S.L. 330.9 Art. 45FApplication of the minimum requirement for own funds and eligible liabilities to entities that are not themselves resolution entities.

(1)(a) Institutions that are subsidiaries of a resolution entity or of a third-country entity, but are not themselves resolution entities, shall comply with the requirements laid down in regulation

45C on an individual basis.

(b) The Resolution Committee may, after consulting the

Authority, decide to apply the requirement laid down in this regulation to an entity referred to in paragraphs

(b), (c) or (d) of the definition "entity" in regulation

2(1) that is a subsidiary of a resolution entity but is not itself a resolution entity.

(c) By way of derogation from paragraph (a), Union parent undertakings that are not themselves resolution entities, but are subsidiaries of third-country entities, shall comply with the requirements laid down in regulations 45C and 45D on a consolidated basis.

(d) For resolution groups identified in accordance with paragraph (b) of the definition "resolution group" in regulation 2(1), those credit institutions which are permanently affiliated to a central body, but are not themselves resolution entities, a central body which is not itself a resolution entity, and any resolution entities that are not subject to a requirement under regulation 45E(3), shall comply with regulation 45C(7) and (8) on an individual basis.

(e) The requirement referred to in regulation 45(1) for any entity referred to in this sub-regulation, shall be determined in accordance with regulations 45H and 89, where applicable, and on the basis of the requirements laid down in regulation 45C.

(1a) By way of derogation from paragraphs (a) and (b) of sub-regulation (1), the Resolution Committee may decide to determine the requirement laid down in regulation 45C on a consolidated basis for a subsidiary as referred to in this paragraph where the Resolution Committee concludes that all of the following conditions are met:

(a) the subsidiary meets one of the following conditions:

(i) the subsidiary is held directly by the resolution entity and:

- the resolution entity is a Union parent financial holding company or a Union parent mixed financial holding company;

- both the subsidiary and the resolution entity are established in Malta and are part of the same resolution group;

- the resolution entity does not hold directly any subsidiary institution or any subsidiary entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1), where that entity is subject to the requirements set out in this regulation or to the requirement referred to in regulation 45C, other than the subsidiary concerned; and

- the subsidiary would be disproportionately affected by the deductions required pursuant to Article 72e(5) of the CRR; or

(ii) the subsidiary is subject to the requirement referred to in Article 104a of the CRD on a consolidated basis only and the determination of the requirement laid down in regulation 45C on a consolidated basis, would not lead to overstating the recapitalisation needs, for the purposes of paragraph (b) of regulation 45C(1), of the sub-group consisting of entities within the consolidation perimeter concerned, in particular where there is a prevalence of liquidation entities within the same consolidation perimeter; and

(b) compliance with the requirement laid down in regulation 45C on a consolidated basis as a substitute for compliance with that requirement on an individual basis, does not impair in a material way any of the following:

(i) the credibility and feasibility of the group resolution strategy;

(ii) the subsidiary’s capacity to comply with its own funds requirement after the exercise of write-down and conversion powers; and

(iii) the adequacy of the internal loss transfer and recapitalisation mechanism, including the write-down or conversion, in accordance with regulation 59, of relevant capital instruments and eligible liabilities of the subsidiary concerned or of other entities in the resolution group.

(2) The requirement referred to in regulation 45(1) for entities referred to in sub-regulation (1), shall be met using one or more of the following:

(a) liabilities:

(i) that are issued to and bought by the resolution entity, either directly or indirectly through other entities in the same resolution group that bought the liabilities from the entity that is subject to this regulation, or are issued to and bought by an existing shareholder that is not part of the same resolution group, as long as the exercise of write down or conversion powers in accordance with regulations 59 to 62, does not affect the control of the subsidiary by the resolution entity;

(ii) that fulfil the eligibility criteria referred to in Article 72a of the CRR, except for points (b), (c), (k),

(l) and (m) of Article 72b(2) and Article 72b(3) to (5) of the said Regulation;

(iii) that in normal insolvency proceedings, rank below liabilities that do not meet the condition referred to in paragraph (a)(i) and that are not eligible for own funds requirements;

(iv) that are subject to write down or conversion powers in accordance with regulations 59 to 62, in a manner that is consistent with the resolution strategy of the resolution group, in particular by not affecting the control of the subsidiary by the resolution entity;

(v) the acquisition of ownership of which is not funded directly or indirectly by the entity that is subject to this regulation;

(vi) the provisions governing which do not indicate explicitly or implicitly that the liabilities would be called, redeemed, repaid or repurchased early, as applicable, by the entity that is subject to this regulation, with the exception of the case of insolvency or liquidation of that entity, and the said entity does not otherwise provide such an indication;

(vii) the provisions governing which do not give the holder the right to accelerate the future scheduled payment of interest or principal, with the exception of the case of insolvency or liquidation of the entity that is subject to this regulation;

(viii) the level of interest or dividend payments, as applicable, due thereon is not amended on the basis of the credit standing of the entity that is subject to this regulation or its parent undertaking;

(b) own funds, through:

(i) Common Equity Tier 1 capital, and

(ii) other own funds that: - are issued to and bought by entities that are included in the same resolution group, or

- are issued to and bought by entities that are not included in the same resolution group as long as the exercise of write down or conversion powers in accordance with regulations 59 to 62, does not affect the control of the subsidiary by the resolution entity.

(2a) Where an entity as referred to in sub-regulation (1) complies with the requirement referred to in regulation 45(1) on a consolidated basis, the amount of own funds and eligible liabilities of such entity shall include the following liabilities issued in accordance with sub-regulation (2)(a) by a subsidiary established in the Union included in the consolidation of such entity:

(a) liabilities issued to and bought by the resolution entity, either directly, or indirectly through other entities in the same resolution group that are not included in the consolidation of the entity complying with the requirement referred to in regulation 45(1) on a consolidated basis; and

(b) liabilities issued to an existing shareholder that is not part of the same resolution group.

(2b) The liabilities referred to in paragraphs (a) and (b) of sub-regulation (2a) shall not exceed the amount determined by subtracting from the amount of the requirement referred to in regulation 45(1) applicable to the subsidiary included in the consolidation the sum of all of the following:

(a) the liabilities issued to and bought by the entity complying with the requirement referred to in regulation 45(1) on a consolidated basis, either directly, or indirectly through other entities in the same resolution group that are included in the consolidation of such entity; and

(b) the amount of own funds that are issued in accordance with sub-regulation (2)(b).

(3) Where the Resolution Committee is responsible for a subsidiary that is not a resolution entity, the Resolution Committee may waive the application of this regulation to that subsidiary where:

(a) both the subsidiary and the resolution entity are established in Malta and are part of the same resolution group;

(b) the resolution entity complies with the requirement referred to in regulation 45E;

(c) there is no current or foreseen material practical or legal impediment to the prompt transfer of own funds or repayment of liabilities by the resolution entity to the subsidiary in respect of which a determination has been made in accordance with regulation 59(3), in particular where resolution action is taken in respect of the resolution entity;

(d) the resolution entity satisfies the Authority regarding the prudent management of the subsidiary and has declared, with the consent of the Authority, that it guarantees the commitments entered into by the subsidiary, or the risks in the subsidiary are of no significance;

(e) the risk evaluation, measurement and control procedures of the resolution entity cover the subsidiary;

(f) the resolution entity holds more than 50per cent of the voting rights attached to shares in the capital of the subsidiary, or has the right to appoint or remove a majority of the members of the management body of the subsidiary.

(4) Where the Resolution Committee is responsible for a subsidiary that is not a resolution entity, the Resolution Committee may waive the application of this regulation to such subsidiary where:

(a) both the subsidiary and its parent undertaking are established in Malta and are part of the same resolution group;

(b) the parent undertaking complies on a consolidated basis with the requirement referred to in regulation 45(1) in Malta;

(c) there is no current or foreseen material practical or legal impediment to the prompt transfer of own funds or repayment of liabilities by the parent undertaking to the subsidiary in respect of which a determination has been made in accordance with regulation 59(3), in particular where resolution action or powers referred to in regulation 59(1) are taken in respect of the parent undertaking;

(d) the parent undertaking satisfies the Authority regarding the prudent management of the subsidiary and has declared, with the consent of the Authority, that it guarantees the commitments entered into by the subsidiary, or the risks in the subsidiary are of no significance;

(e) the risk evaluation, measurement and control procedures of the parent undertaking cover the subsidiary;

(f) the parent undertaking holds more than 50 per cent of the voting rights attached to shares in the capital of the subsidiary or has the right to appoint or remove a majority of the members of the management body of the subsidiary.

(5) Where the conditions laid down in paragraphs (a) and (b) of sub-regulation (3) are met, the Resolution Committee responsible of a subsidiary may permit the requirement referred to in regulation 45(1), to be met in full or in part with a guarantee provided by the resolution entity, which fulfils the following conditions:

(a) the guarantee is provided for at least an amount that is equivalent to the amount of the requirement for which it substitutes;

(b) the guarantee is triggered when the subsidiary is unable to pay its debts or other liabilities as they fall due, or a determination has been made in accordance with regulation 59(3) in respect of the subsidiary, whichever is the earliest;

(c) the guarantee is collateralised through a financial collateral arrangement as defined in point (a) of Article 2(1) of Directive 2002/47/EC for at least 50 per cent of its amount;

(d) the collateral backing the guarantee fulfils the requirements of Article 197 of the CRR, which following appropriately conservative haircuts, is sufficient to cover the amount collateralised as referred to in paragraph (c);

(e) the collateral backing the guarantee is unencumbered and, in particular, is not used as collateral to back any other guarantee;

(f) the collateral has an effective maturity that fulfils the same maturity condition as that referred to in Article 72c(1) of the CRR; and

(g) there are no legal, regulatory or operational barriers to the transfer of the collateral from the resolution entity to the relevant subsidiary, including where resolution action is taken in respect of the resolution entity: Provided that, for the purposes of paragraph (g), at the request of the Resolution Committee, the resolution entity shall provide an independent written and reasoned legal opinion or shall otherwise satisfactorily demonstrate that there are no legal, regulatory or operational barriers to the transfer of collateral from the resolution entity to the relevant subsidiary.