S.L. 330.9 Art. 48Sequence of write- down and conversion.

(1) When applying the bail-in tool, the Resolution

Committee shall exercise the write-down and conversion powers, subject to any exclusions under regulation 44(2) and (3), meeting the following requirements:

(a) Common Equity Tier 1 items are reduced in accordance with regulation 60(1)(a);

(b) if, and only if, the total reduction pursuant to paragraph (a) is less than the sum of the amounts referred to in regulation 47(3)(b) and (c), the Resolution Committee reduces the principal amount of Additional Tier 1 instruments to the extent required and to the extent of their capacity;

(c) if, and only if, the total reduction pursuant to paragraphs (a) and (b) is less than the sum of the amounts referred to in regulation 47(3)(b) and (c), the Resolution Committee reduces the principal amount of Tier 2 instruments to the extent required and to the extent of their capacity;

(d) if, and only if, the total reduction of shares or other instruments of ownership and relevant capital instruments pursuant to paragraphs (a), (b) and (c) is less than the sum of the amounts referred to in regulation 47(3)(b) and (c), the Resolution Committee reduces to the extent required the principal amount of subordinated debt that is not Additional Tier 1 or Tier 2 capital in accordance with the ranking of claims in normal insolvency proceedings, in conjunction with the write down pursuant to paragraphs (a), (b) and (c) to produce the sum of the amounts referred to in regulation 47(3)(b) and (c);

(e) if, and only if, the total reduction of shares or other instruments of ownership, relevant capital instruments and bail-inable liabilities pursuant to paragraphs (a) to (d) is less than the sum of the amounts referred to in regulation 47(3)(b) and (c), the Resolution Committee reduces to the extent required the principal amount of, or outstanding amount payable in respect of, the rest of bail-inable liabilities, including debt instruments referred to in regulation 108(4), in accordance with the hierarchy of claims in normal insolvency proceedings, including the ranking of deposits provided for in regulation 108, pursuant to regulation 44, in conjunction with the write down pursuant to paragraphs (a) to (d) to produce the sum of the amounts referred to in regulation 47(3) (b) and (c).

(2) When applying the write down or conversion powers, the Resolution Committee shall allocate the losses represented by the sum of the amounts referred to in regulation 47(3)(b) and (c) equally between shares or other instruments of ownership and bail-inable liabilities of the same rank by reducing the principal amount of, or outstanding amount payable in respect of, those shares or other instruments of ownership and bail-inable liabilities to the same extent pro rata to their value except where a different allocation of losses amongst liabilities of the same rank is allowed in the circumstances specified in regulation 44(3): Provided that this shall not prevent liabilities which have been excluded from bail-in in accordance with regulation 44(2) and

(3) from receiving more favourable treatment than eligible liabilities which are of the same rank in normal insolvency proceedings.

(3) Before applying the write-down or conversion referred to in sub-regulation (1)(e), the Resolution Committee shall convert or reduce the principal amount on instruments referred to in sub-regulation (1)(b), (c) and (d) when those instruments contain the following terms and have not already been converted:

(a) terms that provide for the principal amount of the instrument to be reduced on the occurrence of any event that refers to the financial situation, solvency or levels of own funds of the institution or entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1);

(b) terms that provide for the conversion of the instruments to shares or other instruments of ownership on the occurrence of any such event.

(4) Where the principal amount of an instrument has been reduced, but not to zero, in accordance with terms of the kind referred to in sub-regulation (3)(a) before the application of the bail-in pursuant to sub-regulation (1), the Resolution Committee shall apply the write-down and conversion powers to the residual amount of that principal in accordance with sub-regulation (1).

(5) When deciding on whether liabilities are to be written down or converted into equity, the Resolution Committee shall not convert one class of liabilities, while a class of liabilities that is subordinated to that class remains substantially unconverted into equity or not written down, unless otherwise permitted under regulation 44(2) and (3).

(6) In relation to institutions or entities referred to in paragraphs (a), (b), (c) or (d) of the definition "entity" in regulation 2(1), all claims resulting from own funds items have, in terms of Maltese insolvency law, a lower priority ranking than any claim that does not result from an own funds item:

Provided that, to the extent that an instrument is only partly recognised as an own funds item, the whole instrument shall be treated as a claim resulting from an own funds item and shall rank lower than any claim that does not result from an own funds item.