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

• (3) Where the resolution authority is group-level resolution authority, it shall not refer a decision of the resolution authority of a subsidiary under Article 45(10) of the Bank Recovery and Resolution Directive to the European Banking Authority where the level of the minimum requirement set for the subsidiary is within one percentage point of the consolidated level set under Regulation 82.

• (4) The resolution authority may, having regard to decisions taken in Regulations 81 to 83 and this Regulation, require that a specified part of the minimum requirement for own funds and eligible liabilities of an institution or entity, at consolidated or individual level, shall be met through contractual bail-in instruments.

• (5) Instruments shall only qualify as a contractual bail-in instrument under paragraph (4) where the resolution authority is satisfied that the instrument—

• (a) contains a contractual term providing that, where a resolution authority decides to apply the bail-in tool to that institution, the instrument shall be written down or converted to the extent required before other eligible liabilities are written down or converted, and

• (b) is subject to a binding subordination agreement, undertaking or provision under which in the event of normal insolvency proceedings, the instrument ranks below other eligible liabilities and cannot be repaid until other eligible liabilities outstanding at the time have been settled.

• (6) The resolution authority, in coordination with the competent authority, shall require and verify that institutions meet the minimum requirement for own funds and eligible liabilities set out in Regulation 81(1) and (2) and where relevant the requirement set out in paragraph (4), and shall take any decision pursuant to Regulations 81 to 83 and this Regulation in parallel with the development and the maintenance of resolution plans.

• (7) The resolution authority, in coordination with the competent authority where necessary, shall inform the European Banking Authority in writing of the minimum requirement for own funds and eligible liabilities, and where relevant the requirement set out in paragraph (4), whether at an individual or consolidated level, that has been set for each institution or entity in the State.

The bail-in tool — implementation of bail-in tool

Assessment of amount of bail-in.

• (a) where relevant, the amount by which eligible liabilities must be written down in order to ensure that the net asset value of the institution under resolution is equal to zero, and

• (b) where relevant, the amount by which eligible liabilities must be converted into shares or other capital instruments in order to restore the Common Equity Tier 1 capital ratio of either—

• (i) the institution under resolution, or

• (ii) the bridge institution.

• (2) The assessment referred to in paragraph (1) shall establish the amount by which eligible liabilities need to be written down or converted in order to—

• (a) restore the Common Equity Tier 1 capital ratio of the institution under resolution, or

• (b) where applicable, establish the Common Equity Tier 1 capital ratio of the bridge institution taking into account any contribution of capital by the Fund pursuant to Regulation 164(1)(d),

and in order to—

• (i) sustain sufficient market confidence in the institution under resolution or the bridge institution, and

• (ii) enable the institution under resolution or the bridge institution to continue to meet, for at least one year, the conditions for authorisation and to continue to carry out the activities for which it is authorised under financial services legislation.

• (3) Where the resolution authority intends to propose the application of the asset separation tool in conjunction with the bail-in tool, the amount by which eligible liabilities need to be written down or converted shall, where appropriate, take into account a prudent estimate of the capital needs of the asset management vehicle.

• (4) Where—

• (a) relevant capital instruments have been written down or converted in accordance with Regulations 95 to 98 and the bail-in tool has been applied pursuant to Regulation 79(1),

• (b) the level of write-down and conversion to be applied has been determined on the basis of a provisional valuation under Regulation 66, and

• (c) the level of the write-down or conversion applied is subsequently determined, on the basis of a definitive valuation under Regulation 66(2), to have exceeded the level that is necessary under paragraph (1),

the resolution authority may apply to the Court pursuant to Regulation 108 to vary a resolution order to apply a write-up mechanism to either—

• (i) increase the principal amount of claims or debt instruments in order to fully or partially offset the reduction in the principal amount which has already been applied pursuant to paragraph (1)(a), or

• (ii) increase the amount of shares or other capital instruments which the holder of eligible liabilities or relevant capital instruments receives as part of the conversion of their claims pursuant to paragraph (1)(b).

• (5) The write-up mechanism referred to in paragraph (4) shall be applied in a manner which respects the order of priority under national law (including under any enactment or rule of law).

• (6) The resolution authority shall establish and maintain arrangements to ensure that—

• (a) the assessment under paragraph (1), and

• (b) the valuation under Regulation 65 or 66 on which that assessment is based,

are based on information about the assets and liabilities of the institution under resolution that is as up to date and comprehensive as is reasonably possible.

Treatment of shareholders in bail-in or write-down or conversion of capital instruments.

• (a) the cancellation of existing shares or other instruments of ownership;

• (b) the transfer of existing shares or other instruments of ownership to bailed-in creditors;

• (c) provided that, in accordance to the valuation carried out under Regulation 65 or 66, the institution under resolution has a positive net value, the dilution of existing shareholders and holders of other instruments of ownership as a result of the conversion into shares or other instruments of ownership of—

• (i) relevant capital instruments issued by the institution pursuant to the power referred to in Regulation 95(1), or

• (ii) eligible liabilities issued by the institution under resolution pursuant to the power referred to in Regulation 111(1)(d).

• (2) Any conversion under paragraph (1)(c) shall be done at a rate of conversion that severely dilutes existing holdings of shares or other instruments of ownership.

• (3) The actions referred to in paragraphs (1) and (2) shall also be taken in respect of shareholders and holders of other instruments of ownership where the shares or other instruments of ownership in question were issued or conferred in either of the following circumstances:

• (a) pursuant to conversion of debt instruments to shares or other instruments of ownership in accordance with contractual terms of the original debt instruments on the occurrence of an event that preceded or occurred at the same time as the assessment by the resolution authority that the institution or entity referred to in Regulation 2(1)(b) to (i) met the conditions for resolution;

• (b) pursuant to the conversion of relevant capital instruments to Common Equity Tier 1 instruments in accordance with Regulation 96.

• (4) When considering which action to take in accordance with paragraphs (1) and (2), the resolution authority shall have regard to the following:

• (a) the valuation carried out in accordance with Regulation 65 or 66, as appropriate;

• (b) the amount by which the resolution authority has assessed that Common Equity Tier 1 items must be reduced and relevant capital instruments must be written down or converted pursuant to Regulation 96(1);

• (c) the aggregate amount assessed by the resolution authority pursuant to Regulation 85.

• (5) By way of derogation from—

• (a) Regulations 10 to 19 of the Capital Requirements Regulations,

• (b) the requirement to inform the competent authorities under Regulations 21 and 23 of the Capital Requirements Regulations,

• (c) Regulations 179, 181, 182, 183, 184, 184A, 185 and 187C of the MiFID I Regulations, and

• (d) the requirement to give notice in Regulations 180 and 187A of the MiFID I Regulations,

where the application of the bail-in tool or the conversion of capital instruments would result in the acquisition of or increase in a qualifying holding in an institution as referred to in Regulation 10 of the Capital Requirements Regulations or Regulation 179 of the MiFID I Regulations, the competent authority shall carry out the assessment required under those Regulations in a timely manner that does not delay the application of the bail-in tool or the conversion of capital instruments and prevent the resolution action from achieving the relevant resolution objectives.

• (6) Where the competent authority has not completed the assessment required under paragraph (5) on the date of application of the bail-in tool or the conversion of capital instruments, Regulation 69(11) shall apply, with any necessary modifications, to any acquisition of or increase in a qualifying holding by an acquirer resulting from the application of the bail-in tool or the conversion of capital instruments.

Sequence of write-down and conversion.

• (a) Common Equity Tier 1 items are reduced in accordance with Regulation 96(1)(a);

• (b) where the total reduction pursuant to subparagraph (a) is less than the sum of the amounts referred to in Regulation 86(4)(b) and (c), the resolution authority shall reduce the principal amount of Additional Tier 1 instruments to the extent required and to the extent of their capacity;

• (c) where the total reduction pursuant to subparagraphs (a) and (b) is less than the sum of the amounts referred to in Regulation 86(4)(b) and (c), the resolution authority shall reduce the principal amount of Tier 2 instruments to the extent required and to the extent of their capacity;

• (d) where the total reduction of shares or other instruments of ownership and relevant capital instruments pursuant to subparagraphs (a), (b) and (c) is less than the sum of the amounts referred to in Regulation 86(4)(b) and (c), the resolution authority shall reduce to the extent required the principal amount of subordinated debt that is not Additional Tier 1 or Tier 2 capital in accordance with the hierarchy of claims in normal insolvency proceedings, in conjunction with the write-down pursuant to subparagraphs (a), (b) and (c) to produce the sum of the amounts referred to in Regulation 86(4)(b) and (c);

• (e) where the total reduction of shares or other instruments of ownership, relevant capital instruments and eligible liabilities pursuant to subparagraphs (a) to (d) is less than the sum of the amounts referred to in Regulation 86(4)(b) and (c), the resolution authority shall reduce to the extent required the principal amount of, or outstanding amount payable in respect of, the rest of eligible liabilities in accordance with the hierarchy of claims in normal insolvency proceedings, including the ranking of deposits provided for in section 621(2) and (2A) of the Act of 2014, pursuant to Regulation 80, in conjunction with the write-down pursuant to subparagraphs (a) to (d) to produce the sum of the amounts referred to in Regulation 86(4)(b) and (c).

• (2) When applying the write-down or conversion powers, the proposed resolution order shall allocate the losses represented by the sum of the amounts referred to in points Regulation 86(4)(b) and (c) equally between shares or other instruments of ownership and eligible liabilities of the same rank under national law (including under any enactment or rule of law) by reducing the principal amount of, or outstanding amount payable in respect of, those shares or other instruments of ownership and eligible liabilities to the same extent pro rata to their value other than where a different allocation of losses among liabilities of the same rank is allowed in the circumstances specified in Regulation 80(9) and (10).

• (3) Paragraph (2) shall not prevent liabilities which have been excluded from bail-in in accordance with Regulation 80(2) to (9) from receiving more favourable treatment than eligible liabilities which are of the same rank in normal insolvency proceedings.

• (4) Prior to applying the write-down or conversion referred to in paragraph (1)(e), the resolution authority shall ensure the conversion or reduction in the principal amount of instruments referred to in paragraphs (1)(b), (c) and (d) when those instruments contain the following terms and have not already been written-down or 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 Regulation 2(1)(b) to (i);

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

• (5) Where the principal amount of an instrument has been reduced, but not to zero, in accordance with terms of the kind referred to in paragraph (4)(a) before the application of the bail-in pursuant to paragraph (1), the resolution authority shall ensure that the write-down and conversion powers are applied to the residual amount of that principal in accordance with paragraph (1).

• (6) When deciding whether to propose that liabilities be written down or converted into equity, the resolution authority shall not propose the conversion of 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 80(2) to (9).

Derivatives.

• (2) A resolution order may terminate and close out any derivative contract.

• (3) It shall not be necessary to terminate or close out a derivative contract where a derivative liability under that contract has been excluded from the application of the bail-in tool under Regulation 80(9).

• (4) Where derivative transactions are subject to a netting agreement, the independent party responsible for the valuation or the resolution authority shall determine as part of the valuation under Regulation 65 or 66 the liability arising from those transactions on a net basis in accordance with the terms of the agreement.

• (5) The resolution authority shall determine the value of liabilities arising from derivatives in accordance with the following:

• (a) appropriate methodologies for determining the value of classes of derivatives, including transactions that are subject to netting agreements;

• (b) principles for establishing the relevant point in time at which the value of a derivative position should be established;

• (c) appropriate methodologies for comparing the destruction in value that would arise from the close out and bail-in of derivatives with the amount of losses that would be borne by derivatives in a bail-in.

Rate of conversion of debt to equity.

• (2) The conversion rate chosen under paragraph (1) shall be such that it appropriately compensates the affected creditor for any loss incurred as a result of the exercise of the write-down and conversion powers.

• (3) Where different conversion rates in accordance with paragraph (1) are applied, the conversion rate applied to liabilities that are considered to be senior under national law (including under any enactment or rule of law) shall be higher than the conversion rate applicable to liabilities which are considered to be subordinated.

Recovery and reorganisation measures to accompany bail-in.

Business reorganisation plan.

• (a) the management body of the institution under resolution, or

• (b) the special manager,

as the case may be, shall draw up and submit to the resolution authority, a business reorganisation plan that satisfies the requirements of paragraphs (7) to (9).

• (2) Where the Union State aid framework applies, that business reorganisation plan must be compatible with the restructuring plan that the institution under resolution is required to submit to the European Commission under the Union State aid framework.

• (3) When the bail-in tool is applied for the purpose referred to in Regulation 79(1)(a) to 2 or more group entities and the Union parent institution is authorised in the State, the business reorganisation plan shall be prepared by the Union parent institution and cover all of the institutions in the group in accordance with the procedure specified in Regulations 14 and 15.

• (4) The Union parent institution referred to in paragraph (3) shall submit the business reorganisation plan to the resolution authority and the resolution authority shall communicate that plan to—

• (a) the Union resolution authorities concerned, and

• (b) the European Banking Authority.

• (5) In exceptional circumstances, where necessary for the achievement of the resolution objectives, the resolution authority may extend the period referred to in paragraph (1) up to a maximum of 2 months from the application of the bail-in tool.

• (6) Where a business reorganisation plan is required to be notified under the Union State aid framework, the resolution authority may extend the period referred to in paragraph (1) up to a maximum of 2 months from the application of the bail-in tool or until the deadline laid down by the Union State aid framework, whichever occurs earlier.

• (7) A business reorganisation plan shall set out measures which aim to restore the long-term viability of the institution under resolution or parts of its business within a reasonable timeframe and shall set out those measures based on realistic assumptions about the economic and financial market conditions under which the institution or entity referred to in Regulation 2(1)(b) to (i) will operate.

• (8) A business reorganisation plan shall—

• (a) take account, in particular, of the current state of and future outlook for financial markets,

• (b) consider different scenarios, based on a range of assumptions informed by appropriate sector-wide benchmarks, and

• (c) aim to identify the main vulnerabilities of the institution under resolution.

• (9) A business reorganisation plan shall include at least the following elements:

• (a) a detailed diagnosis of the factors and problems that caused the institution under resolution to fail or to be likely to fail, and the circumstances that led to its difficulties;

• (b) a description of the measures aiming to restore the long-term viability of the institution under resolution that are to be adopted;

• (c) a timetable for the implementation of those measures.

• (10) Measures aiming to restore the long-term viability of an institution under resolution may include:

• (a) the reorganisation of the activities of the institution under resolution;

• (b) changes to the operational processes and systems and infrastructure within the institution under resolution;

• (c) the withdrawal from loss-making activities;

• (d) the restructuring of existing activities that can be made competitive;

• (e) the sale of assets or of business lines.

• (11) Within one month of the date of submission of the business reorganisation plan, the resolution authority shall, together with the competent authority, assess the likelihood that the plan, if implemented, would restore the long-term viability of the institution under resolution.

• (12) Where the resolution authority and the competent authority are satisfied that the business reorganisation plan would achieve the objective set out in paragraph (11), the resolution authority shall approve the plan.

• (13) Where the resolution authority is not satisfied that the business reorganisation plan would achieve the objective set out in paragraph (11), the resolution authority, in agreement with the competent authority, shall notify—

• (a) the management body of the institution under resolution, or

• (b) the special manager,

as the case may be, of its concerns and shall direct the institution under resolution to amend the plan in a way that addresses those concerns.

• (14) Within 2 weeks from the date of receipt of the notification referred to in paragraph (13)—

• (a) the management body of the institution under resolution, or

• (b) the special manager,

as the case may be, shall submit an amended business reorganisation plan to the resolution authority for approval.

• (15) The resolution authority shall assess the amended business reorganisation plan referred to it under paragraph (14) and shall notify—

• (a) the management body of the institution under resolution,

• (b) the special manager,

as the case may be, within one week whether it is satisfied that the plan, as amended, addresses the concerns notified or whether further amendment is required.

• (16) The—

• (a) management body of the institution under resolution, or

• (b) special manager,

as the case may be, shall implement the reorganisation plan as agreed by the resolution authority and competent authority, and shall submit a report to the resolution authority at least every 6 months on progress in the implementation of the plan.

• (17) The—

• (a) management body of the institution under resolution, or

• (b) special manager,

as the case may be, shall revise the business reorganisation plan where, in the opinion of the resolution authority with the agreement of the competent authority, it is necessary to achieve the aim referred to in paragraphs (7) and (8) and shall submit any such revision to the resolution authority for approval.

• (18) In this Regulation, “business reorganisation plan” or “plan” means the business reorganisation plan drawn up and submitted under paragraph (1) and includes such amendments (if any) to it made pursuant to this Regulation.

The bail-in tool — ancillary provisions

Effect of bail-in.

• (2) The resolution authority may complete, or direct other parties to complete and where directed those other parties shall complete, all the administrative and procedural tasks necessary to give effect to the exercise of a power referred to in Regulation 95(1) or 111(1)(c) to (g), including the following:

• (a) the amendment of all relevant registers;

• (b) the delisting or removal from trading of shares or other instruments of ownership or debt instruments;

• (c) the listing or admission to trading of new shares or other instruments of ownership;

• (d) the relisting or readmission of any debt instruments which have been written down, without the requirement for the issuing of a prospectus pursuant to Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003²¹ .

• (3) Where a resolution order reduces to zero the principal amount of, or outstanding amount payable in respect of, a liability by means of the power referred to in Regulation 111(1)(c), that liability and any obligations or claims arising in relation to it that are not accrued at the time when the power is exercised shall be treated as discharged for all purposes and shall not be provable in any subsequent proceedings in relation to the institution under resolution or any successor entity in any subsequent winding up.

• (4) Where a resolution order reduces in part, but not in full, the principal amount of, or outstanding amount payable in respect of, a liability by means of the power referred to in Regulation 111(1)(c)—

• (a) the liability shall be discharged to the extent of the amount reduced, and

• (b) the relevant instrument or agreement that created the original liability shall continue to apply in relation to the residual principal amount of, or outstanding amount payable in respect of, the liability subject to any modification of the amount of interest payable to reflect the reduction of the principal amount and any further modification of the terms that might be made by means of the power referred to in Regulation 111(1)(h).

Removal of procedural impediments to bail-in.

• (2) The resolution authority may direct an institution or entity, referred to in Regulation 2(1)(b) to (i), to increase its authorised share capital in order to comply with a requirement under paragraph (1).

• (3) The resolution authority shall assess whether it is appropriate to issue a direction under paragraph (2) in the context of the development and maintenance of the resolution plan for that institution or group having regard, in particular, to the resolution actions contemplated in that plan.

• (4) Where the resolution plan referred to in paragraph (3) provides for the possible application of the bail-in tool, the resolution authority shall ensure that the authorised share capital would be sufficient to cover the sum of the amounts referred to in Regulation 86(4)(b) and (c).

• (5) No provision of the constitution of an institution under resolution, contractual term or provision of company law (including, without limitation, pre-emption rights for shareholders or requirements for the consent of shareholders to an increase in capital) shall prevent the resolution authority from converting the liabilities (including relevant capital instruments) of an institution under resolution to shares or other instruments of ownership in accordance with these Regulations.

• (6) This Regulation is without prejudice to the consequential amendments set out in Part 10.

Contractual recognition of bail-in.

• (a) not excluded under Regulation 80(2),

• (b) not a deposit of an eligible depositor referred to in section 621(2) or (2A) of the Act of 2014,

• (c) governed by the law of a third country, and

• (d) issued or entered into after the date of entry into force of this Chapter.

• (2) The resolution authority shall exempt an institution or entity from the obligation set out in paragraph (1) in relation to some or all liabilities and instruments where it determines that the write-down and conversion powers could be effectively applied by the resolution authority to those liabilities or instruments pursuant to the law of the third country or to a binding agreement concluded with that third country.

• (3) The resolution authority may direct institutions and entities referred to in Regulation 2(1)(b) to (i) to, and where so directed the institution or entity concerned shall, provide it with a legal opinion relating to the legal enforceability and effectiveness of the contractual term referred to in paragraph (1).

• (4) Where an institution or entity referred to in Regulation 2(1)(b) to (i) fails to include in the contractual provisions governing a relevant liability a term required in accordance with paragraph (1), that failure shall not prevent the exercise of the write-down and conversion powers in relation to that liability.

Chapter 4 Write-down of capital instruments

Requirement to write-down or convert capital instruments.

• (2) The power to write-down or convert relevant capital instruments referred to in paragraph (1) 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 62 and 63 are met.

• (3) Where a determination has been made that conditions for resolution specified in Regulations 62 and 63 have been met, the proposed resolution order made in accordance with Regulation 104 shall provide for the write-down and conversion of relevant capital instruments.

• (4) The resolution authority shall make a proposed capital instruments order, without delay, in relation to relevant capital instruments issued by an institution or an entity referred to in Regulation 2(1)(b) to (i) when one or more of the following circumstances apply:

• (a) the competent authority has determined that unless the write-down or conversion power is exercised in relation to the relevant capital instruments, the institution or the entity referred to in Regulation 2(1)(b) to (i) will no longer be viable;

• (b) 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, the competent authority and the appropriate authority of another Member State have made a joint determination taking the form of a joint decision in accordance with Regulation 156(5) to (9) that unless the write-down or conversion power is exercised in relation to those instruments, the group will no longer be viable;

• (c) 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, the competent authority, where it is the consolidating supervisor of the group concerned, has made a determination that unless the write-down or conversion power is exercised in relation to those instruments, the group will no longer be viable;

• (d) extraordinary public financial support is required by the institution or the entity referred to in Regulation 2(1)(b) to (i) other than in any of the circumstances set out in Regulation 62(3)(d)(iii).

• (5) For the purposes of paragraph (4), an institution or an entity referred to in Regulation 2(1)(b) to (i) or a group shall be considered to be no longer viable only if both of the following conditions are met:

• (a) the institution or the entity referred to in Regulation 2(1)(b) to (i) 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, independently or in combination with a resolution action would prevent the failure of the institution or the entity referred to in Regulation 2(1)(b) to (i) or the group within a reasonable timeframe.

• (6) For the purposes of paragraph (5)(a)—

• (a) an institution or an entity referred to in Regulation 2(1)(b) to (i) shall be considered to be failing or likely to fail where one or more of the circumstances set out in Regulation 62(3) occurs, and

• (b) a group shall be considered 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 competent 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 pursuant to paragraph (4)(b) on worse terms than equally ranked capital instruments at the level of the parent undertaking which have been written down or converted.

• (8) Before making a determination referred to in paragraph (3)(b) 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 competent authority shall comply with the notification and consultation requirements set out in Regulation 98.

• (9) Before making a proposed capital instruments order, the resolution authority shall ensure that a valuation of the assets and liabilities of the institution or the entity referred to in Regulation 2(1)(b) to (i) has been carried out in accordance with Regulation 65 or 66 and that valuation shall form the basis of the calculation of the write-down to be applied to the relevant capital instruments in order to absorb losses and the level of conversion to be applied to relevant capital instruments in order to recapitalise the institution or the entity concerned.

Provisions governing write-down or conversion of capital instruments.

• (a) Common Equity Tier 1 items are reduced first in proportion to the losses and to the extent of their capacity and the resolution authority takes one or more of the actions specified in Regulation 86(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 61 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 61 or to the extent of the capacity of the relevant capital instruments, whichever is lower.

• (2) Where the principal amount of a relevant capital instrument 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 85(4),

• (b) no liability to the holder of the relevant capital instrument shall remain under or in connection with that amount of the instrument which has been written down other than 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, and

• (c) no compensation shall be paid to any holder of the relevant capital instruments other than in accordance with paragraph (4).

• (3) Paragraph (2)(b) shall not prevent the provision of Common Equity Tier 1 instruments to a holder of relevant capital instruments in accordance with paragraph (4).

• (4) In order to effect a conversion of relevant capital instruments under paragraph (1)(b) or (c), the resolution authority may direct institutions and entities referred to in Regulation 2(1)(b) to (i) to issue Common Equity Tier 1 instruments to the holders of the relevant capital instruments.

• (5) The Common Equity Tier 1 instruments referred to in paragraph (4) shall be—

• (a) issued by the institution or the entity referred to in Regulation 2(1)(b) to (i), or by a parent undertaking of the institution or the entity, with the agreement of the resolution authority or, where relevant, of the Union resolution authority of the parent undertaking,

• (b) issued prior to any issuance of shares or other instruments of ownership by that institution or that entity referred to in Regulation 2(1)(b) to (i) for the purposes of provision of own funds by the State or a government entity, and

• (c) awarded and transferred without delay following the exercise of the conversion power.

• (6) The conversion rate that determines the number of Common Equity Tier 1 instruments referred to in paragraph (4) that are provided in respect of each relevant capital instrument shall comply with the principles set out in Regulation 89 and any guidelines developed by European Banking Authority pursuant to Article 50(4) of the Bank Recovery and Resolution Directive.

• (7) For the purposes of the provision of Common Equity Tier 1 instruments in accordance with paragraph (4), the resolution authority may direct an institution or entity referred to in Regulation 2(1)(b) to (i) to maintain at all times the necessary prior authorisation to issue the relevant number of Common Equity Tier 1 instruments.

• (8) Where an institution meets the conditions for resolution and the resolution authority intends to propose the application of a resolution tool to that institution, the requirements set out in Regulation 95(4) and this Regulation shall be complied with before applying the resolution tool.

Authorities responsible for determination.

• (a) relevant capital instruments have been issued by an institution or an entity referred to in Regulation 2(1)(b) to (i),

• (b) the institution or entity is a subsidiary established in the State, and

• (c) those relevant capital instruments are recognised for the purposes of meeting the own funds requirements, in accordance with Article 92 of the Union Capital Requirements Regulation on an individual basis,

the competent authority shall be responsible for making the determinations referred to in Regulation 95(4).

• (2) Where—

• (a) relevant capital instruments have been issued by an institution or an entity referred to in Regulation 2(1)(b) to (i),

• (b) the institution or entity is a subsidiary established in the State, and

• (c) those relevant capital instruments are recognised for the purposes of meeting own funds requirements both on an individual and on a consolidated basis,

then—

• (i) the competent authority shall be responsible for making the determinations referred to in Regulation 95(4)(a), and

• (ii) the appropriate authority of the Member State of the consolidating supervisor and the competent authority shall be responsible for making the joint determination taking the form of a joint decision referred to in Regulation 95(4)(b).

• (3) Where—

• (a) relevant capital instruments have been issued by an institution or an entity referred to in Regulation 2(1)(b) to (i),

• (b) that institution or entity has been established in another Member State,

• (c) the competent authority is the consolidating supervisor of the group to which that institution or entity belongs, and

• (d) those relevant capital instruments are recognised for the purposes of meeting own funds requirements both on an individual and on a consolidated basis,

the competent authority and the appropriate authority of the Member State where the institution or entity concerned has been established shall be responsible for making the joint determination taking the form of a joint decision referred to in Regulation 95(4)(b).

Consolidated application: procedure for determination.

• (a) the competent authority, where it is considering whether to make a determination referred to in Regulation 95(4), shall notify in writing without delay the consolidating supervisor and, where different, the appropriate authority in the Member State where the consolidating supervisor is located;

• (b) the competent authority, where it is considering whether to make a determination referred to in Regulation 95(4)(b), shall notify in writing without delay the Union competent authority responsible for each institution or entity referred to in Regulation 2(1)(b) to (i) that has issued the relevant capital instruments in relation to which the write-down or conversion power would be exercised if a capital instruments order were made and, where different, the appropriate authorities in the Member States where those Union competent authorities and the consolidating supervisor are located.

• (2) The competent authority shall accompany a notification made pursuant to paragraph (1) with an explanation of the reasons why it is considering making the determination in question.

• (3) The competent authority, after consulting the authorities notified under paragraph (1), shall assess the following matters:

• (a) whether one, or more, alternative measures to the exercise of the write-down or conversion power in accordance with Regulation 95(4) are available;

• (b) where such alternative measures are available, whether they can feasibly be applied;

• (c) where an alternative measure could feasibly be applied, whether there is a realistic prospect that it would address, in an adequate timeframe, the circumstances that would otherwise require a capital instruments order to be made.

• (4) When making a determination referred to in Regulation 95(4) in the case of an institution or of a group with cross-border activity, the competent authority shall take into account the potential impact of the action in all the Member States where the institution or the group operates.

• (5) For the purposes of paragraph (3), “alternative measures” means—

• (a) early intervention measures referred to in Regulation 39,

• (b) powers referred to in Regulation 92(2) of the Capital Requirements Regulations, or

• (c) a transfer of funds or capital from the parent undertaking.

• (6) Where, after consulting the authorities notified under paragraph (1), pursuant to paragraph (3) the competent authority assesses that one, or more, alternative measures are available that can feasibly be applied and would deliver the outcome referred to in subparagraph (c) of that paragraph, it shall ensure that those measures are applied.

• (7) Where, in a case referred to in paragraph (1)(a), and pursuant to paragraph (3), the competent authority, having consulted with the notified authorities, assesses that no alternative measures are available that would deliver the outcome referred to in paragraph (3)(c), the competent authority shall decide whether the determination referred to in Regulation 95(4) under consideration is appropriate.

• (8) Where the competent authority decides to make a determination under Regulation 95(4)(b), it shall immediately notify, in writing, the appropriate authorities of the Member States in which the affected subsidiaries are located and the determination shall take the form of a joint decision as set out in Regulation 156(5) to (9) and in the absence of a joint decision no determination under Regulation 95(4)(b) shall be made.

Proposed capital instruments order.

• (2) Upon a notification pursuant to paragraph (1), the resolution authority shall promptly make a proposed capital instruments order implementing a decision to write-down or convert capital instruments of an institution or entity referred to Regulation 2(1)(b) to (i), having due regard to the urgency of the circumstances.

• (3) The resolution authority may make a proposed capital instruments order in relation to 2 or more institutions or entities referred to in Regulation 2(1)(b) to (i), which are part of the same group, provided that a determination pursuant to Regulation 95(4) has been made in relation to each such institution or entity.

• (4) The resolution authority shall, before making a proposed capital instruments order—

• (a) deliver a written notice to the institution or the entity concerned setting out the terms of the proposed capital instruments order, accompanied by a summary of the reasons why the competent authority is of the opinion that a capital instruments order in the terms of the proposed capital instruments order is necessary,

• (b) afford the institution or the entity concerned 48 hours, or a shorter period on which the competent authority and the institution or the entity agree, in which to make written submissions to the resolution authority, and

• (c) consider any submissions made under subparagraph (b).

• (5) Paragraph (4) does not apply where—

• (a) the competent authority or the resolution authority has consulted the institution or entity concerning the terms of the proposed capital instruments order and that institution or entity has consented to the making of a capital instruments order in those terms, or

• (b) exceptional circumstances (within the meaning of paragraph (6)) exist.

• (6) Exceptional circumstances for the purposes of paragraph (5) exist where—

• (a) there is an imminent threat to the financial position of the institution or the entity concerned and the competent authority is of the opinion that compliance with paragraph (4) would result in significant damage to the financial position of that institution or entity,

• (b) the competent authority has reasonable grounds for believing that confidentiality with regard to the proposed capital instruments order, or the possibility of the making of a capital instruments order, would not be maintained and that the breach of such confidentiality would have significant adverse consequences.

Capital instruments order.

• (2) A report prepared by the competent authority, the resolution authority or a valuer appointed under Regulation 65 or 66 (whether or not prepared specifically for the purpose of the application) is admissible in evidence at the hearing of the application referred to in paragraph (1).

• (3) The Court, when hearing an ex parte application under paragraph (1), shall, where satisfied that the requirements of Regulation 99 have been complied with and that the determination of the competent authority or the joint determination, as the case may be, under Regulation 95(4) was reasonable and was not vitiated by any error of law, make a capital instruments order in the terms of the proposed capital instruments order (or those terms as varied after consideration of any submission referred to in Regulation 99(4)(c)).

• (4) The Court may make a capital instruments order in terms varied or amended from those in the proposed capital instruments order only where the Court is satisfied that—

• (a) there has been non-compliance with any of the requirements of Regulation 99 or that the determination of the competent authority or the joint determination, as the case may be, under Regulation 95(4) was unreasonable or vitiated by an error of law, and

• (b) to do so is necessary for the purpose specified in the proposed capital instruments order.

• (5) Where the Court makes a capital instruments order, it shall have immediate effect other than to any extent that the order provides otherwise.

• (6) Any of the following requirements that would otherwise apply by virtue of law of contract or otherwise shall not apply to the making of a capital instruments order:

• (a) requirements to obtain approval or consent from any person either public or private, including the shareholders or creditors of the institution under resolution;

• (b) procedural requirements to notify any person prior to the making of the capital instruments order, including any requirement to publish any notice or prospectus or to file or register any document with any other authority;

• (c) any restriction on, or requirement for consent for, transfer of the financial instruments, shares of other instruments of ownership, rights, assets or liabilities in question that might otherwise apply.

Publication of capital instruments order.

• (a) serve a copy of the capital instruments order on the institution or entity concerned, and

• (b) publish the order in 2 newspapers circulating generally in the State.

• (2) In a particular case, the resolution authority may, if it thinks it necessary to do so, publish a capital instruments order by an additional means or in an additional place.

• (3) Without delay after the service of the copy of the capital instruments order, the institution or entity concerned shall take all reasonable measures to ensure that its shareholders and members are made aware of the order, including, without limiting the generality of the foregoing—

• (a) where the shares of the relevant institution or entity are traded from time to time on a financial market (whether a regulated market or not), making an announcement that relates to the existence of the capital instruments order and its effect to a regulatory news service generally used by relevant institutions or entities in the State for the purposes of announcements to such markets, and

• (b) providing a copy of the capital instruments order to the regulatory news service referred to in paragraph (a).

Application to vary capital instruments order.

• (a) on notice to the institution or entity concerned, or

• (b) in urgent circumstances, ex parte,

to the Court to vary the capital instruments order.

• (2) The Court, when hearing an application under paragraph (1), shall, where satisfied that the opinion of the resolution authority is reasonable and was not vitiated by any error of law, make an order varying the capital instruments order.

Application to set aside capital instruments order.

• (2) The Court shall give such priority to an application under paragraph (1) as is necessary in the circumstances and may give such directions as it considers appropriate in the circumstances.

• (3) On an application under paragraph (1), the Court may set aside the capital instruments order only where it is of the opinion that there has been non-compliance with any of the requirements of Regulation 99 or that the determination of the competent authority or the joint determination, as the case may be, under Regulation 95(4) was unreasonable or vitiated by an error of law.

• (4) The Court may, instead of setting aside the capital instruments order, make an order varying or amending that order in the manner it considers appropriate where the Court is satisfied that—

• (a) there has been non-compliance with any of the requirements of Regulation 99 or that the determination of the competent authority or the joint determination, as the case may be, under Regulation 95(4) was unreasonable or vitiated by an error of law, and

• (b) it would be appropriate to do so, having regard to the reasons for making the proposed capital instruments order.

• (5) On an application under paragraph (1)—

• (a) where an order is made setting aside the capital instruments order, the order under this Regulation is effective from the date of its making without prejudice to the validity of anything previously done or taken to have been done under the capital instruments order, or

• (b) where an order is made refusing to set aside the capital instruments order and the Court does not make an order under paragraph (4), the order under this Regulation has the effect that the capital instruments order shall be taken to have been effective as if that application had not been made.

• (6) The Court, in considering the order it wishes to make under this Regulation, may, where the applicant is a shareholder of an institution or entity or holder of a relevant capital instrument affected by that order have regard to—

• (a) the date on which the applicant became a shareholder of that institution or entity or holder of a relevant capital instrument, or increased or decreased the number of shares or relevant capital instruments that the applicant held in that institution or entity, and

• (b) the value of the shares or relevant capital instruments acquired by or disposed of by the shareholder or holder of a relevant capital instrument, as the case may be—

• (i) as at the date or dates on which the shares or relevant capital instruments were acquired or disposed of, as the case may be, and

• (ii) as at the date on which the capital instruments order concerned was made.

Chapter 5 Resolution order procedure

Proposed resolution order.

• (a) the conditions laid down in Regulation 62 are fulfilled in relation to that institution,

• (b) if required by Regulation 9(2), the prior written consent of the Minister has been obtained, and

• (c) where the institution is part of a cross-border group, the procedure laid down in Regulation 155 or 156, as applicable, has been complied with.

• (2) The resolution authority may make a proposed resolution order in relation to an entity referred to in Regulation 2(1)(b) to (i) where it decides that—

• (a) the relevant conditions laid down in Regulation 63 are fulfilled in relation to that institution,

• (b) if required by Regulation 9(2), the prior written consent of the Minister has been obtained, and

• (c) where the entity is part of a cross-border group, the procedure laid down in Regulation 155 or 156, as applicable, has been complied with.

• (3) The resolution authority may make a proposed resolution order in relation to 2 or more institutions or entities referred to in Regulation 2(1)(b) to (i), which are part of the same group, provided that the conditions laid down in Regulation 62 or 63, as applicable, are fulfilled in relation to each such institution or entity.

• (4) If the resolution authority makes a proposed resolution order in relation to an institution and the intention of the proposed resolution order or part of it is the preservation or restoration of the financial position of the institution, the resolution authority shall declare in the proposed resolution order that the proposed resolution order or part is made with that intention, in accordance with the Directive 2001/24/EC of the European Parliament and of the Council of 4 April 2001²²

Hearing of application for resolution order — procedure.

• (2) A report prepared by the competent authority, the resolution authority or a valuer appointed under Regulation 65 or 66 (whether or not prepared specifically for the purpose of the application) is admissible in evidence at the hearing of the application.

• (3) The Court, when hearing an application under paragraph (1), shall, if satisfied that the decision of the resolution authority was reasonable and was not vitiated by any error of law, make a resolution order in the terms of the proposed resolution order.

• (4) The resolution order shall have immediate effect, except to any extent that the resolution order provides otherwise.

• (5) Any of the following requirements that would otherwise apply by virtue of law or contract, or otherwise, shall not apply to the making of a resolution order:

• (a) requirements to obtain approval or consent from any person either public or private, including the shareholders or creditors of the institution under resolution;

• (b) procedural requirements to notify any person prior to the making of the resolution order, including any requirement to publish any notice or prospectus or to file or register any document with any other authority;

• (c) any restriction on, or requirement for consent for, transfer of the financial instruments, shares of other instruments of ownership, rights, assets or liabilities in question that might otherwise apply.

Resolution period.

• (2) The resolution period terminates—

• (a) on the setting aside of the resolution order,

• (b) on the making of an order for the winding up of the institution under resolution, or

• (c) where the resolution authority so orders.

Publication of resolution order.

• (a) serve a copy of the resolution order on the institution under resolution, and

• (b) publish the order in 2 newspapers circulating generally in the State.

• (2) The resolution authority may, where it considers it necessary to do so, publish a resolution order by an additional means or in an additional place.

• (3) Without delay after the service of the copy of the resolution order, the institution under resolution shall take all reasonable measures to ensure that its shareholders, are made aware of the order, including, without limiting the generality of the foregoing—

• (a) where the shares of the institution are traded from time to time on a financial market (whether a regulated market or not), making an announcement that relates to the existence of a resolution order and its effect, to a regulatory news service generally used by institutions in the State for the purposes of announcements to such markets, and

• (b) providing a copy of the resolution order to the regulatory news service referred to in subparagraph (a).

Application to vary resolution order.

• (a) on notice to the institution or entity concerned, or

• (b) in urgent circumstances, ex parte,

to the Court to vary the resolution order.

• (2) The Court, when hearing an application under paragraph (1), shall, where satisfied that the opinion of the resolution authority is reasonable and was not vitiated by any error of law, make an order varying the resolution order.

Application to vary resolution order where recipient is a bridge institution.

• (2) The Court may not make an order substituting a recipient under paragraph (1) without the consent of the person whose name is to be substituted as recipient.

• (3) This Regulation is without prejudice to the private law powers of a bridge institution to transfer or dispose of any shares, other instruments of ownership, assets, rights or liabilities.

• (4) The resolution authority may consider an asset separation vehicle to be a suitable recipient for the purposes of paragraph (1).

Application to set aside resolution order.

• (2) The Court shall in hearing an application under paragraph (1) act as expeditiously as possible consistent with the proper administration of justice, and may, subject to Regulation 150, give such directions as it considers appropriate in the circumstances.

• (3) On an application under paragraph (1), the Court may set aside the resolution order only where the Court is satisfied that the decision of the resolution authority was unreasonable or vitiated by an error of law.

• (4) Where the Court sets aside a resolution order—

• (a) no further assets, rights, liabilities, shares or other instruments of ownership shall be transferred as a consequence of the resolution order, and

• (b) no further liabilities, relevant capital instruments, shares or other instruments of ownership shall be written down, converted or cancelled as a consequence of the resolution order.

• (5) Where—

• (a) the Court decides to set aside a resolution order, and

• (b) the invalidation of any transfer, or subsequent administrative acts or transactions, carried out under the resolution order before its setting aside would prejudice the interests of third parties (other than a bridge institution or asset management vehicle) who have acquired in good faith shares, other instruments of ownership, assets, rights or liabilities of an institution under resolution by virtue of the use of resolution tools or exercise of resolution powers,

then—

• (i) the decision to set aside the resolution order shall not affect the validity of that transfer or subsequent administrative act or transaction, and

• (ii) remedies for a wrongful decision or action shall be limited to damages for the loss suffered by the institution as a result of that transfer, decision or action, subject to section 33AJ of the Act of 1942.

• (6) Where the Court sets aside a resolution order which has transferred assets, rights, liabilities, shares or other instruments of ownership to a bridge institution or an asset management vehicle, and—

• (a) where a re-transfer of the assets, rights, liabilities, shares or other instruments of ownership, or any of them, is possible, they shall be transferred back to the institution under resolution and any consideration paid to the institution under resolution shall be repaid to the bridge institution or the asset management vehicle, or

• (b) where a re-transfer of the assets, rights, liabilities, shares or other instruments of ownership, or any of them, is not possible, the transfer is not rendered invalid,

then, subject to subparagraphs (a) and (b), the Court may—

• (i) order that the institution under resolution and the bridge institution or the asset management vehicle be restored as nearly as possible to their respective positions before the resolution order was made, and

• (ii) by order resolve, or provide for the resolution of, any dispute.

• (7) The Court may, instead of setting aside the resolution order, make an order varying or amending that order in the manner it considers appropriate where:

• (a) the Court is satisfied that the decision of the resolution authority was unreasonable or vitiated by an error of law,

• (b) it would be appropriate to vary or amend the order, and

• (c) the conditions in Regulation 62 or 63, as applicable, are met in relation to the institution or entity.

• (8) Subject to paragraph (9), an order varying or amending a resolution order, whether made under this Regulation or on application by the resolution authority under Regulation 108 or 109, shall be from the date of making it effective to vary or amend the resolution order without prejudice to the validity of anything previously done under it.

• (9) Where a variation or amendment of a resolution order, whether made under this Regulation or on application by the resolution authority under Regulation 108 or 109, would, but for this paragraph, have the effect of setting aside a transfer of an asset, right, liability, share or other instrument of ownership, paragraphs (4) to (6) apply with any necessary modifications.

• (10) The Court, in considering the order it wishes to make under this Regulation, may, where the applicant is a shareholder of an institution or entity or holder of a relevant capital instrument or liability affected by that order have regard to—

• (a) the date on which the applicant became a shareholder of that institution or entity or holder of a relevant capital instrument or liability, or increased or decreased the number of shares or relevant capital instruments or liabilities that the applicant held in that institution or entity, and

• (b) the value of the shares, relevant capital instruments or liabilities acquired by, or disposed of by, the shareholder or holder of a relevant capital instrument or liability, as the case may be—

• (i) as at the date or dates on which the shares or relevant capital instruments or liabilities were acquired or disposed of, as the case may be, and

• (ii) as at the date on which the resolution order concerned was made.

Powers of Court in making resolution order — general.

• (a) the transfer of shares or other instruments of ownership issued by an institution under resolution;

• (b) the transfer to another person, with the consent of that person, of the rights, assets or liabilities of an institution under resolution;

• (c) the reduction, including the reduction to zero, of the principal amount of or outstanding amount due in respect of relevant capital instruments or eligible liabilities of an institution under resolution;