S.L. 330.9 Art. 60Provisions governing the write-down or conversion of relevant capital instruments and eligible liabilities.

(1) When complying with the requirement laid down in regulation 59, the Resolution Committee shall exercise the write-

down or conversion power in accordance with the priority of claims under normal insolvency proceedings, in a way that produces the following results:

(a) Common Equity Tier 1 items are reduced first in proportion to the losses and to the extent of their capacity and the Resolution Committee takes one or both of the actions specified in regulation 47(1) in respect of holders of Common Equity Tier 1 instruments;

(b) the principal amount of Additional Tier 1 instruments is written down or converted into Common Equity Tier 1 instruments or both, to the extent required to achieve the resolution objectives set out in regulation 31 or to the extent of the capacity of the relevant capital instruments, whichever is lower;

(c) the principal amount of Tier 2 instruments is written down or converted into Common Equity Tier 1 instruments or both, to the extent required to achieve the resolution objectives set out in regulation 31 or to the extent of the capacity of the relevant capital instruments, whichever is lower.

(d) The principal amount of eligible liabilities referred to in regulation 59(1A) is written down and converted into Common Equity Tier 1 instruments or both, to the extent required to achieve the resolution objectives set out in regulation 31, or to the extent of the capacity of the relevant eligible liabilities, whichever is lower.

(2) Where the principal amount of a relevant capital instrument, or an eligible liability as referred to in regulation 59(1A) is written down:

(a) the reduction of that principal amount shall be permanent, subject to any write up in accordance with the reimbursement mechanism in regulation 46(3);

(b) no liability to the holder of the relevant capital instrument, or of the eligible liability as referred to in regulation 59(1A) shall remain under or in connection with that amount of the instrument, which has been written down, except for any liability already accrued, and any liability for damages that may arise as a result of an appeal challenging the legality of the exercise of the write-down power;

(c) no compensation is paid to any holder of the relevant capital instruments, or of the liabilities as referred to in regulation 59(1A), other than in accordance with sub-regulation (3).

(3) In order to effect a conversion of relevant capital instruments, and eligible liabilities as referred to in regulation 59(1A), under paragraphs (b), (c) and (d) of sub-regulation (1), the Resolution Committee may require institutions and entities referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1), to issue Common Equity Tier 1 instruments to the holders of the relevant capital instruments and such eligible liabilities:

Provided that relevant capital instruments and such liabilities may only be converted where the following conditions are met:

(a) those Common Equity Tier 1 instruments are issued by the institution or the entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1) or by a parent undertaking of the institution or the entity, referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1) with the agreement:

(i) where the Resolution Committee is responsible for the institution or the entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1), of the Resolution Committee or, where relevant, the European resolution authority responsible for the parent undertaking; or

(ii) where the Resolution Committee is responsible for the parent undertaking, the European resolution authority of the institution or the entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1) or, where relevant, of the Resolution Committee;

(b) those Common Equity Tier 1 instruments are issued prior to any issuance of shares or other instruments of ownership by that institution or that entity referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1) for the purposes of provision of own funds by the Government of Malta or a government entity;

(c) those Common Equity Tier 1 instruments are awarded and transferred without delay following the exercise of the conversion power;

(d) the conversion rate that determines the number of Common Equity Tier 1 instruments that are provided in respect of each relevant capital instrument, or each eligible liability as referred to in regulation 59(1A) complies with the principles set out in regulation 50 and any guidelines developed by the EBA pursuant to Article 50(4) of the BRRD.

(4) For the purposes of the provision of Common Equity Tier 1 instruments in accordance with sub-regulation (3), the Resolution Committee may require institutions and entities referred to in paragraphs (b), (c) or (d) of the definition "entity" in regulation 2(1) to maintain at all times the necessary prior authorisation to issue the relevant number of Common Equity Tier 1 instruments.

(5) Where an institution meets the conditions for resolution and the Resolution Committee decides to apply a resolution tool to that institution, the Resolution Committee shall comply with the requirement laid down in regulation 59(3) before applying the resolution tool.