Changes from report parliamentary committee draft to plenary report

Added(b) the amount by which the resolution authority has assessed that Tier 1 items must be reduced and relevant capital instruments must be written down or converted pursuant to Article 37(1).

Added3. By way of derogation from Articles 57 to 62 of Directive 2009/138/EC, where the conversion of capital instruments, debt instruments issued by the undertaking under resolution, or other eligible liabilities of the undertaking under resolution, would result in the acquisition of or increase in a qualifying holding in an insurance or reinsurance undertaking as referred to in Article 57(1) of Directive 2009/138/EC, supervisory authorities shall carry out the assessment required under those Articles in a timely manner that does not delay the conversion of capital instruments, or prevent resolution action from achieving the relevant resolution objectives referred to in Article 18.

Added4. Where the supervisory authority of the that undertaking has not completed the assessment required under paragraph 3 on the date of the conversion of the capital instruments, Article 31(6) shall apply to any acquisition of or increase in a qualifying holding by an acquirer resulting from the conversion of capital instruments.

AddedRate of conversion of debt to equity

AddedMember States shall ensure that, when resolution authorities exercise the tools specified in Article 34(1) and the powers specified in Article 40(1), point (g), they may apply a different conversion rate to different classes of capital instruments and liabilities in accordance with one or both of the following principles:

Added(a) the conversion rate represents appropriate compensation to the affected creditor for any loss incurred by virtue of the exercise of the write-down or conversion powers;

Added(b) the conversion rate applicable to liabilities that are considered to be senior under applicable insolvency law are higher than the conversion rate applicable to subordinated liabilities.

AddedAdditional provisions governing the write-down or conversion tool

Added1. Resolution authorities shall apply the write-down or conversion tool in accordance with the priority of claims applicable under normal insolvency proceedings, in a way that produces the following results:

Added(a) 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 both of the actions specified in Article 35(1) in respect of holders of Tier 1 instruments;

Added(b) the principal amount of Tier 2 instruments is written down or converted into Tier 1 instruments or both, to the extent required to achieve the resolution objectives referred to in Article 18 or to the extent of the capacity of the relevant capital instruments, whichever is lower;

Added(c) the principal amount of Tier 3 instruments is written down or converted into Tier 1 instruments or both, to the extent required to achieve the resolution objectives referred to in Article 18 or to the extent of the capacity of the relevant capital instruments, whichever is lower;

Added(d) 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 insurance claims provided for in Article 275(1) of Directive 2009/138/EC, is written down or converted into Tier 1 instruments or both, to the extent required to achieve the resolution objectives referred to in Article 18.

AddedWhere the level of write-down based on the provisional valuation as referred to in Article 25 is found to exceed requirements when assessed against the definitive valuation as referred to in Article 24(2), a write-up mechanism may be applied to reimburse creditors and, subsequently, shareholders to the extent necessary.

AddedWhen deciding on whether liabilities are to be written down or converted into equity, resolution authorities shall not convert one class of liabilities, while a class of liabilities that is subordinated to the class remains unconverted into equity or not written down.

AddedMember States shall ensure that all claims resulting from own funds items have, in national laws governing normal insolvency proceedings, a lower priority ranking than any claim that does not result from an own funds item. For the purposes of this subparagraph, to the extent that an instrument is only partly recognised as an own funds item, the whole instrument shall be treated as a claim resulting from an own funds items and shall rank lower than any claim that does not result from an own funds item.

Added2. Where the principal amount of a relevant capital instrument or the principal amount of a debt instrument or other eligible liability is written down, the following shall apply:

Added(a) the reduction resulting from the application of the write-down or conversion tool shall be permanent, subject to any write up in accordance with the reimbursement mechanism referred to in paragraph 1;

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

Added(c) no compensation shall be paid to any holder of the relevant capital instrument, the debt instrument or other eligible liability other than in accordance with paragraph 3.

Added3. In order to effect a conversion of the capital instruments, debt instruments or other eligible liabilities concerned in accordance with paragraph 1, points (b) and (c), resolution authorities may require insurance or reinsurance undertakings and entities referred to in Article 1(1), points (b) to (e), to issue Tier 1 instruments to the holders of the capital instruments, debt instruments or other eligible liabilities concerned.

AddedThe capital instruments, debt instruments or other eligible liabilities concerned may only be converted where all of the following conditions are met:

Added(a) the Tier 1 instruments are issued by the insurance or reinsurance undertaking, by the entity referred to Article 1(1), points (b) to (e), or by the parent undertaking with the agreement of the relevant resolution authority;

Added(b) the Tier 1 instruments are issued prior to any issuance of shares or other instruments of ownership by that insurance or reinsurance undertaking or that entity referred to in Article 1(1), points (b) to (e), for the purposes of provision of own funds by the State or a government entity;

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

Added(d) the conversion rate that determines the number of Tier 1 instruments that are provided in respect of each relevant capital instrument, debt instrument or other eligible liability complies with Article 36.

Added4. For the purposes of the provision of Tier 1 instruments in accordance with paragraph 3, the resolution authority may require insurance or reinsurance undertakings and entities referred to in Article 1(1), points (b) to (e), to maintain at all times the necessary prior authorisation to issue the relevant number of Tier 1 instruments.

AddedEffect of write-down or conversion

Added1. Member States shall ensure that, where a resolution authority applies the write-down or conversion tool and powers in accordance with Article 34(1) and Article 40(1), points (f) to (j), the reduction of principal or outstanding amount due, conversion or cancellation takes effect and is immediately binding on the undertaking under resolution and affected creditors and shareholders.

Added2. The resolution authority shall complete or require the completion of all the administrative and procedural tasks necessary to give effect to the application of the write-down or conversion tool, including:

Added(a) the amendment of all registers concerned;

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

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

Added(d) the relisting or readmission of any debt instruments which have been written down, without having to issue a prospectus as required by Regulation (EU) 2017/1129 of the European Parliament and of the Council.

Added3. Where a resolution authority reduces to zero the principal amount of, or outstanding amount payable in respect of, a liability by means of the power referred to Article 40(1), point (f), 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 undertaking under resolution or any successor entity in any subsequent winding up.

Added4. Where a resolution authority 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 Article 40(1), point (f):

Added(a) the liability shall be discharged to the extent of the amount reduced;

Added(b) the instrument concerned or the 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 the resolution authority might make by means of the power referred to in Article 40(1), point (k).

AddedRemoval of procedural obstacles for write-down or conversion

Added1. Where the write-down or conversion tool is applied, Member States shall, where applicable, require the insurance and reinsurance undertakings and entities referred to in Article 1(1), points (b) to (e), to maintain at all times a sufficient amount of authorised share capital or of other Tier 1 instruments to ensure that those undertakings and entities are not prevented from issuing sufficient new shares or other instruments of ownership to ensure that the conversion of liabilities into shares or other instruments of ownership can be carried out effectively.

AddedResolution authorities shall assess compliance with the requirement laid down in paragraph 1 in the context of the development and maintenance of the resolution plans in accordance with Article 9 and Article 10.

Added2. Member States shall ensure that there are no procedural impediments to the conversion of liabilities to shares or other instruments of ownership that exist by virtue of their instruments of incorporation or statutes, including pre-emption rights for shareholders or requirements for the consent of shareholders to an increase in capital.

AddedGeneral powers

Added1. Member States shall ensure that resolution authorities have all the powers necessary to apply the resolution tools referred to in Article 26(3) to insurance and reinsurance undertakings and to entities referred to in Article 1(1), points (b) to (e), that meet the conditions for resolution laid down in Articles 19(1) or 20(3), as applicable. In particular, resolution authorities shall have the following resolution powers, which they may exercise individually or in any combination:

Added(a) the power to require any person to provide any information required for the resolution authority to decide upon and prepare a resolution action, including updates and supplements of information provided in the resolution plans and including information to be provided through on-site inspections;

Added(b) the power to take control of an undertaking under resolution and exercise all the rights and powers conferred upon the shareholders, other owners and the administrative, management or supervisory body of the undertaking under resolution;

Added(c) the power to withdraw the authorisation to write new insurance or reinsurance contracts and to place an undertaking under resolution into an orderly solvent run-off procedure and terminate its activities;

Added(d) the power to transfer shares or other instruments of ownership issued by an undertaking under resolution;

Added(e) the power to transfer to another entity, with the consent of that entity, rights, assets or liabilities of an undertaking under resolution;

Added(f) the power to restructure insurance claims or reduce, including to reduce to zero, the principal amount of or outstanding amount due in respect of debt instruments and eligible liabilities, including insurance claims, of an undertaking under resolution;

Added(g) with the exception of insurance claims, the power to convert debt instruments and eligible liabilities of an undertaking under resolution into ordinary shares or other instruments of ownership of that undertaking or entity referred to in Article 1(1), points (b) to (e), of a relevant parent undertaking or of a bridge undertaking to which assets, rights or liabilities of the insurance or reinsurance undertaking or the entity referred to in Article 1(1), points (b) to (e), are transferred;

Added(h) the power to cancel debt instruments issued by an undertaking under resolution, except for secured liabilities subject to Article 34(5);

Added(i) the power to reduce, including to reduce to zero, the nominal amount of shares or other instruments of ownership of an undertaking under resolution and to cancel such shares or other instruments of ownership;

Added(j) the power to require an undertaking under resolution or a relevant parent undertaking to issue new shares or other instruments of ownership or other capital instruments, including preference shares and contingent convertible instruments;

Added(k) the power to amend or alter the maturity of debt instruments and other eligible liabilities issued by an undertaking under resolution or amend the amount of interest payable under such instruments and other eligible liabilities, or the date on which the interest becomes payable, including by suspending payment for a temporary period;

Added(l) the power to close out and terminate financial contracts, or derivatives as defined in Article 2 point (5), of Regulation (EU) No 648/2012 of the European Parliament and of the Council;

Added(m) the power to remove or replace the administrative, management or supervisory body and senior management of an undertaking under resolution;

Added(n) the power to require the supervisory authority to assess the buyer of a qualifying holding in a timely manner by way of derogation from the time-limits laid down in Article 58 of Directive 2009/138/EC.

Added2. Member States shall take all necessary measures to ensure that, when applying the resolution tools referred to in Article 26(3) and exercising the resolution powers referred to in paragraph 1 of this Article, resolution authorities are not subject to any of the following requirements that would otherwise apply by virtue of national law or contract or otherwise:

Added(a) subject to Article 3(8) and Article 65(1), requirements to obtain approval or consent from any person either public or private, including the shareholders, the creditors or the policy holders of the undertaking under resolution;