S.L. 330.9 Art. 45BEligible liabilities for resolution entities.

(1) Liabilities shall be included in the amount of own funds and eligible liabilities of resolution entities only, where they satisfy the conditions referred to in the following articles of the CRR:

(a) Article 72a;

(b) Article 72b, with the exception of point (d) of paragraph 2; and

(c) Article 72c.

Provided that, by way of derogation from this sub-regulation, where references to the requirements in Article 92a or Article 92b of the CRR for the purpose of those Articles have been made, eligible liabilities shall consist of eligible liabilities as defined in Article 72k of the said Regulation and determined in accordance with Chapter 5a of Title I of Part Two of the said Regulation.

(2) Liabilities that arise from debt instruments with embedded derivatives, including structured notes, that satisfy the conditions of paragraphs (a) to (c) of sub-regulation (1), with the exception of point

(l) of Article 72a(2) of the CRR, shall be included in the amount of own funds and eligible liabilities when one of the following conditions is met:

(a) the principal amount of the liability arising from the debt instrument known at the time of issue, is fixed or increasing, and is not affected by an embedded derivative feature, and the total amount of liability arising from the debt instrument, including the embedded derivative, can be valued on a daily basis by reference to an active and liquid two-way market for an equivalent instrument without credit risk, in accordance with Articles 104 and 105 of the CRR; or

(b) the debt instrument includes a contractual term that specifies that the value of the claim in cases of insolvency of the issuer and of the resolution of the issuer is fixed or increasing, and does not exceed the initially paid-up amount of the liability: Provided that, debt instruments referred to in sub-regulation (2), including their embedded derivatives, shall not be subject to any netting agreement and the valuation of such instruments shall not be subject to regulation 49(4): Provided further that, the liabilities referred to in sub-regulation (2), shall only be included in the amount of own funds and eligible liabilities with respect to the part of the liability that corresponds to the principal amount referred to in sub-regulation (2)(a) or to the fixed or increased amount referred to in sub-regulation (2)(b).

(3) Where the liabilities are issued by a subsidiary established in a Member State to an existing shareholder that is not part of the same resolution group, and that subsidiary is part of the same resolution group as the resolution entity, those liabilities shall be included in the amount of own funds and eligible liabilities of that resolution entity, provided that all of the following conditions are met:

(a) the liabilities are issued in accordance with paragraph

(a) of regulation 45F(2);

(b) the exercise of the write down or conversion power in relation to those liabilities in accordance with regulations 59 or 62 does not affect the control of the subsidiary by the resolution entity;

(c) those liabilities do not exceed an amount determined by subtracting:

(i) the sum of the liabilities issued to and bought by the resolution entity either directly or indirectly through other entities in the same resolution group and the amount of own funds issued in accordance with paragraph (b) of regulation 45F(2) from

(ii) the amount required in accordance with regulation 45F(1).

(4) Without prejudice to the minimum requirement in regulation 45C(5) or paragraph (a) of regulation 45D(1), the Resolution Committee shall ensure that a part of the requirement referred to in regulation 45E equal to eight per cent of the total liabilities, including own funds, shall be met by resolution entities that are G-SIIs or resolution entities that are subject to regulation 45C(5) or (6) using own funds, subordinated eligible instruments, or liabilities as referred to in sub-regulation (3). The Resolution Committee may permit that a level lower than eight per cent of the total liabilities, including own funds, but greater than the amount resulting from the application of the formula (1-(X1/X2)) × 8% of the total liabilities, including own funds, shall be met by resolution entities that are G-SIIs or resolution entities that are subject to regulation 45C(5) or (6) using own funds, subordinated eligible instruments, or liabilities as referred in sub-regulation (3), provided that all the conditions set out in Article 72b(3) of the CRR are met, where in light of the reduction that is possible under Article 72b(3) of the said Regulation:

Provided that, for the purposes of this sub-regulation X1 = 3.5 per cent of the total risk exposure amount calculated in accordance with Article 92(3) of the CRR:

Provided further that, for the purposes of this sub-regulation X2 = the sum of 18 per cent of the total risk exposure amount calculated in accordance with Article 92(3) of the CRR and the amount of the combined buffer requirement:

Provided further that, for resolution entities that are subject to regulation 45C(5), where the application of this sub-regulation leads to a requirement greater than 27 per cent of the total risk exposure amount, for the resolution entity concerned, the Resolution Committee shall limit the part of the requirement referred to in regulation 45E which is to be met using own funds, subordinated eligible instruments, or liabilities as referred to in sub-regulation (3), to an amount equal to 27 per cent of the total risk exposure amount, if the Resolution Committee has assessed that:

(a) access to the resolution financing arrangement is not considered to be an option for resolving that resolution entity in the resolution plan; and

(b) where paragraph (a) does not apply, the requirement referred to in regulation 45E allows that resolution entity to meet the requirements referred to in regulation 44(5) or 44(8) as applicable: Provided further that, in carrying out the assessment referred to in the first proviso, the Resolution Committee shall also take into account the risk of disproportionate impact on the business model of the resolution entity concerned. For resolution entities that are subject to regulation 45C(6), the third proviso does not apply.

(5) Where the resolution entities are neither G-SIIs nor resolution entities that are subject to regulation 45C(5) or (6), the Resolution Committee may decide that a part of the requirement referred to in regulation 45E up to the greater of eight per cent of the total liabilities, including own funds, of the entity and the formula referred to in sub-regulation (7), shall be met using own funds, subordinated eligible instruments, or liabilities as referred to in sub-regulation (3), provided that the following conditions are met:

(a) non-subordinated liabilities referred to in sub-regulations (1) and (2) have the same priority ranking in the insolvency hierarchy under regulation 108 as certain liabilities that are excluded from the application of write down and conversion powers in accordance with regulation 44(2) or (3);

(b) there is a risk that, as a result of a planned application of write-down and conversion powers to non-subordinated liabilities that are not excluded from the application of write down and conversion powers in accordance with regulation 44(2) or (3), creditors whose claims arise from those liabilities incur greater losses than they would incur in a winding- up under normal insolvency proceedings; and

(c) the amount of own funds and other subordinated liabilities does not exceed the amount necessary to ensure that the creditors referred to paragraph (b) do not incur losses above the level of losses that they would otherwise have incurred in the winding-up under normal insolvency proceedings: Provided that, where the Resolution Committee determines that, within a class of liabilities which includes eligible liabilities, the amount of the liabilities that are excluded or reasonably likely to be excluded from the application of write down and conversion powers in accordance with regulation 44(2) or (3) totals more than ten per cent of that class, the Resolution Committee shall assess the risk referred to in paragraph (b).

(6) For the purposes of sub-regulations (4), (5) and (7), derivative liabilities shall be included in total liabilities on the basis that full recognition is given to counterparty netting rights:

Provided that, the own funds of a resolution entity that are used to comply with the combined buffer requirement shall be eligible to comply with the requirements referred to in sub-regulations (4), (5) and (7).

(7) By derogation from sub-regulation (4), the Resolution Committee may decide that the requirement referred to in regulation 45E shall be met by resolution entities that are G-SIIs or resolution entities that are subject to regulation 45C(5) or (6) using own funds, subordinated eligible instruments, or liabilities as referred to in sub-regulation (3), to the extent that, due to the obligation of the resolution entity to comply with the combined buffer requirement and the requirements referred to in Article 92a of the CRR, regulations 45C(5) and 45E, the sum of those own funds, instruments and liabilities does not exceed the greater of:

(a) 8 per cent of the total liabilities, including own funds, of the entity; or

(b) the amount resulting from the application of the formula Ax2+Bx2+C: Where: A = the amount resulting from the requirement referred to in point (c) of Article 92(1) of the CRR; Where:B = the amount resulting from the requirement referred to in Article 104a of the CRD; Where: C = the amount resulting from the combined buffer requirement.

(8) The Resolution Committee may exercise the power referred to in sub-regulation (7), with respect to resolution entities that are G-SIIs or that are subject to regulation 45C(5) or (6), and that meet one of the conditions set out in the first proviso, up to a limit of hundred per cent of the total number of all resolution entities that are G-SIIs or that are subject to regulation 45C(5) or (6) for which the Resolution Committee determines the requirement referred to in regulation 45E:

Provided that, the conditions shall be considered by the Resolution Committee as follows:

(a) substantive impediments to resolvability have been identified in the preceding resolvability assessment and either:

(i) no remedial action has been taken following the application of the measures referred to in regulation 17(5) in the timeline required by the Resolution Committee, or

(ii) the identified substantive impediments cannot be addressed using any of the measures referred to in regulation 17(5), and the exercise of the power referred to in sub-regulation (7) of this regulation would partially or fully compensate for the negative impact of the substantive impediments on resolvability;

(b) the Resolution Committee considers that the feasibility and credibility of the resolution entity's preferred resolution strategy is limited, taking into account the entity's size, its interconnectedness, the nature, scope, risk and complexity of its activities, its legal status and its shareholding structure; or

(c) the requirement referred to in Article 104a of the CRD reflects the fact that the resolution entity that is a G-SII or that is subject to regulation 45C(5) or (6) is, in terms of riskiness, among the top twenty per cent of institutions for which the Resolution Committee determines the requirement referred to in regulation 45(1): Provided further that, for the purposes of the percentages referred to in this sub-regulation, the Resolution Committee shall round the number resulting from the calculation up to the closest whole number.

(9) The Resolution Committee shall take the decisions referred to in sub-regulations (5) or (7) after consulting the Authority: Provided that, when taking those decisions, the Resolution Committee shall take into account:

(a) the depth of the market for the resolution entity’s own funds instruments and subordinated eligible instruments, the pricing of such instruments, where they exist, and the time needed to execute any transactions necessary for the purpose of complying with the decision;

(b) the amount of eligible liabilities instruments that meet all of the conditions referred to in Article 72a of CRR that have a residual maturity below one year as of the date of the decision, with a view to making quantitative adjustments to the requirements referred to in sub-regulations (5) and (7);

(c) the availability and the amount of instruments that meet all of the conditions referred to in Article 72a of the CRR with the exception of point (d) of Article 72b(2) of the said Regulation;

(d) whether the amount of liabilities that are excluded from the application of write down and conversion powers in accordance with regulation 44(2) or (3) and that, in normal insolvency proceedings, rank equally with or below the highest ranking eligible liabilities is significant in comparison to the own funds and eligible liabilities of the resolution entity. Where the amount of excluded liabilities does not exceed five per cent of the amount of the own funds and eligible liabilities of the resolution entity, the excluded amount shall be considered as not being significant. Above that threshold, the significance of the excluded liabilities shall be assessed by the Resolution Committee;

(e) the resolution entity’s business model, funding model, and risk profile, as well as its stability and ability to contribute to the economy; and

(f) the impact of possible restructuring costs on the resolution entity’s recapitalisation.