Article 8
Exclusion on grounds of avoidance of widespread contagion under Article 44(3)(c) of Directive 2014/59/EU
1. When considering exclusions based on the risk of direct contagion pursuant to Article 44(3)(c) of Directive 2014/59/EU, resolution authorities should assess, to the maximum extent possible, the interconnectedness of the institution under resolution with its counterparties.
The assessment referred to in the first subparagraph shall include all of the following:
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(a) |
consideration of exposures to relevant counterparties with regard to the risk that bail-in of such exposures might cause knock-on failures; |
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(b) |
the systemic importance of counterparties which are at risk of failing, in particular with regard to other financial market participants and financial market infrastructure providers. |
2. When considering exclusions based on the risk of indirect contagion pursuant to Article 44(3)(c) of Directive 2014/59/EU, the resolution authority shall assess, to the maximum extent possible, the need and proportionality of the exclusion based on multiple objective relevant indicators. Indicators which may be relevant to the case include the following:
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(a) |
number, size and interconnectedness of institutions with similar characteristics as the institution under resolution, insofar as that could give rise to widespread lack of confidence in the banking sector or the broader financial system; |
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(b) |
the number of natural persons directly and indirectly affected by the bail-in, visibility and press coverage of the resolution action, insofar as that has a significant risk of undermining overall confidence in the banking or broader financial system; |
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(c) |
the number, size, interconnectedness of counterparties affected by the bail-in, including market participants from the non-banking sector, and the importance of critical functions performed by these counterparties; |
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(d) |
the ability of the counterparties to access alternative service providers for functions which have been assessed as substitutable, given the specific situation; |
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(e) |
whether a significant number of counterparties would withdraw funding or cease making transactions with other institutions following the bail-in, or whether markets would cease functioning properly as a consequence of the bail-in of such market participants, in particular in the event of generalised loss of market confidence or panic; |
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(f) |
widespread withdrawal of short-term funding or deposits in significant amounts; |
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(g) |
the number, size or significance of institutions which are at risk of meeting the conditions for early intervention, or meeting the conditions of failing or likely to fail pursuant to Article 32(4) of Directive 2014/59/EU; |
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(h) |
the risk of a significant discontinuance of critical functions or a significant increase in prices for the provision of such functions (as evident from changes in market conditions for such functions or their availability), or the expectation of counterparties and other market participants; |
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(i) |
widespread significant decreases in share prices of institutions or in prices of assets held by institutions, in particular where they can have an impact on the capital situation of institutions; |
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(j) |
general and widespread significant reduction in short or medium term funding available to institutions; |
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(k) |
significant impairment to the functioning of the interbank funding market, as apparent from a significant increase of margin requirements and decrease of collateral available to institutions; |
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(l) |
widespread and significant increases in prices for credit default insurance or deterioration in credit ratings of institutions or other market participants which are relevant for the financial situation of institutions. |