Article 27
General provisions on resolution tools
1. Resolution authorities shall take resolution actions referred to in Article 21 by applying any of the following resolution tools individually or in any combination:
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(a) |
the position and loss allocation tools; |
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(b) |
the write-down and conversion tool; |
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(c) |
the sale of business tool; |
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(d) |
the bridge CCP tool. |
2. In the event of a systemic crisis, a Member State may as a last resort provide extraordinary public financial support by applying government stabilisation tools in accordance with Articles 45, 46 and 47 on the condition of prior and final approval under the Union State aid framework and where credible arrangements for the timely and comprehensive recovery of the funds in accordance with paragraph 10 of this Article are provided for.
3. Prior to the application of the tools referred to in paragraph 1, the resolution authority shall enforce:
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(a) |
any existing and outstanding rights of the CCP, including any contractual obligations by clearing members to meet recovery cash calls, to provide additional resources to the CCP, or to take on positions of defaulting clearing members, whether through an auction or other agreed means in the CCP’s operating rules; |
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(b) |
any existing and outstanding contractual obligation committing parties other than clearing members to any forms of financial support. |
The resolution authority may partially enforce the contractual obligations referred to in points (a) and (b) where it is not possible to enforce those contractual obligations in full within a reasonable timeframe.
4. By way of derogation from paragraph 3, the resolution authority may refrain from enforcing the relevant existing and outstanding obligations either partially or in full to avoid significant adverse effects on the financial system or widespread contagion, or where the application of the tools referred to in paragraph 1 is more appropriate in order to achieve the resolution objectives in a timely manner.
5. In the event that the resolution authority refrains partially or fully from enforcing existing and outstanding obligations as set out in the second subparagraph of paragraph 3 or in paragraph 4 of this Article, the resolution authority may enforce the remaining obligations within 18 months after the CCP is considered to be failing or likely to fail in accordance with Article 22, provided that the reasons for refraining from enforcing those obligations no longer exist. The resolution authority shall notify the clearing member and other party three to six months before enforcing the remaining obligation. The proceeds from the enforced remaining obligations shall be used to recover the use of public funds.
The resolution authority shall, after consultation with the competent authorities and resolution authorities of the affected clearing members and any other parties committed by existing and outstanding obligations, determine whether the reasons for refraining from enforcing the existing and outstanding obligations have ceased to exist and whether to enforce remaining obligations. Where the resolution authority deviates from the views expressed by the authorities consulted, it shall provide duly justified reasons, in writing, for doing so.
The requirement to meet the remaining obligations in the circumstances referred to in this paragraph shall be included in the CCP’s rules and other contractual arrangements.
6. The resolution authority may require the CCP to compensate non-defaulting clearing members for their losses stemming from the application of loss allocation tools, where those losses are in excess of the losses that the non-defaulting clearing member would have borne under their obligations under the CCP’s operating rules, provided that the non-defaulting clearing member would have been entitled to the payment of the difference referred to in Article 62.
The compensation referred to in the first subparagraph may take the form of instruments of ownership, debt instruments or instruments recognising a claim on the CCP’s future profits.
The amount of instruments issued to each affected non-defaulting clearing member shall be proportionate to the excess loss referred to in the first subparagraph. It shall take account of any outstanding contractual obligations of the clearing members toward the CCP and be deducted from any entitlement to the payment of the difference referred to in Article 62.
The amount of instruments shall be based on the valuation conducted in accordance with Article 24(3).
7. Where one of the government stabilisation tools is applied, the resolution authority shall exercise the power to write down and convert any instruments of ownership and debt instruments or other unsecured liabilities before or together with the application of the government stabilisation tool.
Where the application of a resolution tool other than the write-down and conversion tool results in financial losses being borne by clearing members, the resolution authority shall exercise the power to write down and convert any instruments of ownership and debt instruments or other unsecured liabilities immediately before or together with the application of the resolution tool, unless applying a different sequence would minimise deviations from the ‘no creditor worse off’ principle set out in Article 60 and better achieve the resolution objectives.
8. Where only the resolution tools referred to in points (c) and (d) of paragraph 1 of this Article are applied, and only part of the assets, rights, obligations or liabilities of the CCP under resolution are transferred in accordance with Articles 40 and 42, the residual part of that CCP shall be wound up in accordance with normal insolvency proceedings.
9. National insolvency law rules relating to the voidability or unenforceability of legal acts detrimental to creditors shall not apply to transfers of assets, rights, obligations or liabilities from a CCP in relation to which resolution tools or government financial stabilisation tools are applied.
10. Member States shall recover over an appropriate period any public funds used as government financial stabilisation tools as referred to in Section 7 of this Chapter and resolution authorities shall recover any reasonable expenses incurred by them in connection with the application of the resolution tools or powers. Such recovery shall, inter alia, come from:
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(a) |
the CCP under resolution, as a preferred creditor, including any of its claims against defaulting clearing members; |
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(b) |
any consideration paid by the purchaser to the CCP, as a preferred creditor prior to the application of Article 40(4), where the sale of business tool has been applied; |
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(c) |
any proceeds generated as a result of the termination of the bridge CCP, as a preferred creditor prior to the application of Article 42(5); |
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(d) |
any proceeds generated by the application of the public equity support tool referred to in Article 46 and the temporary public ownership tool referred to in Article 47, including the proceeds generated from their sale. |
11. When applying the resolution tools, resolution authorities shall ensure, on the basis of a valuation that complies with Article 25, the restoration of a matched book, the full allocation of losses, the replenishment of the pre-funded resources of the CCP or the bridge CCP, and the recapitalisation of the CCP or the bridge CCP.
Resolution authorities shall ensure the replenishment of the pre-funded resources and the recapitalisation of the CCP or the bridge CCP as referred to in the first subparagraph, to an extent sufficient to restore the ability of the CCP or the bridge CCP to comply with the conditions for authorisation and to continue to carry out the critical functions of the CCP or the bridge CCP, taking into account the operating rules of the CCP or the bridge CCP.
Notwithstanding the application of other resolution tools, resolution authorities may apply the tools referred to in Articles 30 and 31 to recapitalise the CCP.