S.L. 330.9 Art. 59Requirement to write-down or convert relevant capitalinstruments and eligible liabilities.

(1) The power to write-down or convert relevant capital instruments and eligible liabilities may be exercised either:

(a) independently of resolution action; or

(b) in combination with a resolution action, where the conditions for resolution specified in regulations

32, 32A or 33 are met: Provided that, where relevant capital instruments and eligible liabilities have been purchased by the resolution entity indirectly through other entities in the same resolution group, the power to write-down or convert those relevant capital instruments and eligible liabilities shall be exercised together with the exercise of the same power at the level of the parent undertaking of the entity concerned or at the level of other parent undertakings that are not resolution entities, so that the losses are effectively passed on to, and the entity concerned is recapitalised by, the resolution entity: Provided further that, after the exercise of the power to write-down or convert relevant capital instruments and eligible liabilities independently of resolution action, the valuation provided in regulation 74 shall be carried out, and regulation 75 shall apply.

(1A) The power to write-down or convert eligible liabilities independently of resolution action may be exercised only in relation to eligible liabilities that meet the conditions referred to in regulation 45F(2) , except the condition related to the maturity of liabilities as set out in Article 72c(1) of the CRR:

Provided that, the Resolution Committee shall when the power mentioned above is exercised, ensure that the write-down or conversion is done in accordance with the principle referred to in paragraph (g) of regulation 34(1);

(1b) Where a resolution action in relation to a resolution entity or, in exceptional circumstances in deviation from the resolution plan, in relation to an entity that is not a resolution entity, the amount that is reduced, written or converted in accordance with regulation 60(1) at the level of such entity, shall count towards the thresholds laid down in regulation 37(10) and paragraph (a) of regulation 44(5), or paragraph

(a) of regulation 44(8) that apply to the entity concerned.

(2) The Resolution Committee shall have the power to write down or convert relevant capital instruments, and eligible liabilities as referred to in sub-regulation (1A) into shares or other instruments of ownership of institutions and entities referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1).

(3) The Resolution Committee shall exercise the write-down or conversion power, in accordance with regulation 60 and without delay, in relation to relevant capital instruments, and eligible liabilities as referred to in sub-regulation (1a), issued by an institution or entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1), when one or more of the following circumstances apply:

(a) Where the determination has been made that the conditions for resolution specified in regulations 32, 32A or 33 have been met, before any resolution action is taken; or

(b) The appropriate authority determines that unless that power is exercised in relation to the relevant capital instruments and eligible liabilities as referred to in sub-regulation (1A), the institution or entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1) will no longer be viable;

(c) in the case of relevant capital instruments issued by a subsidiary and where those capital instruments are recognised for the purposes of meeting own funds requirements on an individual and on a consolidated basis, a joint determination taking the form of a joint decision is made by -

(i) where the Authority is the consolidating supervisor, the appropriate authority and the overseas appropriate authority of the Member State of the subsidiary; or

(ii) where the Authority is responsible for the subsidiary, the appropriate authority, the appropriate authority of the Member State of the consolidating supervisor and the overseas appropriate authorities of the Member State of the other subsidiaries, if any; in accordance with regulation 92(4) and (5) that unless the write down or conversion power is exercised in relation to those instruments, the group will no longer be viable;

(d) in the case of relevant capital instruments issued at the level of the parent undertaking and where those capital instruments are recognised for the purposes of meeting own funds requirements on an individual basis at the level of the parent undertaking or on a consolidated basis, and: where the Authority is the consolidating supervisor, the appropriate authority; or, where the Authority is responsible for a subsidiary, the overseas appropriate authority of the Member State of the consolidating supervisor; makes a determination that unless the write down or conversion power is exercised in relation to those instruments, the group will no longer be viable;

(e) extraordinary public financial support is required by the institution or the entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1) except in any of the circumstances set out in regulation 32(4)(d)(iii).

(4) For the purposes of sub-regulation (3), an institution or an entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1) or a group shall be deemed to be no longer viable only if both of the following conditions are met:

(a) the institution or the entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1) or the group is failing or likely to fail;

(b) having regard to timing and other relevant circumstances, there is no reasonable prospect that any action, including alternative private sector measures or supervisory action (including early intervention measures), other than the write down or conversion of capital instruments, or eligible liabilities as referred to in sub-regulation (1A), independently or in combination with a resolution action, would prevent the failure of the institution or the entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1) or the group within a reasonable time-frame.

(5) For the purposes of sub-regulation (4)(a), an institution or an entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1) shall be deemed to be failing or likely to fail where one or more of the circumstances set out in regulation 32(4) occurs.

(6) For the purposes of sub-regulation (4)(a), a group shall be deemed to be failing or likely to fail where the group infringes or there are objective elements to support a determination that the group, in the near future, will infringe its consolidated prudential requirements in a way that would justify action by the Authority including but not limited to because the group has incurred or is likely to incur losses that will deplete all or a significant amount of its own funds.

(7) A relevant capital instrument issued by a subsidiary shall not be written down to a greater extent or converted on worse terms pursuant to sub-regulation (3)(c) than equally ranked capital instruments at the level of the parent undertaking which have been written down or converted.

(8) Where the appropriate authority makes a determination referred to in sub-regulation (3), it shall, where it is responsible for a subsidiary, or where the Authority is the consolidating supervisor, immediately notify the European resolution authority responsible for the institution or for the entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1) in question.

(9) Before making a determination referred to in sub-regulation (3)(c) in relation to a subsidiary that issues relevant capital instruments that are recognised for the purposes of meeting the own funds requirements on an individual and on a consolidated basis, the appropriate authority shall comply with the notification and consultation requirements laid down in regulation 62.

(10) Before exercising the power to write down or convert capital instruments, or eligible liabilities as referred to in sub-regulation (1A), the Resolution Committee shall ensure that a valuation of the assets and liabilities of the institution or the entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1) is carried out in accordance with regulation 36. That valuation shall form the basis of the calculation of the write down to be applied to the relevant capital instruments, or eligible liabilities as referred to in sub-regulation (1A). in order to absorb losses and the level of conversion to be applied to relevant capital instruments, or eligible liabilities as referred to in sub-regulation (1A). in order to recapitalise the institution or the entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1).