(1)

Article 55(2), first subparagraph, of Directive 2014/59/EU requires Member States to ensure that where an institution or entity referred to in Article 1(1), points (b), (c) and (d) of that Directive reaches the determination that it is legally or otherwise impracticable to include in the contractual provisions governing a relevant liability the contractual term referred to in Article 55(1) of Directive 2014/59/EU (‘the contractual term’), that institution or entity is to notify its determination to the resolution authority.

(2)

The conditions under which it would be legally or otherwise impracticable for an institution or entity to include the contractual term in certain categories of liabilities should be defined in a way that allows for an appropriate level of convergence, while at the same time enabling resolution authorities to take into account differences in relevant markets.

(3)

Institutions or entities should not be required to include, in the contractual provisions governing a relevant liability, the contractual term, where such inclusion would be illegal in the relevant third country. This could be the case where, for example, the laws, or instructions from the authorities of the third country do not allow for such terms. It should also be considered as impracticable for an institution or entity to include the contractual term in an agreement or instrument where that institution or entity is unable to amend those contractual provisions. This is often the case where agreements or instruments are concluded in accordance with international standardised terms or protocols setting uniform terms and conditions for such kinds of agreements or instruments. Trade finance products, such as guarantees, counter-guarantees, letters of credit or other instruments used in the context of supporting or funding trade transactions are typically issued subject to internationally recognised standard terms or rules set by an internationally recognised industry organisation or developed based on standard bilateral customs. Impracticability might also arise where the institution or entity concludes financial services provision contracts with non-Union bodies, including financial service providers, trading venues, financial market infrastructures or custodians that use standard terms that cannot be negotiated by the institution or entity.

(4)

In any event, the unwillingness alone of the counterparty to include the contractual terms or an increase in the price of the instrument or agreement alone should not be considered as a condition of impracticability of including the contractual term.

(5)

In accordance with Article 55(2), third subparagraph, of Directive 2014/59/EU, even in the absence of impracticability conditions, a resolution authority may decide not to require the relevant institution or entity to include the contractual term where it considers that such inclusion is not necessary to ensure the resolvability of the institution or entity. The conclusions of the analysis of the impact on resolvability for the purposes of Article 55 of Directive 2014/59/EU, should be consistent with those under the resolvability assessment as laid down in Title II, Chapter II, of that Directive. However, for the purposes of the assessment of the impact on resolvability in accordance with Article 55(2), third subparagraph, of Directive 2014/59/EU, agreements or instruments creating liabilities with long maturities or high nominal values should be considered necessary to ensure resolvability. The inclusion of such contractual terms should, therefore, not be waived when such inclusion does not meet the conditions of impracticability. Regarding other agreements or instruments creating liabilities, when assessing their impact on resolvability, resolution authorities should have due regard to a number of relevant elements but should be allowed, as appropriate depending on the specific circumstances, to assess any additional element they may consider necessary.

(6)

After receiving a complete notification of impracticability, a resolution authority should have a reasonable timeframe to evaluate it. Notifications can vary in complexity. It is therefore appropriate that a resolution authority is allowed to extend the timeframe for requiring the inclusion of the contractual term for a predetermined period of time as regards complex notifications. Such an extension should be duly notified to the relevant institution or entity. Considering the novel nature of the notification and its assessment, resolution authorities should be allowed to extend the timeframe to assess complex notifications for six additional months during the first year after the entry into force of this Regulation. After this period, resolution authorities should be allowed to extend the timeframe for the assessment of complex notifications for three months.

(7)

This Regulation is based on the draft regulatory technical standards submitted to the Commission by the European Banking Authority.

(8)

The European Banking Authority has conducted open public consultations on the draft regulatory technical standards on which this Regulation is based, analysed the potential related costs and benefits and requested the advice of the Banking Stakeholder Group established in accordance with Article 37 of Regulation (EU) No 1093/2010 of the European Parliament and of the Council (2),