S.L. 330.9 Art. 55Contractual recognition of bail- in.

(1) Institutions and entities referred to in paragraphs (b),

(c) and (d) of the definition "entity" in regulation 2(1) shall include a contractual term by which the creditor or party to the agreement creating the liability recognises that such liability may be subject to write-down and conversion powers and agrees to be bound by any reduction of the principal or outstanding amount due, conversion or cancellation that is effected by the exercise of those powers by the Resolution Committee, provided that such liability complies with all of the following conditions:

(a) the liability is not excluded under regulation 44(2);

(b) the liability is not a deposit referred to in regulation 108(3);

(c) the liability is governed by the law of a third country; and

(d) the liability is issued or entered into after the date on which these regulations shall come into force: Provided that, the Resolution Committee may decide that the obligation in this regulation shall not apply to institutions or entities in respect of which the requirement under regulation 45(1) equals the loss absorption amount as defined under paragraph (a) of regulation 45C(2). However liabilities that meet the conditions referred to in this sub-regulation and which do not include the contractual term referred to in this sub-regulation are not counted towards that requirement: Provided further that, this sub-regulation shall not apply where the Resolution committee determines that the liabilities or instruments referred to in this sub-regulation can be subject to write-down and conversion powers by the Resolution Committee pursuant to the law of the third country or to a binding agreement concluded with that third country.

(2) (a)The Resolution Committee shall ensure that where an institution or entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1) reaches the determination that is legally or otherwise impracticable to include in the contractual provisions governing a relevant liability a term required in accordance with sub-regulation (1), the institution or entity mentioned above notifies its determination, including the designation of the class of the liability and the justification of that determination, to the Resolution Committee: Provided that, the institution or entity mentioned above shall submit to the Resolution Committee all information that the said Resolution Committee requests, within a reasonable time frame following the receipt of the notification, in order for the Resolution Committee to assess the effect of such notification on the resolvability of that institution or entity: Provided further that, in the case of a notification under paragraph (a) of sub-regulation (2), the obligation to include a term required in accordance with sub-regulation (1) in the contractual provisions is automatically suspended from the moment of receipt by the Resolution Committee of the notification.

(b) Where the Resolution Committee concludes that it is not legally or otherwise impracticable to include in the contractual provisions a term required in accordance with sub-regulation (1), taking into account the need to ensure the resolvability of the institution or entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1), the Resolution Committee shall require, within a reasonable timeframe, the inclusion of such contractual term, following the notification pursuant to paragraph (a), the inclusion of such contractual term:

Provided that, the Resolution Committee may, in addition, require the said institution or entity to amend its practices concerning the application of the exemption from the contractual recognition of bail-in.

(c) The liabilities referred to in paragraph (a) of sub-regulation (2), shall not include Additional Tier 1 instruments, Tier 2 instruments and debt instruments referred to under paragraph (a) of regulation 108(6), where those instruments are unsecured liabilities:

Provided that, the liabilities referred to in sub-regulation (2)(a) shall be senior to the liabilities referred to in regulation 108(4) and (5).

(d) Where the Resolution Committee, in the context of the assessment of the resolvability of an institution or entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1), in accordance with regulations 15 and 16, or at any other time, determines that, within a class of liabilities which includes eligible liabilities, the amount of liabilities that, in accordance with sub-regulation (2)(a), do not include the contractual term referred to in sub-regulation (1), together with the liabilities which are excluded from the application of the bail-in tool in accordance with regulation 44(2), or which are likely to be excluded in accordance with regulation 44(3) amounts to more than 10 % of that class, it shall immediately assess the impact of that particular fact on the resolvability of that institution or entity, including the impact on the resolvability resulting from the risk of breaching the creditor safeguards provided in regulation 73 when applying write-down and conversion powers to eligible liabilities.

(e) Where the Resolution Committee concludes, on the basis of the assessment referred to in paragraph (d), that the liabilities which, in accordance with sub-regulation 2(a), do not include the contractual term referred to in sub-regulation (1), create a substantive impediment to resolvability, it shall apply the powers provided in regulation 17, as appropriate, to remove that impediment to resolvability.

(f) Liabilities resulting from the institution or entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1), fail to include in the contractual provisions the term required by sub-regulation (1), or for which, in accordance with this sub-regulation, that requirement does not apply, shall not be counted towards the minimum requirement for own funds and eligible liabilities.

(3) The Resolution Committee may require institutions or entities referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1), to provide authorities with a legal opinion relating to the legal enforceability and effectiveness of the contractual term referred to in sub-regulation (1).

(4) Where an institution or entity referred to in paragraphs (b),

(c) or (d) of the definition "entity" in regulation 2(1), does not include in the contractual provisions governing a relevant liability a contractual term required in accordance with sub-regulation (1), that shall not prevent the Resolution Committee from exercising the write-down and conversion powers in relation to that liability.

(5) The Resolution Committee shall specify, where it deems necessary, the categories of liabilities for which an institution or entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1), may reach the determination that it is legally or otherwise impracticable to include the contractual term referred to in sub-regulation (1), based on the conditions further specified by the EBA as a result of the application of article 55(6) of the BRRD.