S.L. 330.9 Art. 36Valuation for the purposes of resolution.

(1) Before taking resolution action or exercising the power to write down or convert relevant capital instruments,and eligible liabilities in accordance with regulation 59, the Resolution

Committee shall ensure that a fair, prudent and realistic valuation of the assets and liabilities of the institution or entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1) is carried out by a person independent from any public authority, including the Resolution Committee, and the institution or entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1). Subject to sub-regulation (13) and to regulation 85, where all the requirements laid down in this regulation are met, the valuation shall be considered to be definitive.

(2) Where an independent valuation according to sub-regulation (1) is not possible, the Resolution Committee may carry out a provisional valuation of the assets and liabilities of the institution or entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1), in accordance with sub-regulation (9).

(3) The objective of the valuation shall be to assess the value of the assets and liabilities of the institution or entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1) that meets the conditions for resolution of regulations 32 and 33.

(4) The purposes of the valuation shall be:

(a) to inform the determination of whether the conditions for resolution or the conditions for the write-down or conversion of capital instruments and eligible liabilities in accordance with regulation 59 are met;

(b) if the conditions for resolution are met, to inform the decision on the appropriate resolution action to be taken in respect of the institution or entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1);

(c) when the power to write down or convert relevant capital instruments and eligible liabilities in accordance with regulation 59 is applied, to inform the decision on the extent of the cancellation or dilution of shares or other instruments of ownership, and the extent of the write-down or conversion of relevant capital instruments and eligible liabilities in accordance with regulation 59;

(d) when the bail-in tool is applied, to inform the decision on the extent of the write-down or conversion of bail-inable liabilities;

(e) when the bridge institution tool or asset separation tool is applied, to inform the decision on the assets, rights, liabilities or shares or other instruments of ownership to be transferred and the decision on the value of any consideration to be paid to the institution under resolution or, as the case may be, to the owners of the shares or other instruments of ownership;

(f) when the sale of business tool is applied, to inform the decision on the assets, rights, liabilities or shares or other instruments of ownership to be transferred and to inform the Resolution Committee’s understanding of what constitutes commercial terms for the purposes of regulation 38;

(g) in all cases, to ensure that any losses on the assets of the institution or entity referred to in paragraphs (b),

(c) or (d) of the definition "entity" in regulation 2(1) are fully recognised at the moment the resolution tools are applied or the power to write down or convert relevant capital instruments is exercised and eligible liabilities in accordance with regulation 59.

(5) Without prejudice to the Union State aid framework, where applicable, the valuation shall be based on prudent assumptions, including as to rates of default and severity of losses. The valuation shall not assume any potential future provision of extraordinary public financial support or central bank emergency liquidity assistance or any central bank liquidity assistance provided under non-standard collateralisation, tenor and interest rate terms to the institution or entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1) from the point at which resolution action is taken or the power to write down or convert relevant capital instruments and eligible liabilities in accordance with regulation 59 is exercised. Furthermore, the valuation shall take account of the fact that, if any resolution tool is applied:

(a) the Resolution Committee and any financing arrangement acting pursuant to regulation 101 may recover any reasonable expenses properly incurred from the institution under resolution, in accordance with regulation 37(7);

(b) the resolution financing arrangement may charge interest or fees in respect of any loans or guarantees provided to the institution under resolution, in accordance with regulation 101.

(6) The valuation shall be supplemented by the following information as appearing in the accounting books and records of the institution or entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1):

(a) an updated balance sheet and a report on the financial position of the institution or entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1);

(b) an analysis and an estimate of the accounting value of the assets;

(c) the list of outstanding on balance sheet and off-balance sheet liabilities shown in the books and records of the institution or entity referred to in paragraphs (b), (c) or

(d) of the definition "entity" in regulation 2(1), with an indication of the respective credits and priority levels under the applicable insolvency law.

(7) Where appropriate, to inform the decisions referred to in sub-regulation (4)(e) and (f), the information in sub-regulation (6)(b) may be complemented by an analysis and estimate of the value of the assets and liabilities of the institution or entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1) on a market value basis.

(8) The valuation shall indicate the subdivision of the creditors in classes in accordance with their priority levels under the applicable insolvency law and an estimate of the treatment that each class of shareholders and creditors would have been expected to receive, if the institution or entity referred to in paragraphs (b),

(c) or (d) of the definition "entity" in regulation 2(1) were wound up under normal insolvency proceedings: Provided that, that estimate shall not affect the application of the "no creditor worse off" principle to be carried out under regulation 74.

(9) Where due to the urgency in the circumstances of the case it is not possible to comply with the requirements in sub-regulations

(6) and (8) or sub-regulation (2) applies, a provisional valuation shall be carried out. The provisional valuation shall comply with the requirements in sub-regulation (3) and in so far as reasonably practicable in the circumstances with the requirements of sub-regulations (1), (6) and (8). The provisional valuation referred to in this sub-regulation shall include a buffer for additional losses, with appropriate justification.

(10) A valuation that does not comply with all the requirements laid down in this regulation shall be considered to be provisional until an independent person has carried out a valuation that is fully compliant with all the requirements laid down in this regulation. That ex-post definitive valuation shall be carried out as soon as practicable. It may be carried out either separately from the valuation referred to in regulation 74, or simultaneously with and by the same independent person as that valuation, but shall be distinct from it. The purposes of the ex-post definitive valuation shall be:

(a) to ensure that any losses on the assets of the institution or entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1) are fully recognised in the books of accounts of the institution or entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1);

(b) to inform a decision to write back creditors’ claims or to increase the value of the consideration paid, in accordance with sub-regulation (11).

(11) In the event that the definitive valuation’s estimate ex-post of the net asset value of the institution or entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1) is higher than the provisional valuation’s estimate of the net asset value of the institution or entity referred to in paragraphs (b),

(c) or (d) of the definition "entity" in regulation 2(1), the Resolution Committee may:

(a) exercise its power to increase the value of the claims of creditors or owners of relevant capital instruments which have been written down under the bail-in tool;

(b) instruct a bridge institution or asset management vehicle to make a further payment of consideration in respect of the assets, rights, liabilities to the institution under resolution, or as the case may be, in respect of the shares or instruments of ownership to the owners of the shares or other instruments of ownership.

(12) Notwithstanding sub-regulation (1), a provisional valuation conducted in accordance with sub-regulations (9) and (10) shall be a valid basis for the Resolution Committee to take resolution actions, including taking control of a failing institution or entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1), or to exercise the write-down or conversion power of capital instruments and eligible liabilities in accordance with regulation 59.

(13) The valuation shall be an integral part of the decision to apply a resolution tool or exercise a resolution power, or the decision to exercise the write-down or conversion power of capital instruments and eligible liabilities in accordance with regulation 59. The valuation itself shall not be subject to a separate right of appeal but may be subject to an appeal together with the decision in accordance with regulation 85.