urgency of the situation. 12. In any case where a group resolution scheme is not implemented and resolution authorities take resolution actions in relation to any group entity, those resolution authorities shall cooperate closely within the resolution college with a view to achieving a coordinated resolution strategy for all the group entities that are failing or likely to fail. 13. Resolution authorities that take any resolution action in relation to any group entity shall inform the members of the resolution college regularly and fully about those actions or measures and their on-going progress.
Article 92 Group resolution
1. Where a group-level resolution authority decides that a Union parent undertaking for which it is responsible meets the conditions referred to in Article 32 or 33 it shall notify the information referred to in points (a) and (b) of Article 91(1) without delay to the consolidating supervisor, if different, and to the other members of the resolution college of the group in question. The resolution actions or insolvency measures for the purposes of point (b) of Article 91(1) may include the implementation of a group resolution scheme drawn up in accordance with Article 91(6) in any of the following circumstances: (a) resolution actions or other measures at parent level notified in accordance with point (b) of Article 91(1) make it likely that the conditions laid down in Article 32 or 33 would be fulfilled in relation to a group entity in another Member State; (b) resolution actions or other measures at parent level only are not sufficient to stabilise the situation or are not likely to provide an optimum outcome; (c) one or more subsidiaries meet the conditions referred to in Article 32 or 33 according to a determination by the resolution authorities responsible for those subsidiaries; or (d) resolution actions or other measures at group level will benefit the subsidiaries of the group in a way which makes a group resolution scheme appropriate. 2. Where the actions proposed by the group-level resolution authority under paragraph 1 do not include a group resolution scheme, the group-level resolution authority shall take its decision after consulting the members of the resolution college. The decision of the group-level resolution authority shall take into account: (a) and follow the resolution plans as referred to in Article 13 unless resolution authorities assess, taking into account circumstances of the case, that resolution objectives will be achieved more effectively by taking actions which are not provided for in the resolution plans; (b) the financial stability of the Member States concerned. 3. Where the actions proposed by the group-level resolution authority under paragraph 1 include a group resolution scheme, the group resolution scheme shall take the form of a joint decision of the group-level resolution authority and the resolution authorities responsible for the subsidiaries that are covered by the group resolution scheme. EBA may, at the request of a resolution authority, assist the resolution authorities in reaching a joint decision in accordance with Article 31(c) of Regulation (EU) No 1093/2010. 4. If any resolution authority disagrees with or departs from the group resolution scheme proposed by the group-level resolution authority or considers that it needs to take independent resolution actions or measures other than those proposed in the scheme in relation to an institution or entity referred to in point (b), (c) or (d) of Article 1(1) for reasons of financial stability, it shall set out in detail the reasons for the disagreement or the reasons to depart from the group resolution scheme, notify the group-level resolution authority and the other resolution authorities that are covered by the group resolution scheme of the reasons and inform them about the actions or measures it intends to take. When setting out the reasons for its disagreement, that resolution authority shall give consideration to the resolution plans as referred to in Article 13, the potential impact on financial stability in the Member States concerned as well as the potential effect of the actions or measures on other parts of the group. 5. Resolution authorities which did not disagree with the group resolution scheme under the paragraph 4 may reach a joint decision on a group resolution scheme covering group entities in their Member State. 6. The joint decision referred to in paragraph 3 or 5 and the decisions taken by the resolution authorities in the absence of a joint decision referred to in paragraph 4 shall be recognised as conclusive and applied by the resolution authorities in the Member States concerned. 7. Authorities shall perform all actions under this Article without delay, and with due regard to the urgency of the situation. In any case where a group resolution scheme is not implemented and resolution authorities take resolution action in relation to any group entity, those resolution authorities shall cooperate closely within the resolution college with a view to achieving a coordinated resolution strategy for all affected group entities. Resolution authorities that take resolution action in relation to any group entity shall inform the members of the resolution college regularly and fully about those actions or measures and their on-going progress.
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 92 Group resolution):
1. (a) resolution actions or other measures at parent level notified in accordance with point (b) of Article 91(1) make it likely that the conditions laid down in Article 32 or 33 would be fulfilled in relation to a group entity in another Member State; (b) resolution actions or other measures at parent level only are not sufficient to stabilise the situation or are not likely to provide an optimum outcome; (c) one or more subsidiaries meet the conditions referred to in Article 32 or 33 according to a determination by the resolution authorities responsible for those subsidiaries; or (d) resolution actions or other measures at group level will benefit the subsidiaries of the group in a way which makes a group resolution scheme appropriate. 2. Where the actions proposed by the group-level resolution authority under paragraph 1 do not include a group resolution scheme, the group-level resolution authority shall take its decision after consulting the members of the resolution college. The decision of the group-level resolution authority shall take into account: (a) and follow the resolution plans as referred to in Article 13 unless resolution authorities assess, taking into account circumstances of the case, that resolution objectives will be achieved more effectively by taking actions which are not provided for in the resolution plans; (b) the financial stability of the Member States concerned. 3. Where the actions proposed by the group-level resolution authority under paragraph 1 include a group resolution scheme, the group resolution scheme shall take the form of a joint decision of the group-level resolution authority and the resolution authorities responsible for the subsidiaries that are covered by the group resolution scheme. EBA may, at the request of a resolution authority, assist the resolution authorities in reaching a joint decision in accordance with Article 31(c) of Regulation (EU) No 1093/2010. 4. If any resolution authority disagrees with or departs from the group resolution scheme proposed by the group-level resolution authority or considers that it needs to take independent resolution actions or measures other than those proposed in the scheme in relation to an institution or entity referred to in point (b), (c) or (d) of Article 1(1) for reasons of financial stability, it shall set out in detail the reasons for the disagreement or the reasons to depart from the group resolution scheme, notify the group-level resolution authority and the other resolution authorities that are covered by the group resolution scheme of the reasons and inform them about the actions or measures it intends to take. When setting out the reasons for its disagreement, that resolution authority shall give consideration to the resolution plans as referred to in Article 13, the potential impact on financial stability in the Member States concerned as well as the potential effect of the actions or measures on other parts of the group. 5. Resolution authorities which did not disagree with the group resolution scheme under the paragraph 4 may reach a joint decision on a group resolution scheme covering group entities in their Member State. 6. The joint decision referred to in paragraph 3 or 5 and the decisions taken by the resolution authorities in the absence of a joint decision referred to in paragraph 4 shall be recognised as conclusive and applied by the resolution authorities in the Member States concerned. 7. Authorities shall perform all actions under this Article without delay, and with due regard to the urgency of the situation. In any case where a group resolution scheme is not implemented and resolution authorities take resolution action in relation to any group entity, those resolution authorities shall cooperate closely within the resolution college with a view to achieving a coordinated resolution strategy for all affected group entities. Resolution authorities that take resolution action in relation to any group entity shall inform the members of the resolution college regularly and fully about those actions or measures and their on-going progress.
Article 93 Agreements with third countries
1. In accordance with Article 218 TFEU, the Commission may submit to the Council proposals for the negotiation of agreements with one or more third countries regarding the means of cooperation between the resolution authorities and the relevant third country authorities, inter alia, for the purpose of information sharing in connection with recovery and resolution planning in relation to institutions, financial institutions, parent undertakings and third country institutions, with regard to the following situations: (a) in cases where a third country parent undertaking has subsidiary institutions or branches where such branches are regarded as significant in two or more Member States; (b) in cases where a parent undertaking established in a Member State and which has a subsidiary or a significant branch in at least one other Member State has one or more third country subsidiary institutions; (c) in cases where an institution established in a Member State and which has a parent undertaking, a subsidiary or a significant branch in at least one other Member State has one or more branches in one or more third countries. 2. The agreements referred to in paragraph 1 shall, in particular, seek to ensure the establishment of processes and arrangements between resolution authorities and the relevant third country authorities for cooperation in carrying out some or all of the tasks and exercising some or all of the powers indicated in Article 97. 3. The agreements referred to in paragraph 1 shall not make provision in relation to individual institutions, financial institutions, parent undertakings or third country institutions. 4. Member States may enter into bilateral agreements with a third country regarding the matters referred to in paragraphs 1 and 2 until the entry into force of an agreement referred to in paragraph 1 with the relevant third country to the extent that such bilateral agreements are not inconsistent with this Title.
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 93 Agreements with third countries):
2. The agreements referred to in paragraph 1 shall, in particular, seek to ensure the establishment of processes and arrangements between resolution authorities and the relevant third country authorities for cooperation in carrying out some or all of the tasks and exercising some or all of the powers indicated in Article 97. 3. The agreements referred to in paragraph 1 shall not make provision in relation to individual institutions, financial institutions, parent undertakings or third country institutions. 4. Member States may enter into bilateral agreements with a third country regarding the matters referred to in paragraphs 1 and 2 until the entry into force of an agreement referred to in paragraph 1 with the relevant third country to the extent that such bilateral agreements are not inconsistent with this Title.
Article 94 Recognition and enforcement of third-country resolution proceedings
1. This Article shall apply in respect of third-country resolution proceedings unless and until an international agreement as referred to in Article 93(1) enters into force with the relevant third country. It shall also apply following the entry into force of an international agreement as referred to in Article 93(1) with the relevant third country to the extent that recognition and enforcement of third-country resolution proceedings is not governed by that agreement. 2. Where there is a European resolution college established in accordance with Article 89, it shall take a joint decision on whether to recognise, except as provided for in Article 95, third-country resolution proceedings relating to a third-country institution or a parent undertaking that: (a) has Union subsidiaries established in, or Union branches located in and regarded as significant by, two or more Member States; or (b) has assets, rights or liabilities located in two or more Member States or are governed by the law of those Member States. Where the joint decision on the recognition of the third-country resolution proceedings is reached, respective national resolution authorities shall seek the enforcement of the recognised third-country resolution proceedings in accordance with their national law. 3. In the absence of a joint decision between the resolution authorities participating in the European resolution college, or in the absence of a European resolution college, each resolution authority concerned shall make its own decision on whether to recognise and enforce, except as provided for in Article 95, third-country resolution proceedings relating to a third-country institution or a parent undertaking. The decision shall give due consideration to the interests of each individual Member State where a third-country institution or parent undertaking operates, and in particular to the potential impact of the recognition and enforcement of the third-country resolution proceedings on the other parts of the group and the financial stability in those Member States. 4. Member States shall ensure that resolution authorities are, as a minimum, empowered to do the following: (a) exercise the resolution powers in relation to the following: (i) assets of a third-country institution or parent undertaking that are located in their Member State or governed by the law of their Member State; (ii) rights or liabilities of a third-country institution that are booked by the Union branch in their Member State or governed by the law of their Member State, or where claims in relation to such rights and liabilities are enforceable in their Member State; (b) perfect, including to require another person to take action to perfect, a transfer of shares or other instruments of ownership in a Union subsidiary established in the designating Member State; (c) exercise the powers in Article 69, 70 or 71 in relation to the rights of any party to a contract with an entity referred to in paragraph 2 of this Article, where such powers are necessary in order to enforce third-country resolution proceedings; and (d) render unenforceable any right to terminate, liquidate or accelerate contracts, or affect the contractual rights, of entities referred to in paragraph 2 and other group entities, where such a right arises from resolution action taken in respect of the third-country institution, parent undertaking of such entities or other group entities, whether by the third-country resolution authority itself or otherwise pursuant to legal or regulatory requirements as to resolution arrangements in that country, provided that the substantive obligations under the contract, including payment and delivery obligations, and provision of collateral, continue to be performed. 5. Resolution authorities may take, where necessary in the public interest, resolution action with respect to a parent undertaking where the relevant third-country authority determines that an institution that is incorporated in that third country meets the conditions for resolution under the law of that third country. To that end, Member States shall ensure that resolution authorities are empowered to use any resolution power in respect of that parent undertaking, and Article 68 shall apply. 6. The recognition and enforcement of third-country resolution proceedings shall be without prejudice to any normal insolvency proceedings under national law applicable, where appropriate, in accordance with this Directive.
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 94 Recognition and enforcement of third-country resolution proceedings):
1. This Article shall apply in respect of third-country resolution proceedings unless and until an international agreement as referred to in Article 93(1) enters into force with the relevant third country. It shall also apply following the entry into force of an international agreement as referred to in Article 93(1) with the relevant third country to the extent that recognition and enforcement of third-country resolution proceedings is not governed by that agreement. 2. Where there is a European resolution college established in accordance with Article 89, it shall take a joint decision on whether to recognise, except as provided for in Article 95, third-country resolution proceedings relating to a third-country institution or a parent undertaking that: (a) has Union subsidiaries established in, or Union branches located in and regarded as significant by, two or more Member States; or (b) has assets, rights or liabilities located in two or more Member States or are governed by the law of those Member States. Where there is a European resolution college established in accordance with Article 89, it shall take a joint decision on whether to recognise, except as provided for in Article 95, third-country resolution proceedings relating to a third-country institution or a parent undertaking that: (a) has Union subsidiaries established in, or Union branches located in and regarded as significant by, two or more Member States; or (b) has assets, rights or liabilities located in two or more Member States or are governed by the law of those Member States. Where the joint decision on the recognition of the third-country resolution proceedings is reached, respective national resolution authorities shall seek the enforcement of the recognised third-country resolution proceedings in accordance with their national law. 3. In the absence of a joint decision between the resolution authorities participating in the European resolution college, or in the absence of a European resolution college, each resolution authority concerned shall make its own decision on whether to recognise and enforce, except as provided for in Article 95, third-country resolution proceedings relating to a third-country institution or a parent undertaking. The decision shall give due consideration to the interests of each individual Member State where a third-country institution or parent undertaking operates, and in particular to the potential impact of the recognition and enforcement of the third-country resolution proceedings on the other parts of the group and the financial stability in those Member States. 4. Member States shall ensure that resolution authorities are, as a minimum, empowered to do the following: exercise the resolution powers in relation to the following: (i) assets of a third-country institution or parent undertaking that are located in their Member State or governed by the law of their Member State; (ii) rights or liabilities of a third-country institution that are booked by the Union branch in their Member State or governed by the law of their Member State, or where claims in relation to such rights and liabilities are enforceable in their Member State; exercise the resolution powers in relation to the following: (i) assets of a third-country institution or parent undertaking that are located in their Member State or governed by the law of their Member State; (ii) rights or liabilities of a third-country institution that are booked by the Union branch in their Member State or governed by the law of their Member State, or where claims in relation to such rights and liabilities are enforceable in their Member State; (b) perfect, including to require another person to take action to perfect, a transfer of shares or other instruments of ownership in a Union subsidiary established in the designating Member State; (c) exercise the powers in Article 69, 70 or 71 in relation to the rights of any party to a contract with an entity referred to in paragraph 2 of this Article, where such powers are necessary in order to enforce third-country resolution proceedings; and (d) render unenforceable any right to terminate, liquidate or accelerate contracts, or affect the contractual rights, of entities referred to in paragraph 2 and other group entities, where such a right arises from resolution action taken in respect of the third-country institution, parent undertaking of such entities or other group entities, whether by the third-country resolution authority itself or otherwise pursuant to legal or regulatory requirements as to resolution arrangements in that country, provided that the substantive obligations under the contract, including payment and delivery obligations, and provision of collateral, continue to be performed. 5. Resolution authorities may take, where necessary in the public interest, resolution action with respect to a parent undertaking where the relevant third-country authority determines that an institution that is incorporated in that third country meets the conditions for resolution under the law of that third country. To that end, Member States shall ensure that resolution authorities are empowered to use any resolution power in respect of that parent undertaking, and Article 68 shall apply. 6. The recognition and enforcement of third-country resolution proceedings shall be without prejudice to any normal insolvency proceedings under national law applicable, where appropriate, in accordance with this Directive.
Article 95 Right to refuse recognition or enforcement of third-country resolution proceedings
The resolution authority, after consulting other resolution authorities, where a European resolution college is established under Article 89, may refuse to recognise or to enforce third-country resolution proceedings pursuant to Article 94(2) if it considers: (a) that the third-country resolution proceedings would have adverse effects on financial stability in the Member State in which the resolution authority is based or that the proceedings would have adverse effects on financial stability in another Member State; (b) that independent resolution action under Article 96 in relation to a Union branch is necessary to achieve one or more of the resolution objectives; (c) that creditors, including in particular depositors located or payable in a Member State, would not receive the same treatment as third-country creditors and depositors with similar legal rights under the third-country home resolution proceedings; (d) that recognition or enforcement of the third-country resolution proceedings would have material fiscal implications for the Member State; or (e) that the effects of such recognition or enforcement would be contrary to the national law.
Article 96 Resolution of Union branches
1. Member States shall ensure that resolution authorities have the powers necessary to act in relation to a Union branch that is not subject to any third-country resolution proceedings or that is subject to third-country proceedings and one of the circumstances referred to in Article 95 applies. Member States shall ensure that Article 68 applies to the exercise of such powers. 2. Member States shall ensure that the powers required in paragraph 1 may be exercised by resolution authorities where the resolution authority considers that action is necessary in the public interest and one or more of the following conditions is met: (a) the Union branch no longer meets, or is likely not to meet, the conditions imposed by national law for its authorisation and operation within that Member State and there is no prospect that any private sector, supervisory or relevant third-country action would restore the branch to compliance or prevent failure in a reasonable timeframe; (b) the third-country institution is, in the opinion of the resolution authority, unable or unwilling, or is likely to be unable, to pay its obligations to Union creditors, or obligations that have been created or booked through the branch, as they fall due and the resolution authority is satisfied that no third-country resolution proceedings or insolvency proceedings have been or will be initiated in relation to that third-country institution in a reasonable timeframe; (c) the relevant third-country authority has initiated third-country resolution proceedings in relation to the third-country institution, or has notified to the resolution authority its intention to initiate such a proceeding. 3. Where a resolution authority takes an independent action in relation to a Union branch, it shall have regard to the resolution objectives and take the action in accordance with the following principles and requirements, insofar as they are relevant: (a) the principles set out in Article 34; (b) the requirements relating to the application of the resolution tools in Chapter III of Title IV.
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 96 Resolution of Union branches):
1. Member States shall ensure that resolution authorities have the powers necessary to act in relation to a Union branch that is not subject to any third-country resolution proceedings or that is subject to third-country proceedings and one of the circumstances referred to in Article 95 applies. Member States shall ensure that Article 68 applies to the exercise of such powers. 2. Member States shall ensure that the powers required in paragraph 1 may be exercised by resolution authorities where the resolution authority considers that action is necessary in the public interest and one or more of the following conditions is met: (a) the Union branch no longer meets, or is likely not to meet, the conditions imposed by national law for its authorisation and operation within that Member State and there is no prospect that any private sector, supervisory or relevant third-country action would restore the branch to compliance or prevent failure in a reasonable timeframe; (b) the third-country institution is, in the opinion of the resolution authority, unable or unwilling, or is likely to be unable, to pay its obligations to Union creditors, or obligations that have been created or booked through the branch, as they fall due and the resolution authority is satisfied that no third-country resolution proceedings or insolvency proceedings have been or will be initiated in relation to that third-country institution in a reasonable timeframe; (c) the relevant third-country authority has initiated third-country resolution proceedings in relation to the third-country institution, or has notified to the resolution authority its intention to initiate such a proceeding. 3. Where a resolution authority takes an independent action in relation to a Union branch, it shall have regard to the resolution objectives and take the action in accordance with the following principles and requirements, insofar as they are relevant: (a) the principles set out in Article 34; (b) the requirements relating to the application of the resolution tools in Chapter III of Title IV. Where a resolution authority takes an independent action in relation to a Union branch, it shall have regard to the resolution objectives and take the action in accordance with the following principles and requirements, insofar as they are relevant: (a) the principles set out in Article 34; (b) the requirements relating to the application of the resolution tools in Chapter III of Title IV.
Article 97 Cooperation with third-country authorities
1. This Article shall apply in respect of cooperation with a third country unless and until an international agreement as referred to in Article 93(1) enters into force with the relevant third country. It shall also apply following the entry into force of an international agreement provided for in Article 93(1) with the relevant third country to the extent that the subject matter of this Article is not governed by that agreement. 2. EBA may conclude non-binding framework cooperation arrangements with the following relevant third-country authorities: (a) in cases where a Union subsidiary is established in two or more Member States, the relevant authorities of the third country where the parent undertaking or a company referred to in points (c) and (d) of Article 1(1) are established; (b) in cases where a third-country institution operates Union branches in two or more Member States, the relevant authority of the third country where that institution is established; (c) in cases where a parent undertaking or a company referred to in points (c) and (d) of Article 1(1) established in a Member State with a subsidiary institution or significant branch in another Member State also has one or more third-country subsidiary institutions, the relevant authorities of the third countries where those subsidiary institutions are established; (d) in cases where an institution with a subsidiary institution or significant branch in another Member State has established one or more branches in one or more third countries, the relevant authorities of the third countries where those branches are located. The arrangements referred to in this paragraph shall not make provision in relation to specific institutions. They shall not impose legal obligations upon Member States. 3. The framework cooperation agreements referred to in paragraph 2 shall establish processes and arrangements between the participating authorities for sharing information necessary for and cooperation in carrying out some or all or the following tasks and exercising some or all of the following powers in relation to institutions referred to in points (a) to (d) of paragraph 2 or groups including such institutions: (a) the development of resolution plans in accordance with Articles 10 to 13 and similar requirements under the law of the relevant third countries; (b) the assessment of the resolvability of such institutions and groups, in accordance with Articles 15 and 16 and similar requirements under the law of the relevant third countries; (c) the application of powers to address or remove impediments to resolvability pursuant to Articles 17 and 18 and any similar powers under the law of the relevant third countries; (d) the application of early intervention measures pursuant to Article 27 and similar powers under the law of the relevant third countries; (e) the application of resolution tools and exercise of resolution powers and similar powers exercisable by the relevant third-country authorities. 4. Competent authorities or resolution authorities, where appropriate, shall conclude non-binding cooperation arrangements in line with EBA framework arrangement with the relevant third-country authorities indicated in paragraph 2. This Article shall not prevent Member States or their competent authorities from concluding bilateral or multilateral arrangements with third countries, in accordance with Article 33 of Regulation (EU) No 1093/2010. 5. Cooperation arrangements concluded between resolution authorities of Member States and third countries in accordance with this Article may include provisions on the following matters: (a) the exchange of information necessary for the preparation and maintenance of resolution plans; (b) consultation and cooperation in the development of resolution plans, including principles for the exercise of powers under Articles 94 and 96 and similar powers under the law of the relevant third countries; (c) the exchange of information necessary for the application of resolution tools and exercise of resolution powers and similar powers under the law of the relevant third countries; (d) early warning to or consultation of parties to the cooperation arrangement before taking any significant action under this Directive or relevant third-country law affecting the institution or group to which the arrangement relates; (e) the coordination of public communication in the case of joint resolution actions; (f) procedures and arrangements for the exchange of information and cooperation under points (a) to (e), including, where appropriate, through the establishment and operation of crisis management groups. 6. Member States shall notify EBA of any cooperation arrangements that resolution authorities and competent authorities have concluded in accordance with 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 97 Cooperation with third-country authorities):
1. This Article shall apply in respect of cooperation with a third country unless and until an international agreement as referred to in Article 93(1) enters into force with the relevant third country. It shall also apply following the entry into force of an international agreement provided for in Article 93(1) with the relevant third country to the extent that the subject matter of this Article is not governed by that agreement. EBA may conclude non-binding framework cooperation arrangements with the following relevant third-country authorities: (b) in cases where a third-country institution operates Union branches in two or more Member States, the relevant authority of the third country where that institution is established; (d) in cases where an institution with a subsidiary institution or significant branch in another Member State has established one or more branches in one or more third countries, the relevant authorities of the third countries where those branches are located. The arrangements referred to in this paragraph shall not make provision in relation to specific institutions. They shall not impose legal obligations upon Member States. The framework cooperation agreements referred to in paragraph 2 shall establish processes and arrangements between the participating authorities for sharing information necessary for and cooperation in carrying out some or all or the following tasks and exercising some or all of the following powers in relation to institutions referred to in points (a) to (d) of paragraph 2 or groups including such institutions: (a) the development of resolution plans in accordance with Articles 10 to 13 and similar requirements under the law of the relevant third countries; (b) the assessment of the resolvability of such institutions and groups, in accordance with Articles 15 and 16 and similar requirements under the law of the relevant third countries; (c) the application of powers to address or remove impediments to resolvability pursuant to Articles 17 and 18 and any similar powers under the law of the relevant third countries; (d) the application of early intervention measures pursuant to Article 27 and similar powers under the law of the relevant third countries; (e) the application of resolution tools and exercise of resolution powers and similar powers exercisable by the relevant third-country authorities. 4. Competent authorities or resolution authorities, where appropriate, shall conclude non-binding cooperation arrangements in line with EBA framework arrangement with the relevant third-country authorities indicated in paragraph 2. This Article shall not prevent Member States or their competent authorities from concluding bilateral or multilateral arrangements with third countries, in accordance with Article 33 of Regulation (EU) No 1093/2010. 5. Cooperation arrangements concluded between resolution authorities of Member States and third countries in accordance with this Article may include provisions on the following matters: (a) the exchange of information necessary for the preparation and maintenance of resolution plans; (b) consultation and cooperation in the development of resolution plans, including principles for the exercise of powers under Articles 94 and 96 and similar powers under the law of the relevant third countries; (c) the exchange of information necessary for the application of resolution tools and exercise of resolution powers and similar powers under the law of the relevant third countries; (d) early warning to or consultation of parties to the cooperation arrangement before taking any significant action under this Directive or relevant third-country law affecting the institution or group to which the arrangement relates; (e) the coordination of public communication in the case of joint resolution actions; (f) procedures and arrangements for the exchange of information and cooperation under points (a) to (e), including, where appropriate, through the establishment and operation of crisis management groups. 6. Member States shall notify EBA of any cooperation arrangements that resolution authorities and competent authorities have concluded in accordance with this Article.
Article 98 Exchange of confidential information
1. Member States shall ensure that resolution authorities, competent authorities and competent ministries exchange confidential information, including recovery plans, with relevant third-country authorities only if the following conditions are met: (a) those third-country authorities are subject to requirements and standards of professional secrecy at least considered to be equivalent, in the opinion of all the authorities concerned, to those imposed by Article 84. In so far as the exchange of information relates to personal data, the handling and transmission of such personal data to third-country authorities shall be governed by the applicable Union and national data protection law. (b) the information is necessary for the performance by the relevant third-country authorities of their resolution functions under national law that are comparable to those under this Directive and, subject to point (a) of this paragraph, is not used for any other purposes. 2. Where confidential information originates in another Member State, resolution authorities, competent authorities and competent ministries shall not disclose that information to relevant third-country authorities unless the following conditions are met: (a) the relevant authority of the Member State where the information originated (the originating authority) agrees to that disclosure; (b) the information is disclosed only for the purposes permitted by the originating authority. 3. For the purposes of this Article, information is deemed to be confidential if it is subject to confidentiality requirements under Union 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 98 Exchange of confidential information):
1. Member States shall ensure that resolution authorities, competent authorities and competent ministries exchange confidential information, including recovery plans, with relevant third-country authorities only if the following conditions are met: (a) those third-country authorities are subject to requirements and standards of professional secrecy at least considered to be equivalent, in the opinion of all the authorities concerned, to those imposed by Article 84. In so far as the exchange of information relates to personal data, the handling and transmission of such personal data to third-country authorities shall be governed by the applicable Union and national data protection law. those third-country authorities are subject to requirements and standards of professional secrecy at least considered to be equivalent, in the opinion of all the authorities concerned, to those imposed by Article 84. In so far as the exchange of information relates to personal data, the handling and transmission of such personal data to third-country authorities shall be governed by the applicable Union and national data protection law. (b) the information is necessary for the performance by the relevant third-country authorities of their resolution functions under national law that are comparable to those under this Directive and, subject to point (a) of this paragraph, is not used for any other purposes. 2. Where confidential information originates in another Member State, resolution authorities, competent authorities and competent ministries shall not disclose that information to relevant third-country authorities unless the following conditions are met: (a) the relevant authority of the Member State where the information originated (the originating authority) agrees to that disclosure; (b) the information is disclosed only for the purposes permitted by the originating authority. Where confidential information originates in another Member State, resolution authorities, competent authorities and competent ministries shall not disclose that information to relevant third-country authorities unless the following conditions are met: (a) the relevant authority of the Member State where the information originated (the originating authority) agrees to that disclosure; (b) the information is disclosed only for the purposes permitted by the originating authority. 3. For the purposes of this Article, information is deemed to be confidential if it is subject to confidentiality requirements under Union law.
Article 99 European system of financing arrangements
A European system of financing arrangements shall be established and shall consist of: (a) national financing arrangements established in accordance with Article 100; (b) the borrowing between national financing arrangements as specified in Article 106, (c) the mutualisation of national financing arrangements in the case of a group resolution as referred to in Article 107.