S.L. 330.9 Art. 45CDetermination of the minimum requirement for own funds and eligible liabilities.

(1)The Resolution Committee shall, after consulting the Authority, determine the requirement referred to in regulation 45(1)

on the basis of the following criteria:

(a) the need to ensure that the resolution group can be resolved by the application of the resolution tools to the resolution entity, including, where appropriate, the bail-in tool, in a way that meets the resolution objectives;

(b) the need to ensure, where appropriate, that the resolution entity and its subsidiaries that are institutions or entities referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1) but are not resolution entities have sufficient own funds and eligible liabilities to ensure that, if the bail-in tool or write down and conversion powers, were to be applied to the resolution entity and its subsidiaries, losses could be absorbed and that it is possible to restore the total capital ratio and, as applicable, the leverage ratio, of the relevant entities to a level necessary to enable them to continue to comply with the conditions for authorisation and to carry on the activities for which they are authorised under the CRD or Directive 2014/65/EU;

(c) the need to ensure, if the resolution plan anticipates the possibility for certain classes of eligible liabilities to be excluded from bail-in pursuant to regulation 44(3) or to be transferred in full to a recipient under a partial transfer, that the resolution entity has sufficient own funds and other eligible liabilities to absorb losses and to restore its total capital ratio and, as applicable, its leverage ratio, to the level necessary to enable it to continue to comply with the conditions for authorisation and to carry on the activities for which it is authorised under the CRD or Directive 2014/65/EU;

(d) the size, the business model, the funding model and the risk profile of the entity; and

(e) the extent to which the failure of the entity would have adverse effect of the financial stability, including through contagion to other institutions or entities, due to the interconnectedness of the entity with those other institutions or entities or with the rest of the financial system.

(2) Where the resolution plan provides that resolution action is to be taken or that the power to write down and convert relevant capital instruments and eligible liabilities, in accordance with regulation 59, is to be exercised in accordance with the relevant scenario referred to in regulation 10(3), the requirement referred to in regulation 45(1) shall equal an amount sufficient to ensure that:

(a) the losses that are expected to be incurred by the entity are fully absorbed; and

(b) the resolution entity and its subsidiaries that are institutions or entities referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1) but are not resolution entities, are recapitalised to a level necessary to enable them to continue to comply with the conditions for authorisation and to carry on the activities for which they are authorised under the CRD, Directive 2014/65/EU or an equivalent legislative act for an appropriate period not longer than one (1) year.

(2a) The Resolution Committee shall not determine the requirement referred to in regulation 45(1) for liquidation entities:

Provided that by way of derogation from this sub-regulation, the Resolution Committee may assess whether it is justified to determine the requirement referred to in regulation 45(1) for a liquidation entity on an individual basis in an amount exceeding the amount sufficient to absorb losses in accordance with paragraph (a) of sub-regulation (2). The Resolution Committee shall take into account in its assessment, in particular, any possible impact on financial stability and on the risk of contagion to the financial system, including with regard to the financing capacity of the depositor compensation scheme. Where the Resolution Committee determines the requirement referred to in regulation 45(1), the liquidation entity shall meet such requirement by using one or more of the following:

(a) own funds;

(b) liabilities that fulfil the eligibility criteria referred to in Article 72a of the CRR, with the exception of points

(b) and (d) of Article 72b(2) of the said Regulation;

(c) the liabilities referred to in regulation 45B(2):

Provided further that Article 77(2) and Article 78a of the CRR shall not apply to liquidation entities for which the Resolution Committee has not determined the requirement referred to in regulation 45(1): Provided further that holdings of own funds instruments and eligible liabilities instruments issued by subsidiary institutions which are liquidation entities for which the Resolution Committee has not determined the requirement referred to in regulation 45(1) shall not be deducted under Article 72e(5) of the CRR: Provided further that, by way of derogation from the third proviso hereof, an institution or entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1), that is not itself a resolution entity but is a subsidiary of a resolution entity or of a third-country entity that would be a resolution entity if it were established in the Union, shall deduct its holdings of own funds instruments in subsidiary institutions that belong to the same resolution group and that are liquidation entities for which the Resolution Committee has not determined the requirement referred to in regulation 45(1) where the aggregate amount of those holdings is equal to, or exceeds seven percent (7%) of the total amount of its own funds and liabilities that comply with the eligibility criteria set out in regulation 45F(2), calculated annually as of 31 December as an average over the previous twelve (12) months.

(3) For resolution entities, the amount referred to in regulation 45C(2) shall be the following:

(a) for the purpose of calculating the requirement referred to in regulation 45(1), in accordance with paragraph

(a) of regulation 45(2), the sum of:

(i) the amount of losses to be absorbed in resolution that corresponds to the requirements referred to in point (c) of Article 92(1) of the CRR and Article 104a of the CRD Directive 2013/36/EU at the consolidated resolution group level; and

(ii) a recapitalisation amount that allows the resolution group resulting from resolution to restore compliance with its total capital ratio requirement referred to in point (c) of Article 92(1) of Regulation

(EU) No 575/2013 and its requirement referred to in Article 104a of Directive 2013/36/EU at the consolidated resolution group level, after the implementation of the preferred resolution strategy; and

(b) for the purpose of calculating the requirement referred to in regulation 45(1), in accordance with paragraph

(b) of regulation 45(2), the sum of:

(i) the amount of the losses to be absorbed in resolution that corresponds to the resolution entity’s leverage ratio requirement referred to in point (d) of Article 92(1) of the CRR at the consolidated resolution group level; and

(ii) a recapitalisation amount that allows the resolution group resulting from resolution to restore compliance with the leverage ratio requirement referred to in point (d) of Article 92(1) of the CRR at the consolidated resolution group level, after the implementation of the preferred resolution strategy:

Provided that, for the purposes of paragraph (a) of regulation 45(2), the requirement referred to in regulation 45(1) shall be expressed in percentage terms as the amount calculated in accordance with paragraph (a), divided by the total risk exposure amount:

Provided further that, for the purposes of paragraph (b) of regulation 45(2), the requirement referred to in regulation 45(1) shall be expressed in percentage terms as the amount calculated in accordance with paragraph (b) of this sub-regulation, divided by the total exposure measure.

Provided further that, when setting the individual requirement provided for in paragraph (b), the Resolution Committee shall take into account the requirements referred to in regulations 37(10), 44(5) and (8).

(4) (a) When setting the recapitalisation amounts referred to in sub-regulation (3), the Resolution Committee shall:

(i) use the most recently reported values for the relevant total risk exposure amount or total exposure measure, adjusted for any changes resulting from resolution actions set out in the resolution plan; and

(ii) after consulting the Authority, adjust the amount corresponding to the current requirement referred to in Article 104a of the CRD downwards or upwards to determine the requirement that is to apply to the resolution entity after the implementation of the referred resolution strategy.

(b) The Resolution Committee shall be able to increase the requirement provided in paragraph (a)(ii) of sub-regulation (3) by an appropriate amount necessary to ensure that, following resolution, the entity is able to sustain sufficient market confidence for an appropriate period, which shall not exceed one year.

(c) Where paragraph (b) of this sub-regulation applies, the amount referred therein shall be equal to the combined buffer requirement that is to apply after the application of the resolution tools, less the amount referred to in paragraph (a) of point (6) of Article 128 of the CRD.

(d) The amount referred to in paragraph (b) of this sub-regulation shall be adjusted downwards if, after consulting the Authority, the Resolution Committee determines that it would be feasible and credible for a lower amount to be sufficient to sustain market confidence and to ensure both the continued provision of critical economic functions by the institution or entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1), and its access to funding without recourse to extraordinary public financial support, with the exception of contributions from resolution financing arrangements, in accordance with regulation 44(5) and (8) and regulation 101(2), following the implementation of the resolution strategy:

Provided that, the said amount shall be adjusted upwards if, after consulting the Authority, the Resolution Committee determines that a higher amount is necessary to sustain sufficient market confidence and to ensure both the continued provision of critical economic functions by the institution or entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1), and its access to funding without recourse to extraordinary public financial support, with the exception of contributions from resolution financing arrangements, in accordance with regulations 44(5) and (8) and regulation 101(2), for an appropriate period which shall not exceed one year.

(5) For resolution entities that are not subject to Article 92a of the CRR and that are part of a resolution group, the total assets of which exceed EUR 100 billion, the level of the requirement referred to in sub-regulation (3) shall be at least equal to:

(a) 13.5 per cent when calculated in accordance with paragraph (a) of regulation 45(2); and

(b) 5 per cent when calculated in accordance with paragraph (b) of regulation 45(2).

Provided that, by way of derogation from regulation 45B, the resolution entities referred to in this sub-regulation shall meet a level of the requirement referred to in this sub-regulation that is equal to 13.5 per cent when calculated in accordance with paragraph (a) of regulation 45(2) and to 5 per cent when calculated in accordance with paragraph (b) of regulation 45(2) using own funds, subordinated eligible instruments, or liabilities as referred to in regulation 45B(3).

(6) The Resolution Committee may, after consulting the Authority, decide to apply the requirements laid down in sub-regulation (5), to a resolution entity which is not subject to Article 92a of the CRR and which is part of a resolution group, the total assets of which are lower than EUR 100 billion and which the Resolution Committee has assessed as reasonably likely to pose a systemic risk in the event of its failure:

Provided that, when taking a decision as referred to in this sub-regulation, the Resolution Committee shall take into account:

(a) the prevalence of deposits, and the absence of debt instruments, in the funding model;

(b) the extent to which access to the capital markets for eligible liabilities is limited;

(c) the extent to which the resolution entity relies on Common Equity Tier 1 capital to meet the requirement referred to in regulation 45E:

Provided further that, the absence of a decision pursuant to this sub-regulation is without prejudice to any decision under regulation 45B(5).

(7) For entities that are not themselves resolution entities, the amount referred to in sub-regulation (2) shall be the following:

(a) for the purpose of calculating the requirement referred to in regulation 45(1), in accordance with paragraph (a) of regulation 45(2), the sum of:

(i) the amount of the losses to be absorbed that corresponds to the requirements referred to in point (c) of Article 92(1) of the CRR and Article 104a of the CRD of the entity; and

(ii) a recapitalisation amount that allows the entity to restore compliance with its total capital ratio requirement referred in point (c) of Article 92(1) of the CRR and its requirement referred to in Article 104a of the CRD, after the exercise of the power to write down or convert relevant capital instruments and eligible liabilities in accordance with regulation 59, or after the resolution of the resolution group; and

(b) for the purpose of calculating the requirement referred to in regulation 45(1), in accordance with paragraph (b) of regulation 45(2), the sum of:

(i) the amount of the losses to be absorbed that corresponds to the entity’s leverage ratio requirement referred to in point (d) of Article 92(1) of the CRR; and

(ii) a recapitalisation amount that allows the entity to restore compliance with its leverage ratio requirement referred to in point (d) of Article 92(1) of the CRR after the exercise of the power to write down or convert relevant capital instruments and eligible liabilities in accordance with regulation 59, or after the resolution of the resolution group:

Provided that, for the purposes of paragraph (a) of regulation 45(2), the requirement referred to in regulation 45(1) shall be expressed in percentage terms as the amount calculated in accordance with paragraph (a) divided by the total risk exposure amount:

Provided further that, for the purposes of paragraph (b) of regulation 45(2), the requirement referred to in regulation 45(1) shall be expressed in percentage terms as the amount calculated in accordance with paragraph (b) divided by the total exposure measure.

(8) (a)The Resolution Committee shall, when setting the individual requirement provided in paragraph (b) of sub-regulation

(7) take into account the requirements referred to in regulations 37(10), 44(5) and 44(8).

(b) For the purpose of setting the recapitalisation amounts referred to in sub-regulation (7), the Resolution Committee shall:

(i) use the most recently reported values for the relevant total risk exposure amount or total exposure measure, adjusted for any changes resulting from actions set out in the resolution plan; and

(ii) after consulting the Authority, adjust the amount corresponding to the current requirement referred to in Article 104a of the CRD downwards or upwards to determine the requirement that is to apply to the relevant entity, after the exercise of the power to write down or convert relevant capital instruments and eligible liabilities, in accordance with regulation 59, or after the resolution of the resolution group.

(c) The Resolution Committee may increase the requirement provided in paragraph (a)(ii) of sub-regulation (7) by an appropriate amount necessary to ensure that, following the exercise of the power to write down or convert relevant capital instruments and eligible liabilities in accordance with regulation 59, the entity is able to sustain sufficient market confidence for an appropriate period which shall not exceed one year.

(d) Where paragraph (c) of this sub-regulation applies, the amount referred to in the said paragraph (c) shall be equal to the combined buffer requirement that is to apply after the exercise of the power referred to in regulation 59, or after the resolution of the resolution group, less the amount referred to in paragraph (a) of point (6) of Article 128 of the CRD.

(e) The amount referred to in paragraph (c) shall be adjusted downwards if, after consulting the Authority, the Resolution Committee determines that it would be feasible and credible for a lower amount to be sufficient to ensure market confidence, and to ensure both the continuous provision of critical economic functions by the institution or entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1), and its access to funding without recourse to extraordinary public financial support, with the exception of contributions from resolution financing arrangements, in accordance with regulations 44(5) and 44(8) and regulation 101(2), after the exercise of the power referred to in regulation 59, or after the resolution of the resolution group:

Provided that, the amount shall be adjusted upwards if, after consulting the Authority, the Resolution Committee determines that a higher amount is necessary to sustain sufficient market confidence and to ensure both continued provision of critical economic functions by the institution or entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1), and its access to funding without recourse to extraordinary public financial support, with the exception of contributions from resolution financing arrangements, in accordance with regulations 44(5) and 44(8) and regulation 101(2) for an appropriate period which shall not exceed one year.

(9) Where the Resolution Committee expects that certain classes of eligible liabilities are reasonably likely to be fully or partially excluded from bail-in pursuant to regulation 44(3), or might be transferred in full to a recipient under a partial transfer, the requirement referred to in regulation 45(1) shall be met using own funds or other eligible liabilities that are sufficient to:

(a) cover the amount of excluded liabilities identified in accordance with regulation 44(3); and

(b) ensure that the conditions referred to in sub-regulation

(2) are fulfilled.

(10) Any decision by the Resolution Committee to impose a minimum requirement of own funds and eligible liabilities under this regulation shall contain the reasons for that decision, including a full assessment of the elements referred to in sub-regulations (2) to (9), and shall be reviewed by the Resolution Committee without undue delay to reflect any changes in the level of the requirement referred to in Article 104a of the CRD.

(11) For the purposes of sub-regulations (3), (4), (7) and (8), capital requirements shall be interpreted in accordance with the Authority’s application of the transitional provisions laid down in Chapters 1, 2 and 4 of Title 1 of Part Ten of the CRR and in the provisions laid down in Maltese law exercising the options granted to the Authority by the said Regulation.