Article 4
Common provisions
1. Resolution authorities shall not exclude a liability or class of liabilities from bail-in unless they fall within the list of liabilities in Article 44(2) of Directive 2014/59/EU.
2. A decision by the resolution authority to exclude a liability or class of liabilities from the application of the bail-in tool pursuant to Article 44(3) of Directive 2014/59/EU shall be based on a case-by-case analysis of the institution under resolution and shall not be automatic.
3. When considering exclusions pursuant to Article 44(3) of Directive 2014/59/EU and before completely excluding a liability or class of liabilities from bail-in, the resolution authority shall first consider the option to partially exclude that liability by limiting the extent of their write-down wherever possible.
4. In its determination as to whether a liability should be excluded pursuant to Article 44(3) Directive 2014/59/EU, the resolution authority shall assess whether the conditions therein are met at the time of the application of the bail-in tool to the institution. That assessment shall be without prejudice to the obligation of the resolution authority to follow the resolution plan as set out in Article 87 of Directive 2014/59/EU.
5. The decision to exclude a liability or class of liabilities from the application of bail-in pursuant to Article 44(3) of Directive 2014/59/EU shall be based on at least one of the resolution objectives described under Article 31(2) of that Directive.
6. The decision to exclude or partially exclude a liability or class of liabilities from the application of the bail-in tool pursuant to Article 44(3) of Directive 2014/59/EU which would imply the use of the resolution fund, shall be duly justified, taking into account the need for expedience as warranted by the circumstances of the specific case.
7. Where the resolution authority has assumed that a liability or class of liabilities would credibly and feasibly contribute to loss absorption and recapitalisation, and that those liabilities would not meet the requirements for exclusion under Article 44(3), that resolution authority shall explain each of the following if it then decides to exclude or partially exclude a liability or class of liabilities pursuant to Article 44(3) which would involve passing losses onto the resolution fund:
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(a) |
the exceptional circumstances which differ from those at the moment of resolution planning to the effect that those liabilities need to be excluded from bail-in at the moment of taking resolution action; |
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(b) |
why the need for exclusion and, in particular, the exceptional circumstances leading to it could not be foreseen in the course of resolution planning; |
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(c) |
if the need for exclusion was provided for in the resolution plan, how the resolution authority addressed this need to avoid it constituting an impediment to resolvability. |
8. When deciding whether to exclude or partially exclude a liability or class of liabilities pursuant to Article 44(3)(a) of Directive 2014/59/EU, if the exclusion would involve passing losses onto the resolution fund, the resolution authority shall also explain:
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(a) |
how/whether the requirements laid down in Articles 5 and 6 of this Regulation are satisfied; and |
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(b) |
why the need for exclusion could not be addressed by an appropriate method of valuation pursuant to Article 36 of Directive 2014/59/EU. |
9. When deciding whether to exclude or partially exclude a liability or class of liabilities in order to preserve the continuity of critical functions and core business lines pursuant to Article 44(3)(b) of Directive 2014/59/EU, if the exclusion would involve passing losses onto the resolution fund the resolution authority shall also explain:
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(a) |
how/whether the requirements laid down in Article 7 of this Regulation are satisfied. |
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(b) |
why the liabilities to be excluded are more relevant for the continuity of clearly specified critical functions or core business lines than liabilities which are not to be excluded. |
10. Where the resolution authority excludes or partially excludes a liability or class of liabilities in order to avoid widespread contagion pursuant to Article 44(3)(c) of Directive 2014/59/EU, if the exclusion would involve passing losses onto the resolution fund the resolution authority shall also explain:
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(a) |
how/whether the requirements laid down in Article 8 of this Regulation are satisfied; |
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(b) |
the reasons why the excluded liabilities have a higher likelihood of causing widespread contagion of the type described in Article 44(3)(c) of Directive 2014/59/EU than those not excluded. |
11. Where the resolution authority excludes or partially excludes a liability or class of liabilities pursuant to Article 44(3)(d) of Directive 2014/59/EU, if the exclusion would involve passing losses onto the resolution fund the resolution authority shall also explain how/whether the requirements laid down in Article 9 of this Regulation are satisfied.