S.I. No. 289/2015 - European Union (Bank Recovery and Resolution) Regulations 2015

where a transfer of shares or other instruments of ownership under the sale of business tool would result in the acquisition of or increase in a qualifying holding in an institution of a kind referred to in Regulation 10 of the Capital Requirements Regulations or Regulation 179 of the MiFID I Regulations, the competent authority, where it is the relevant competent authority for the purpose of the Capital Requirements Regulations or the MiFID I Regulations shall carry out the assessment required under those instruments, as the case may be, in a timely manner that does not delay the application of the sale of business tool and prevent the resolution action from achieving the relevant resolution objectives.

• (11) Where the competent authority has not completed the assessment referred to in paragraph (10) by the date on which the resolution order has specified that the transfer of shares or other instruments of ownership is to take effect, the following provisions shall apply:

• (a) such a transfer of shares or other instruments of ownership to the acquirer shall have immediate legal effect;

• (b) during the assessment period and during any divestment period provided under subparagraph (f), the acquirer’s voting rights attached to such shares or other instruments of ownership shall be suspended and vested solely in the resolution authority, which shall have no obligation to exercise any such voting rights and which shall have no liability whatsoever for exercising or refraining from exercising any such voting rights;

• (c) during the assessment period and during any divestment period provided under subparagraph (f), the penalties and other measures for infringing the requirements for acquisitions or disposals of qualifying holdings contemplated by Regulations 54, 55 and 56 of the Capital Requirements Regulations shall not apply to such a transfer of shares or other instruments of ownership;

• (d) promptly upon completion of its assessment, the competent authority shall notify the resolution authority and the acquirer in writing of whether it approves or, in accordance with Regulation 18 of the Capital Requirements Regulations, opposes such a transfer of shares or other instruments of ownership to the acquirer;

• (e) where the competent authority approves such a transfer of shares or other instruments of ownership to the acquirer, then the voting rights attached to such shares or other instruments of ownership shall be deemed to be fully vested in the acquirer immediately upon receipt by the resolution authority and the acquirer of such an approval notice from the competent authority;

• (f) where the competent authority opposes such a transfer of shares or other instruments of ownership to the acquirer, then—

• (i) the suspension of voting rights under subparagraph (b) shall remain in full force and effect,

• (ii) the resolution authority may direct the acquirer to divest the shares or other instruments of ownership within a divestment period determined by the resolution authority taking account of prevailing market conditions, and

• (iii) if the acquirer does not complete such a divestment within the divestment period, the competent authority may, with the consent of the resolution authority, impose on the acquirer penalties and other measures for infringing the requirements for acquisitions or disposals of qualifying holdings under Regulations 54, 55 and 56 of the Capital Requirements Regulations.

• (12) Transfers made by virtue of the sale of business tool shall be subject to the safeguards referred to in Chapter 9.

• (13) For the purposes of exercising the rights to provide services or to establish itself in a Member State in accordance with the MiFID I Regulations or Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004¹⁸ , the purchaser shall be considered to be a continuation of the institution under resolution and may continue to exercise any such right that was exercised by the institution under resolution in respect of the assets, rights or liabilities transferred.

• (14) A purchaser referred to in paragraph (1) may continue to exercise the rights of membership and access to payment, clearing and settlement systems, stock exchanges, investor compensation schemes and deposit guarantee schemes of the institution under resolution, provided that it meets the conditions for membership and participation in such systems, exchanges and schemes.

• (15) Notwithstanding paragraph (14), access shall not be denied on the ground that a purchaser does not possess a rating from a credit rating agency, or, where it does possess such a rating, that rating is not commensurate with the rating levels required to be granted access to the systems, exchanges and schemes referred to in the paragraph (14).

• (16) Notwithstanding paragraph (14), where a purchaser does not meet the conditions for membership or participation in a relevant payment, clearing or settlement system, stock exchange, investor compensation scheme or deposit guarantee scheme, the resolution authority may direct that the purchaser shall continue to exercise the rights referred to in paragraph (14) for such a period of time as may be specified by the resolution authority, not exceeding 24 months, and such a direction may be renewed by the resolution authority on the application of the purchaser.

• (17) Without prejudice to Chapter 9, the following persons shall not have any rights over or in relation to assets, rights or liabilities which have been transferred pursuant to the sale of business tool:

• (a) shareholders of the institution under resolution;

• (b) creditors of the institution under resolution, or

• (c) other third parties whose assets, rights or liabilities have not been transferred.

Sale of business tool: procedural requirements.

• (a) the resolution authority shall market or make arrangements for the marketing of the assets, rights, liabilities, shares or other instruments of ownership of that institution that the resolution authority intends to transfer, and

• (b) pools of rights, assets, and liabilities may be marketed separately.

• (2) Without prejudice to the Union State aid framework, where applicable, the resolution authority shall carry out the marketing process in accordance with the following principles:

• (a) it shall be as transparent as possible and shall not materially misrepresent the assets, rights, liabilities, shares or other instruments of ownership, having regard to the circumstances and in particular the need to maintain financial stability;

• (b) it shall not unduly favour or discriminate between potential purchasers;

• (c) it shall be free from any conflicts of interest;

• (d) it shall not confer any unfair advantage on a potential purchaser;

• (e) it shall take account of the need to effect a resolution action with the necessary speed;

• (f) it shall aim at maximising, as far as possible, the sale price for the shares or other instruments of ownership, assets, rights or liabilities involved.

• (3) Subject to paragraph (2)(b), the principles referred to in paragraph (2) shall not prevent the resolution authority from soliciting particular potential purchasers.

• (4) Any public disclosure of the marketing of the institution or entity referred to in Regulation 2(1)(b) to (i) that would otherwise be required in accordance with Article 17(1) of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014¹⁹ may be delayed in accordance with Article 17(4) or (5) of that Regulation.

• (5) The resolution authority may apply the sale of business tool without complying with the requirement to market as set out in paragraph (1) where, in the opinion of the resolution authority, compliance with that requirement would be likely to undermine one or more of the resolution objectives and, in particular, where the resolution authority considers that—

• (a) there is a material threat to financial stability arising from or aggravated by the failure or likely failure of the institution under resolution, and

• (b) compliance with the requirement set out in paragraph (1) would be likely to undermine the effectiveness of the sale of business tool in addressing that threat or achieving the resolution objective referred to in Regulation 61(2)(b).

The bridge institution tool

Bridge institution tool.

• (a) shares or other instruments of ownership issued by one or more institutions under resolution;

• (b) all or any assets, rights or liabilities of one or more institutions under resolution.

• (2) Subject to Regulations 110, 148, 149 and 150, a transfer referred to in the paragraph (1) may take place—

• (a) without obtaining the consent of the shareholders of the institution under resolution or any third party other than the bridge institution, and

• (b) without complying with any procedural requirements under company or securities law in the State.

• (3) For the purposes of this Regulation, the resolution authority may cause to be formed and registered under the Act of 2014 a company (referred to in these Regulations as a “bridge institution”) that meets the following requirements:

• (a) it is wholly or partially owned by one or more public authorities which may include the resolution authority;

• (b) it is established for the purpose of receiving and holding some or all of the shares or other instruments of ownership issued by an institution under resolution or some or all of the assets, rights and liabilities of one or more institutions under resolution with a view to maintaining access to critical functions and selling the institution or entity referred to in Regulation 2(1)(b) to (i).

• (4) The resolution authority may direct the bridge institution to take any action or refrain from taking any action where, in the opinion of the resolution authority, it would facilitate the achievement of the resolution objectives, and the bridge institution shall comply with any such direction.

• (5) The application of the bail-in tool for the purpose referred to in Regulation 79(1)(b) shall not interfere with the ability of the resolution authority to issue directions to the bridge institution pursuant to paragraph (4).

• (6) When applying the bridge institution tool, the resolution authority shall ensure that the total value of liabilities transferred to the bridge institution does not exceed the total value of the rights and assets transferred from the institution under resolution or provided by other sources.

• (7) Subject to Regulation 68(7), any consideration paid by the bridge institution shall benefit the following:

• (a) the owners of the shares or instruments of ownership, where the transfer to the bridge institution has been effected by transferring shares or instruments of ownership issued by the institution under resolution from the holders of those shares or instruments to the bridge institution;

• (b) the institution under resolution, where the transfer to the bridge institution has been effected by transferring some or all of the assets or liabilities of the institution under resolution to the bridge institution.

• (8) When applying the bridge institution tool, the resolution authority may apply to the Court under Regulation 108 to vary a resolution order to make supplemental transfers of shares or other instruments of ownership issued by an institution under resolution or, as the case may be, assets, rights or liabilities of the institution under resolution.

• (9) Following an application of the bridge institution tool, the resolution authority may do either or both of the following:

• (a) apply to the Court under Regulation 108 to vary a resolution order to transfer rights, assets or liabilities back from the bridge institution to the institution under resolution, or the shares or other instruments of ownership back to their original owners, and the institution under resolution or original owners shall be obliged to take back any such assets, rights or liabilities, or shares or other instruments of ownership, provided that the conditions set out in paragraph (10) are met;

• (b) apply to the Court under Regulation 109 to vary a resolution order to transfer shares or other instruments of ownership, or assets, rights or liabilities from the bridge institution to a third party.

• (10) The resolution authority may apply to the Court to transfer shares or other instruments of ownership or assets, rights or liabilities back from the bridge institution in one of the following circumstances:

• (a) the possibility that the specific shares or other instruments of ownership, assets, rights or liabilities might be transferred back is stated expressly in the resolution order by which the transfer was made;

• (b) the specific shares or other instruments of ownership, assets, rights or liabilities do not fall within the classes of, or meet the conditions for transfer of, shares or other instruments of ownership, assets, rights or liabilities specified in the resolution order by which the transfer was made.

• (11) The transfer back referred to in paragraph (10) may be made at any time, and shall comply with any other conditions, stated in that resolution order for the relevant purpose.

• (12) Transfers between the institution under resolution, or the original owners of shares or other instruments of ownership, on the one hand, and the bridge institution on the other, shall be subject to the safeguards referred to in Chapter 9.

• (13) For the purposes of exercising the rights to provide services or to establish itself in another Member State in accordance with the Capital Requirements Regulations or the MiFID I Regulations, a bridge institution shall be considered to be a continuation of the institution under resolution and may continue to exercise any such right that was exercised by the institution under resolution in respect of the assets, rights or liabilities transferred.

• (14) The bridge institution may continue to exercise the rights of membership and access to payment, clearing and settlement systems, stock exchanges, investor compensation schemes and deposit guarantee schemes of the institution under resolution, provided that it meets the conditions for membership and participation in such systems, exchanges and schemes.

• (15) Notwithstanding paragraph (14)—

• (a) access shall not be denied on the ground that the bridge institution does not possess a rating from a credit rating agency, or, where it does possess such a rating, that rating is not commensurate with the rating levels required to be granted access to the systems, exchanges and schemes referred to in that paragraph, or

• (b) where a bridge institution does not meet the conditions for membership or participation in a relevant payment, clearing or settlement system, stock exchange, investor compensation scheme or deposit guarantee scheme, the resolution authority may direct that the bridge institution shall continue to exercise the rights referred to in that paragraph for such a period of time as may be specified in writing by the resolution authority, not exceeding 24 months.

• (16) A direction referred to in paragraph (15)(b) may be renewed by the resolution authority on the application in writing of the bridge institution.

• (17) Without prejudice to Chapter 9, the following persons shall not have any rights over or in relation to assets, rights or liabilities which have been transferred to the bridge institution or its management:

• (a) shareholders of the institution under resolution;

• (b) creditors of the institution under resolution, or

• (c) other third parties whose assets, rights or liabilities have not been transferred.

• (18) The bridge institution, and the members of its senior management, shall not owe any legal duty or responsibility to shareholders or creditors of the institution under resolution and the senior management of the bridge institution shall have no liability to such shareholders or creditors for acts or omissions in the discharge of their legal duties.

Requirements of bridge institution.

• (2) The members of the management body of a bridge institution shall be elected by the shareholders of the bridge institution, which may include the resolution authority, in accordance with its constitution.

• (3) The appointment of members of the management body of a bridge institution shall—

• (a) be subject to the pre-approval of the competent authority in accordance with section 23 of the Act of 2010, and

• (b) not take effect without the prior approval of the resolution authority in writing.

• (4) The remuneration of the members of the management body of the bridge institution and their respective responsibilities shall be subject to the prior approval of the resolution authority in writing.

• (5) The bridge institution shall provide to the resolution authority upon request plans and policies relating to the strategy and risk profile of the bridge institution, and the resolution authority may request changes to any such plans or policies by notice in writing.

• (6) The bridge institution shall be required to comply, as applicable, with the requirements of, and shall be subject to supervision in accordance with, the following:

• (a) the Union Capital Requirements Regulation;

• (b) the Capital Requirements Regulations;

• (c) the MiFID I Regulations;

• (d) financial services legislation.

• (7) The bridge institution, as soon as practicable after its formation, shall apply for authorisation to carry on the business of—

• (a) a credit institution under section 9 of the Act of 1971 or section 17 of the Act of 1989, or

• (b) an investment firm as defined in Regulation 3(1) of MiFID I Regulations.

• (8) A bridge institution shall operate in accordance with the Union State aid framework and the resolution authority may specify restrictions in writing on the operation of the bridge institution in order to ensure compliance.

• (9) Notwithstanding the requirements of paragraphs (6) and (7), the bridge institution may be established and authorised without complying with the authorisation provisions as set down in financial services legislation for a short period of time at the beginning of its operation, where the resolution authority considers this necessary for the achievement of the relevant resolution objectives.

• (10) Where paragraph (9) applies, the resolution authority may apply to the competent authority for a temporary derogation from the requirements of those provisions, which the competent authority may grant where it considers it appropriate.

• (11) Where the competent authority receives an application under paragraph (10), it shall consider the application and, where it grants the derogation, the competent authority shall indicate the duration of that derogation in writing.

Operation of bridge institution.

• (a) maintaining access to critical functions;

• (b) selling the institution or entity referred to in Regulation 2(1)(b) to (i), or its assets, rights or liabilities, to one or more private sector purchasers when conditions are appropriate and within the period specified in paragraph (6) or, where applicable, paragraph (7).

• (2) The resolution authority shall decide that the bridge institution is no longer a bridge institution for the purposes of Regulation 71(3) where any of the following has occurred:

• (a) the bridge institution has merged with another entity;

• (b) the bridge institution has ceased to meet the requirements of Regulation 71(3);

• (c) all or substantially all of the bridge institution’s assets, rights and liabilities have been sold to a third party or asset management vehicle;

• (d) the period specified in paragraph (6) or, where applicable, paragraph (7) has expired;

• (e) the bridge institution’s assets have been completely wound down and its liabilities have been completely discharged.

• (3) Where, under paragraph (2), the resolution authority has decided that the bridge institution is no longer a bridge institution, the provisions of Regulations 71, 72 and this Regulation shall cease to apply to the bridge institution concerned.

• (4) Where the resolution authority seeks to sell its shares or other instruments of ownership in a bridge institution or where the bridge institution seeks to sell any of its assets, rights or liabilities, the resolution authority or bridge institution shall ensure that the shares or other instruments of ownership or the relevant assets, rights or liabilities are marketed openly and transparently and that the sale does not materially misrepresent them or unduly favour or discriminate between potential purchasers.

• (5) Any such sale referred to in paragraph (4) shall be made on commercial terms, having regard to the circumstances and in accordance with the Union State aid framework.

• (6) Subject to paragraph (7), where none of the circumstances referred to in paragraph (2)(a), (b), (c) or (e) have occurred, the resolution authority shall terminate the operation of a bridge institution as soon as possible and not later than 2 years after the date on which the last transfer from an institution under resolution pursuant to the bridge institution tool was made.

• (7) The resolution authority may extend the period referred to in paragraph (6) for one or more additional one-year periods where such extension—

• (a) assists in the achievement of one or more of the outcomes referred to in paragraph (2)(a), (b), (c) or (e), or

• (b) is necessary to ensure the continuity of essential banking or financial services.

• (8) Any decision of the resolution authority to extend the period referred to in paragraph (6) shall be reasoned and shall contain a detailed assessment of the situation, including market conditions, justifying the extension.

• (9) Where the operations of a bridge institution have ceased in the circumstances referred to in paragraph (2)(c) or (d), the resolution authority shall cause the bridge institution to be wound up under normal insolvency proceedings.

• (10) Subject to Regulation 68(7), any proceeds generated as a result of the termination of the operation of the bridge institution shall benefit the shareholders of the bridge institution.

• (11) Where a bridge institution is used for the purpose of transferring assets and liabilities of more than one institution under resolution, the requirements of paragraph (9) shall refer to the assets and liabilities transferred from each of the institutions under resolution and not to the bridge institution concerned.

The asset separation tool

Asset separation tool.

• (a) one or more institutions under resolution, or

• (b) a bridge institution,

to one or more asset management vehicles.

• (2) Subject to Regulations 110, 148, 149 and 150, the transfer referred to in paragraph (1) may take place—

• (a) without the resolution authority obtaining the consent of the shareholders of the institutions under resolution or any third party other than the bridge institution, and

• (b) without complying with any procedural requirements under national company or securities law.

• (3) For the purposes of this Regulation, the resolution authority may cause to be formed and registered under the Act of 2014 a company (referred to in these Regulations as an “asset management vehicle”) that meets the following requirements:

• (a) it is wholly or partially owned by one or more public authorities which may include the resolution authority;

• (b) it has been established for the purpose of receiving some or all of the assets, rights and liabilities of one or more institutions under resolution or a bridge institution.

• (4) The resolution authority may direct an asset management vehicle to take any action or refrain from taking any action where, in the opinion of the resolution authority, it would facilitate the achievement of the resolution objectives, and the asset management vehicle shall comply with any such direction.

• (5) An asset management vehicle shall manage the assets transferred to it with a view to maximising their value through eventual sale or orderly wind down.

• (6) The contents of the asset management vehicle’s constitution shall be subject to the prior approval of the resolution authority in writing.

• (7) The management body of an asset management vehicle shall be appointed by the shareholders of the asset management vehicle, which may include the resolution authority, in accordance with its constitution and the appointment of any person as a manager or director of the asset management vehicle shall not take effect without the resolution authority’s prior approval in writing.

• (8) The remuneration of the members of the management body of an asset management vehicle and their respective responsibilities shall be subject to the approval of the resolution authority.

• (9) The asset management vehicle shall provide to the resolution authority, upon written request from the resolution authority, the plans and policies relating to the strategy and risk profile of the asset management vehicle, and the resolution authority may require changes to any such plans or policies in writing.

• (10) A resolution order may in accordance with paragraph (1) transfer assets, rights or liabilities only where—

• (a) the conditions in the market for the assets to be transferred are such that the liquidation of those assets under normal insolvency proceedings could have an adverse effect on one or more financial markets,

• (b) such a transfer is necessary to ensure the proper functioning of the institution under resolution or bridge institution, or

• (c) such a transfer is necessary to maximise liquidation proceeds.

• (11) When applying the asset separation tool, the resolution authority shall determine the consideration for which assets, rights and liabilities are transferred to the asset management vehicle in accordance with—

• (a) the principles established in Regulations 65 and 66, and

• (b) the Union State aid framework.

• (12) Paragraph (11) does not prevent the consideration referred to in that paragraph having nominal or negative value.

• (13) Subject to Regulation 68(7), any consideration paid by the asset management vehicle in respect of the assets, rights or liabilities acquired directly from the institution under resolution shall benefit the institution under resolution and any such consideration may be paid in the form of debt issued by the asset management vehicle.

• (14) Where the bridge institution tool has been applied, an asset management vehicle may, subsequent to the application of the bridge institution tool, acquire assets, rights or liabilities from the bridge institution.

• (15) The resolution authority may apply to the Court pursuant to Regulation 108 to vary a resolution order to transfer assets, rights or liabilities from the institution under resolution to one or more asset management vehicles on more than one occasion and transfer assets, rights or liabilities back from one or more asset management vehicles to the institution under resolution provided that the conditions specified in paragraph (17) are met.

• (16) The institution under resolution shall be obliged to take back any assets, rights or liabilities transferred to it in accordance with this Regulation.

• (17) The resolution authority may apply to the Court pursuant to Regulation 108 to vary a resolution order to transfer rights, assets or liabilities back from the asset management vehicle to the institution under resolution where—

• (a) the possibility that the specific rights, assets or liabilities might be transferred back is stated expressly in the resolution order by which the transfer was made, or

• (b) the specific rights, assets or liabilities do not fall within the classes of, or meet the conditions for transfer of, rights, assets or liabilities specified in the resolution order by which the transfer was made.

• (18) In either of the cases referred in paragraph (17)(a) and (b), the transfer back may be made at any time, and shall comply with any other conditions, stated in that resolution order for the relevant purpose.

• (19) Transfers between the institution under resolution and the asset management vehicle shall be subject to the safeguards for partial property transfers specified in Chapter 9.

• (20) Without prejudice to Chapter 9, shareholders or creditors of an institution under resolution and other third parties whose assets, rights or liabilities have not been transferred to the asset management vehicle shall not have any rights over or in relation to assets, rights or liabilities which have been transferred to the asset management vehicle, or to its management body.

• (21) An asset management vehicle, its management body and senior management, shall not owe any legal duty or responsibility to shareholders or creditors of the institution under resolution and the management body and senior management of the vehicle shall have no liability to such shareholders or creditors for acts or omissions in the discharge of their legal duties.

Sale of business, bridge institution and asset separation tools: ancillary provisions

Effect of transfer by resolution order — general.

• (2) On and after the transfer of an asset, right, liability, share or other instrument of ownership under a resolution order—

• (a) the recipient has the same rights (including priorities) and obligations in respect of that asset, right, liability, share or other instrument of ownership as the institution under resolution had immediately before the transfer, and

• (b) the institution under resolution no longer has those rights and obligations referred to in subparagraph (a).

• (3) Other than where the resolution order specifies otherwise, and without prejudice to the generality of paragraph (2)—

• (a) any account included in the transfer is transferred to the recipient at the time of the transfer and becomes, at and after that time, an account between the recipient and the account holder with the same rights and subject to the same rights and obligations (including rights of set-off) as would have been applicable before the transfer,

• (b) any order, instruction, direction, mandate or authority given, whether before or after the transfer, by the account holder in relation to such an account or any obligation entered into by the institution under resolution in relation to any person and subsisting at the time of the transfer has effect after the transfer of the account,

• (c) any amount owing on such an account by the account holder to the institution under resolution at the time of the transfer becomes due and payable by the account holder to the recipient, and any amount owing on such an account by the institution under resolution to the account holder at the time of the transfer becomes due and payable by the recipient to the account holder,

• (d) all property (whether real or personal, and including choses-in-action) specified in the resolution order is transferred to the recipient,

• (e) all contracts, agreements, conveyances, mortgages, deeds, leases, licences, undertakings, notices and other instruments (whether or not in writing) entered into by, made with, given to or by, or addressed to the institution under resolution (whether alone or with another person) relating to property referred to in paragraph (d) are, to the extent that they were previously binding on and enforceable by, against or in favour of the institution under resolution, binding on and enforceable by, against, or in favour of the recipient as fully and effectually in every respect as if the recipient had been the person by whom they were entered into, with whom they were made, or to or by whom they were given or addressed (as the case may be),

• (f) security held by the institution under resolution in connection with the assets, rights, liabilities, shares or other instruments of ownership transferred as security for the payment of the debts or liabilities (whether present or future and whether actual or contingent) of any person are transferred to the recipient as security for the payment of such debts and liabilities to the recipient,

• (g) where the amount secured by such security referred to subparagraph (f) includes future advances to, or liabilities of, a person, the security becomes available to the recipient as security for future advances to that person by, and future liabilities of that person to, the recipient to the extent to which future advances by or liabilities to the institution under resolution were secured by it immediately before the time of the transfer,

• (h) the recipient, in relation to any security transferred to it and the amount secured by that security in accordance with the terms of the security, becomes entitled to the same rights and priorities and subject to the same obligations as those to which the institution under resolution would have been entitled, and subject to, if the security had continued to be held by the institution under resolution,

• (i) except to any extent that the resolution order provides otherwise—

• (i) agreements made or other things done by or in relation to the institution under resolution shall be treated, so far as may be necessary for the purposes of, in connection with or in consequence of the transfer, as made or done by or in relation to the recipient (as the case may be), and

• (ii) references to the institution under resolution, or to any officer or employee of the institution under resolution, in instruments or documents relating to the assets, rights, liabilities, shares or other instruments of ownership transferred have effect as if they were references to the recipient, or to any officer or employee of the recipient (as the case may be),

and

• (j) where, immediately before the time of the transfer, any legal proceedings are pending to which the institution under resolution is a party, and the proceedings have reference to the assets, rights, liabilities, shares or other instruments of ownership transferred, the proceedings continue, and the name of the recipient is substituted (to any extent necessary) for that of the institution under resolution in any such proceedings.

• (4) Where the institution under resolution is a building society and a share account is included in the transfer the following shall apply:

• (a) where the recipient is a building society—

• (i) where the recipient has agreed that the account holders of the institution under resolution shall have membership rights in the recipient, on and after that transfer the holder of the transferred share account has such rights in the recipient, and

• (ii) in any other case, on that transfer the account becomes a deposit account and the account holder has no membership rights in the recipient;

• (b) in any other case, on that transfer the account becomes a deposit account with the recipient.

• (5) Where—

• (a) an institution under resolution is a building society,

• (b) a share account is included in the transfer, and

• (c) the share account becomes a deposit account in the recipient pursuant to subparagraph (4)(b),

the holder of that account continues to have the membership rights in the institution under resolution that he or she had before the transfer, including (without limitation) voting rights and rights to participate in any surplus on a winding up.

• (6) Paragraph (5) has effect notwithstanding anything in—

• (a) the Act of 1989, or

• (b) the constitution of the institution under resolution.

• (7) The transfer of assets, rights, liabilities, shares or other instruments of ownership under a resolution order takes effect notwithstanding—

• (a) any duty or obligation to any person that would otherwise prevent or restrict the transfer,

• (b) any provision of any enactment, rule of law, code of practice or agreement providing for or requiring—

• (i) notice to any person,

• (ii) the consent, approval or concurrence of any person, or

• (iii) any formality such as registration,

• (c) any other rule of law or equity,

• (d) any code of practice made under an enactment,

• (e) the listing rules of a regulated market or the rules of any other market on which the shares of the institution under resolution are traded,

• (f) the constitution of the institution under resolution, or

• (g) any agreement to which the institution under resolution is a party, is bound by, or has an interest in, except to any extent to which the resolution order expressly provides otherwise.

Effect of transfer by resolution order in relation to securities.

• (a) notwithstanding any provision of an Act referred to in paragraph (2) or any other Act that provides for the registration of assets or security, or any details of assets or security, a recipient is not required to become registered as owner of the security,

• (b) notwithstanding sections 62 and 64 of the Registration of Title Act 1964 (No. 16 of 1964), a recipient has, in relation to any charge that is or is part of such a security, the powers of a mortgagee under a mortgage by deed, even though the recipient is not registered as owner of the charge,

• (c) the recipient has the powers and rights conferred on the registered owner of a charge by the Registration of Title Act 1964 , and

• (d) where the resolution order effects an extension of, or in relation to the security so as to include future advances by or future liabilities to the recipient, the extension or inclusion need not be registered under any Act referred to in paragraph (2) under which it would otherwise be required to be registered but operates for the purposes of those Acts as if made by deed duly registered under that Act on the time of the transfer.

• (2) The Acts referred to in paragraph (1)(a) and (d) are the following:

• (a) the Bills of Sale (Ireland) Act 1879 (1879 (42 & 43 Vict.) c. 50);

• (b) the Bills of Sale (Ireland) Act (1879) Amendment Act 1883 (1883 (46 & 47 Vict.) c. 7);

• (c) the Agricultural Co-operative Societies (Debentures) Act 1934 (No. 39 of 1934);

• (d) the Registration of Deeds and Title Acts 1964 and 2006;

• (e) the Agricultural Credit Acts 1978 to 1992;

• (f) the Patents Acts 1992 to 2014;

• (g) the Trade Marks Act 1996 (No 6 of 1996);

• (h) the Taxes Consolidation Act 1997 (No. 39 of 1997);

• (i) the Act of 2014.

Application of Bankers’ Books Evidence Acts 1879 to 1989.

• (2) In paragraph (1), “books” includes ledgers, day books, cash books, account books and all other books and records used in the ordinary business of the institution under resolution before the time at which the transfer has effect.

Stamp duty.

• (2) Stamp duty is not chargeable on any instrument executed in order to give legal effect to a transfer effected or taken to be effected by a resolution order, or on the issuance or transfer of any shares or other instruments of ownership in order to give legal effect to a transfer or a write-down or conversion of an instrument or liability.

The bail-in tool — Objective and scope of bail-in tool

Bail-in tool.

• (a) to recapitalise an institution or an entity referred to in Regulation 2(1)(b) to (i) that meets the conditions for resolution to the extent sufficient to restore its ability to comply with the conditions for authorisation (to the extent that those conditions apply to the entity) and to continue to carry out the activities for which it is authorised under financial services legislation, where the entity is authorised under that legislation, and to sustain sufficient market confidence in the institution or entity;

• (b) to convert to equity or reduce the principal amount of claims or debt instruments that are transferred—

• (i) to a bridge institution, with a view to providing capital for that bridge institution, or

• (ii) under the sale of business tool referred to in Regulation 69 or the asset separation tool referred to in Regulation 74.

• (2) The resolution authority may apply the bail-in tool for the purposes referred to in paragraph (1)(a) only where there is a reasonable prospect that the application of that tool together with other relevant measures including measures implemented in accordance with the business reorganisation plan required by Regulation 91 will, in addition to achieving relevant resolution objectives, restore the institution or entity referred to in Regulation 2(1)(b) to (i) in question to financial soundness and long-term viability.

• (3) The resolution authority may apply any of the resolution tools referred to Regulation 68(2)(a), (b) and (c), and the bail-in tool referred to in paragraph (1)(b), where the conditions set out in paragraph (2) are not met.

• (4) The resolution authority shall, when applying the bail-in tool to an institution or entity referred to in Regulation 2(1)(b) to (i), take due account of the legal form of the institution or entity concerned.

• (5) Notwithstanding paragraph (4), nothing shall prevent the resolution authority from applying the bail-in tool to those institutions or entities in a manner that would cause or necessitate changes to the legal form of the institution or entity concerned.

Scope of bail-in tool.

• (2) A resolution order shall not exercise the write-down or conversion powers in relation to the following liabilities whether they are governed by the law of a Member State (including the State) or of a third country:

• (a) covered deposits;

• (b) secured liabilities, including—

• (i) covered bonds, or

• (ii) liabilities in the form of financial instruments used for hedging purposes which form an integral part of the cover pool and which, according to the law of the State, are secured in a way similar to covered bonds;

• (c) any liability that arises by virtue of the holding by an institution or entity referred to in Regulation 2(1)(b) to (i) of client assets or client money, including client assets or client money held on behalf of—

• (i) UCITS, as defined in Article 1(2) of Directive 2009/65/EC, or

• (ii) AIFs as defined in Article 4(1)(a) of Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011²⁰ ,

to the extent that such a liability arises from monies held by the institution or entity concerned on trust;

• (d) any liability that arises by virtue of a fiduciary relationship between an institution or entity referred to in Regulation 2(1)(b) to (i), in its capacity as fiduciary, and another person, in its capacity as beneficiary, to the extent that such a liability arises from monies held by the institution or entity concerned on trust;

• (e) any liability owned by an investment firm which arises from client monies or client financial instruments, or documents of title relating to such client financial instruments, received, held or paid on behalf of a client by an investment firm for the purposes of Regulation 157 of the MiFID I Regulations;

• (f) liabilities to institutions, excluding entities that are part of the same group, with an original maturity of less than 7 days;

• (g) liabilities with a remaining maturity of less than 7 days, owed to systems or operators of systems, designated according to Directive 98/26/EC, or their participants and arising from the participation in such a system;

• (h) any liability to an employee, in relation to accrued salary, pension benefits or other fixed remuneration, other than for the variable component of remuneration that is not regulated by a collective bargaining agreement;

• (i) any liability to a commercial or trade creditor arising from the provision to an institution or entity referred to in Regulation 2(1)(b) to (i) of goods or services that are critical to the daily functioning of its operations, which may in particular include information technology services, utilities and the rental, servicing and upkeep of premises;

• (j) any liability to Revenue or the Minister for Social Protection, provided that those liabilities are preferred under the law of the State;

• (k) any liability to deposit guarantee schemes arising from contributions due in accordance with Directive 2014/49/EU.

• (3) Paragraph (2)(h) shall not apply to the variable component of the remuneration of material risk takers within the meaning of Article 92(2) of the Capital Requirements Directive.

• (4) Notwithstanding this Regulation, all secured assets relating to a covered bond cover pool shall remain unaffected, segregated and with enough funding.

• (5) Notwithstanding paragraphs (2)(b) and (4), a resolution order may, where appropriate, exercise the write-down or conversion powers in relation to any part of a secured liability or a liability for which collateral has been pledged that exceeds the value of the assets, pledge, lien or collateral against which it is secured.

• (6) Notwithstanding paragraph (2)(a), a resolution order may, where appropriate, exercise the write-down or conversion powers in relation to any part of a deposit that exceeds the coverage level provided for in Article 6 of Directive 2014/49/EU.

• (7) For the purposes of paragraph (2)(i), the resolution authority shall determine at the time of the application of the bail-in tool, taking due account of any resolution plan for the institution or entity concerned, which goods or services are critical to the daily functioning of the operations of that institution or entity and in making this determination, the resolution authority shall consider in particular the following:

• (a) whether the institution or entity will continue to require those goods or services after the resolution action has been taken;

• (b) whether the application of the bail-in tool to liabilities owed to the providers of those goods and services would be likely to cause a serious disruption to the provision of those goods and services;

• (c) whether those goods or services could be readily provided by an alternative supplier within an appropriate timeframe at a reasonable cost to the institution or entity.

• (8) In applying its powers to direct the limitation of exposures under Regulation 28(10)(c), the resolution authority shall, where appropriate, take into account the proportion of an institution’s exposures to other institutions (excluding institutions which are part of the same group) which are comprised of own funds, relevant capital instruments and eligible liabilities.

• (9) In exceptional circumstances where the bail-in tool is applied, having given due consideration to the matters referred to in paragraph (16), the resolution authority may propose the exclusion or partial exclusion of certain liabilities from the application of the write-down or conversion powers where—

• (a) it is not possible to bail-in that liability within a reasonable time notwithstanding the good faith efforts of the resolution authority,

• (b) the exclusion is strictly necessary and is proportionate to achieve the continuity of critical functions and core business lines in a manner that maintains the ability of the institution under resolution to continue key operations, services and transactions,

• (c) the exclusion is strictly necessary and proportionate to avoid giving rise to widespread contagion, in particular as regards eligible deposits held by natural persons and micro, small and medium-sized enterprises, which would severely disrupt the functioning of financial markets, including of financial market infrastructures, in a manner that could cause a serious disturbance to the economy of a Member State or of the Union, or

• (d) the application of the bail-in tool to those liabilities would cause a destruction in value such that the losses borne by other creditors would be higher than if those liabilities were excluded from bail-in.

• (10) Where the resolution authority proposes the exclusion or partial exclusion of an eligible liability or class of eligible liabilities under paragraph (9), it may propose an increase in the level of write-down or conversion applied to other eligible liabilities to take account of such exclusion or partial exclusion, provided that the level of write-down and conversion applied to other eligible liabilities complies with the principle set out in Regulation 64(1)(g).

• (11) Where the resolution authority proposes the exclusion or partial exclusion of an eligible liability or class of eligible liabilities pursuant to paragraph (9) and the effect of such exclusion or partial exclusion is that the losses that would have been borne by those liabilities would not be passed on fully to other creditors, the resolution order may, subject to paragraph (12), provide for the use of the Fund to make a contribution to the institution under resolution to do one, or both, of the following:

• (a) cover any losses which have not been absorbed by eligible liabilities and restore the net asset value of the institution under resolution to zero in accordance with Regulation 85(1)(a);

• (b) purchase shares or other instruments of ownership or capital instruments in the institution under resolution, in order to recapitalise the institution in accordance with Regulation 85(1)(b).

• (12) The Fund may only be used to make a contribution referred to in paragraph (11) where—

• (a) a contribution to loss absorption and recapitalisation equal to an amount not less than 8% of the total liabilities including own funds of the institution under resolution, measured at the time of resolution action in accordance with the valuation provided for in Regulation 65 or 66, has been made by the shareholders and the holders of other instruments of ownership, the holders of relevant capital instruments and other eligible liabilities through write-down, conversion or otherwise, and

• (b) the contribution of the Fund does not exceed 5% of the total liabilities including own funds of the institution under resolution, measured at the time of resolution action in accordance with the valuation provided for in Regulation 65 or 66.

• (13) The contribution of the Fund referred to in paragraph (11) may be financed by—

• (a) the amount available to the Fund which has been raised through contributions by institutions and Union branches in the State in accordance with Regulation 166,

• (b) the amount that can be raised through ex-post contributions in accordance with Regulation 167 within 3 years, or

• (c) where the amounts referred to in subparagraphs (a) and (b) are insufficient, amounts raised from alternative financing sources in accordance with Regulation 168.

• (14) In addition to the sources of finance referred to in paragraph (13), in extraordinary circumstances the resolution authority may seek further funding from alternative financing sources after the occurrence of both of the following conditions:

• (a) the 5% limit specified in paragraph (12)(b) has been reached;

• (b) all unsecured, non-preferred liabilities, other than eligible deposits, have been written down or converted in full.

• (15) As an alternative or in addition, where the conditions set out in paragraph (14) are met, the resolution authority may make a contribution from the Fund from resources which have been raised through ex-ante contributions in accordance with Regulation 166 and which have not yet been used.

• (16) The matters for due consideration referred to in paragraph (9) are the following:

• (a) the principle that losses should be borne first by shareholders and next, in general, by creditors of the institution under resolution in order of preference;

• (b) the level of loss-absorbing capacity that would remain in the institution under resolution if the liability or class of liabilities were excluded;

• (c) the need to maintain adequate resources for resolution financing.

• (17) The exclusions under paragraph (9) may be applied to either completely exclude a liability from write-down or to limit the extent of the write-down applied to that liability.

• (18) Prior to the exercise of the discretion to exclude a liability under paragraph (9), the resolution authority shall notify the European Commission in writing.

• (19) Where the proposed exclusion or partial exclusion of a liability under paragraph (9) would require a contribution by the Fund or an alternative financing source under paragraphs (11) to (15), the discretion to exclude the liability shall only be exercised where the European Commission does not prohibit it from being done within 24 hours of receiving the notification from the resolution authority, or such longer period as may be agreed between the resolution authority and the European Commission.

• (20) Where the European Commission requires amendments to the proposed exclusion within—

• (a) the 24 hour time period, or

• (b) such longer period agreed with the resolution authority,

referred to in paragraph (19), the resolution authority shall make those amendments.

The bail-in tool — minimum requirement for own fundsand eligible liabilities

Application of minimum requirement.

• (2) The minimum requirement referred to in paragraph (1) shall be calculated as the amount of own funds and eligible liabilities expressed as a percentage of the own funds and total liabilities (including liabilities arising from derivatives, expressed on a net basis giving full recognition to counterparty-netting rights) of the institution.

• (3) Notwithstanding paragraphs (1) and (2), the resolution authority shall exempt mortgage credit institutions financed by covered bonds which, according to national law (including under any enactment or rule of law), are not allowed to receive deposits from the obligation to meet, at all times, a minimum requirement for own funds and eligible liabilities.

• (4) Eligible liabilities shall be included in the amount of own funds and eligible liabilities, referred to in paragraph (1), only where they satisfy the following conditions:

• (a) the instrument is issued and fully paid up;

• (b) the liability is not owed to, secured by or guaranteed by the institution itself;

• (c) the purchase of the instrument was not funded directly or indirectly by the institution;

• (d) the liability has a remaining maturity of not less than one year;

• (e) the liability does not arise from a derivative;

• (f) the liability does not arise from a deposit which benefits from preference in insolvency under section 621(2) or (2A) of the Act of 2014.

• (5) For the purpose of paragraph (4)(d), where a liability confers upon its owner a right to early reimbursement the maturity of that liability shall be the first date where such a right arises.

• (6) Where a liability is governed by the law of a third country, the resolution authority may require the institution concerned to demonstrate that any decision of the resolution authority to write-down or convert that liability would be effective under the law of that third country, having regard to the terms of the contract governing the liability, international agreements on the recognition of resolution proceedings and other relevant matters.

• (7) Where the resolution authority is not satisfied that any such decision referred to in paragraph (6) would be effective under the law of the third country, the liability shall not be counted towards the minimum requirement for own funds and eligible liabilities under paragraph (1).

• (8) The minimum requirement for own funds and eligible liabilities of each institution pursuant to paragraph (1) shall be determined by the resolution authority, after consulting the competent authority, at least on the basis of the following criteria:

• (a) the need to ensure that the institution can be resolved by the application of the resolution tools including, where appropriate, the bail-in tool in a way that meets the resolution objectives;

• (b) the need to ensure, in appropriate cases, that the institution has sufficient eligible liabilities that, if the bail-in tool were to be applied, losses could be absorbed and the Common Equity Tier 1 ratio of the institution could be restored to a level necessary to enable it to continue to comply with the conditions for authorisation and to continue to carry out the activities for which it is authorised under financial services legislation and to sustain sufficient market confidence in the institution or entity;

• (c) the need to ensure that, if the resolution plan anticipates that certain classes of eligible liabilities might be excluded from bail-in under Regulation 80(9) or that certain classes of eligible liabilities might be transferred to a recipient in full under a partial transfer, the institution has sufficient other eligible liabilities to ensure that losses could be absorbed and the Common Equity Tier 1 ratio of the institution could be restored to a level necessary to enable it to continue to comply with the conditions for authorisation and to continue to carry out the activities for which it is authorised under financial services legislation;

• (d) the size, the business model, the funding model and the risk profile of the institution concerned;

• (e) the extent to which the deposit guarantee scheme could contribute to the financing of resolution in accordance with Regulation 173;

• (f) the extent to which the failure of the institution would have adverse effects on financial stability, including through contagion caused by its interconnectedness with other institutions or with the financial system generally.

• (9) Institutions shall comply with the minimum requirements set out in this Regulation and Regulations 82 to 84 on an individual basis.

• (10) The resolution authority may, after consulting the competent authority, decide to apply the minimum requirement set out in this Regulation to an entity referred to in Regulation 2(1)(b) to (i).

• (11) In addition to paragraph (9), Union parent undertakings in the State shall comply with the minimum requirements set out in this Regulation and Regulations 82 to 84 on a consolidated basis.

Minimum requirement — resolution authority as group-level resolution authority.

• (a) the criteria set out in Regulation 81(8);

• (b) whether the resolution plan anticipates that any subsidiaries of the group established in third countries are to be resolved separately to the other entities in the group.

• (2) Where the resolution authority is the group-level resolution authority, it shall endeavour to reach a joint decision with the Union resolution authorities responsible for the subsidiaries in other Member States on the level of the minimum requirement to be applied to the Union parent undertaking at a consolidated level within 4 months and where a joint decision is reached, the resolution authority shall provide the decision and reasons for the decision in writing to the Union parent undertaking.

• (3) Where the resolution authority has not reached a joint decision with the relevant Union resolution authorities of subsidiaries within the 4 months referred to in paragraph (2), the resolution authority shall decide on the consolidated minimum requirement, taking into consideration the assessment of subsidiaries carried out by the relevant Union resolution authorities.

• (4) Where, at the end of the four-month period referred to in paragraph (2), any Union resolution authority or the resolution authority has referred the matter to the European Banking Authority in accordance with Article 19 of Regulation (EU) No 1093/2010, the resolution authority shall defer its decision and await any decision that that other authority may take in accordance with Article 19(3) of that Regulation.

• (5) The resolution authority shall take its decision in accordance with any decision of the European Banking Authority referred to in paragraph (4), and the four-month period referred to in paragraph (2) shall be deemed to be the conciliation period within the meaning of Regulation (EU) No 1093/2010.

• (6) Where the European Banking Authority has not made a decision within one month after referral to it in accordance with paragraph (4), the decision of the resolution authority as group-level resolution authority shall apply and the resolution authority shall provide the decision and reasons for the decision in writing to the parent undertaking.

• (7) The resolution authority shall, together with the relevant Union resolution authorities of subsidiaries, review and where relevant update on a regular basis the joint decision referred to in paragraph (2) and any decision taken in the absence of a joint decision.

• (8) Where the resolution authority is the group-level resolution authority, it may fully waive the application of the minimum requirement to a Union parent institution at an individual level where—

• (a) the Union parent institution complies on a consolidated basis with the minimum requirement set under Regulation 81(11) and paragraph (1), and

• (b) the competent authority has fully waived the application of individual capital requirements to the institution in accordance with Article 7(3) of the Union Capital Requirements Regulation.

Minimum requirement — resolution authority as resolution authority of subsidiary.

• (a) the criteria listed in Regulation 81(8), in particular the size, business model and risk profile of the subsidiary, including its own funds;

• (b) the consolidated requirement that has been set for the group under Regulation 82.

• (2) The resolution authority shall endeavour to reach a joint decision with the group-level resolution authority on the level of the minimum requirement to be applied to the subsidiary at an individual level and where a joint decision is reached, the resolution authority shall provide the decision and reasons for the decision in writing to the subsidiary.

• (3) Where the resolution authority has not reached a joint decision with the group-level resolution authority within 4 months, the resolution authority shall decide the minimum requirement for the subsidiary, taking into account the views and reservations expressed by the group-level resolution authority.

• (4) Where, at the end of the four-month period referred to in paragraph (3), the group-level resolution authority has referred the matter to the European Banking Authority in accordance with Article 19 of Regulation (EU) No 1093/2010, the resolution authority shall defer its decision and await any decision that that other authority may take in accordance with Article 19(3) of that Regulation.

• (5) The resolution authority shall take its decision in accordance with any decision of the European Banking Authority referred to in paragraph (4), and the four-month period referred to in paragraph (3) shall be deemed to be the conciliation period within the meaning of Regulation (EU) No 1093/2010.

• (6) Where the European Banking Authority has not made a decision within one month after a referral to it in accordance with paragraph (4), the decision of the resolution authority as resolution authority of the subsidiary shall apply.

• (7) The resolution authority shall, together with the group-level resolution authority, review and where relevant update on a regular basis the joint decision referred to in paragraph (2) and any decision taken in the absence of a joint decision.

• (8) Where the resolution authority is the resolution authority of a subsidiary for the purposes of the Bank Recovery and Resolution Directive, it may fully waive the application of the requirements of Regulation 81(9) and (10) in respect of that subsidiary where—

• (a) both the subsidiary and its parent undertaking are subject to authorisation and supervision in the State,

• (b) the subsidiary is included in the supervision on a consolidated basis of the institution which is the parent undertaking,

• (c) the highest level group institution in the State, where different to the Union parent institution, complies on a sub-consolidated basis with the minimum requirement set under Regulation 81(9) and (10),

• (d) there is no current or foreseen material practical or legal impediment to the prompt transfer of own funds or repayment of liabilities to the subsidiary by its parent undertaking,

• (e) either—

• (i) the parent undertaking has satisfied the competent authority of the prudent management of the subsidiary and has declared, with the consent of the competent authority, that it guarantees the commitments entered into by the subsidiary, or

• (ii) the risks in the subsidiary are of no significance,

• (f) the risk evaluation, measurement and control procedures of the parent undertaking cover the subsidiary,

• (g) either—

• (i) the parent undertaking holds more than 50% of the voting rights attached to shares in the subsidiary, or

• (ii) the parent undertaking has the right to appoint or remove a majority of the members of the management body of the subsidiary,

and

• (h) the competent authority has fully waived the application of individual capital requirements to the subsidiary under Article 7(1) of the Union Capital Requirements Regulation.

Minimum requirement — resolution authority generally.

• (2) The resolution authority shall not refer the matter to the European Banking Authority after the end of the relevant four-month period or after a joint decision has been reached.