Article 33
Provisions governing the write-down or conversion of instruments of ownership and debt instruments or other unsecured liabilities
1. The resolution authority shall apply the write-down and conversion tool in accordance with the priority of claims applicable under normal insolvency proceedings.
2. Prior to reducing or converting the principal amount of debt instruments or other unsecured liabilities, the resolution authority shall reduce the nominal amount of instruments of ownership in proportion to the losses and up to their full value, where necessary.
Where, in accordance with the valuation carried out pursuant to Article 24(3), the CCP maintains a positive net value after the reduction of the nominal amount of instruments of ownership, the resolution authority shall cancel or dilute, as the case may be, those instruments of ownership.
3. The resolution authority shall reduce, convert, or both, the principal amount of debt instruments or other unsecured liabilities to the extent required to achieve the resolution objectives, and up to the full value of those instruments or liabilities, where necessary.
4. The resolution authority shall not apply the write-down and conversion tool in respect of the following liabilities:
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(a) |
liabilities to employees, in relation to accrued salary, pension benefits or other fixed remuneration, except for any variable component of remuneration that is not regulated by a collective bargaining agreement; |
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(b) |
liabilities to commercial or trade creditors arising from the provision to the CCP of goods or services that are critical to the daily functioning of its operations, including IT services, utilities and the rental, servicing and upkeep of premises; |
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(c) |
liabilities to tax and social security authorities, provided that those liabilities are preferred liabilities under the applicable insolvency law; |
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(d) |
liabilities owed to systems or operators of systems designated according to Directive 98/26/EC, to participants to the extent that the liabilities result from their participation in such systems, to other CCPs, and to central banks; |
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(e) |
5. Where the nominal amount of an instrument of ownership or the principal amount of a debt instrument or other unsecured liabilities is reduced, the following conditions shall apply:
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(a) |
that reduction shall be permanent; |
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(b) |
the holder of the instrument shall have no claim in connection with that reduction, except for any liability already accrued, any liability for damages that may arise as a result of an appeal challenging the legality of that reduction, any claim based on instruments of ownership issued or transferred pursuant to paragraph 6 of this Article, or any claim for payment in accordance with Article 62; and |
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(c) |
where that reduction is only partial, the agreement that created the original liability shall continue to apply in respect of the residual amount subject to any necessary amendments of the terms of that agreement due to the reduction. |
Point (a) of the first subparagraph shall not prevent resolution authorities from applying a write-up mechanism to reimburse holders of debt instruments or other unsecured liabilities and then holders of instruments of ownership, where the level of write-down applied based on the provisional valuation referred to in Article 26(1) is found to exceed the amounts required based on the definitive valuation referred to in Article 26(2).
6. Where converting debt instruments or other unsecured liabilities pursuant to paragraph 3, the resolution authority may require the CCP to issue or to transfer instruments of ownership to the holders of the debt instruments or other unsecured liabilities.
7. The resolution authority shall only convert debt instruments or other unsecured liabilities pursuant to paragraph 3 where the following conditions are met:
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(a) |
the instruments of ownership are issued prior to any issuance of instruments of ownership by the CCP for the purposes of provision of own funds by the State or a government entity; and |
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(b) |
the conversion rate represents appropriate compensation to the affected debt holders for any loss incurred as a result of the exercise of the write-down and conversion powers, in line with their treatment under normal insolvency proceedings. |
Following any conversion of debt instruments or other unsecured liabilities to instruments of ownership, the latter shall be subscribed or transferred without delay after the conversion.
8. For the purposes of paragraph 7, the resolution authority shall ensure, in the context of drawing up and maintaining the CCP’s resolution plan and as part of the powers to remove impediments to the resolvability of the CCP, that the CCP is at all times able to issue the necessary number of instruments of ownership.