Changes from report parliamentary committee draft to plenary report

Added2. The support measures referred to in paragraph 1, point (a), shall fulfil all of the following conditions:

Added(a) the measures are confined to solvent entities, as confirmed by the ECB or by the relevant national competent authority;

Added(b) the measures are of a precautionary and temporary nature and are based on a pre-defined ▌strategy to exit the support measure approved by the ECB or the relevant national competent authority, including a clearly specified termination date, sale date or repayment schedule for any of the measures provided; this information shall not be disclosed until one year after concluding the strategy to exit the support measure, or the implementation of the remediation plan, or the assessment under the seventh subparagraph of this paragraph;

Added(c) the measures are proportionate to remedy the consequences of the serious disturbance or to preserve financial stability;

Added(d) the measures are not used to offset losses that the entity has incurred or is likely to incur over the next 12 months.

AddedFor the purposes of the first subparagraph, point (a), an entity shall be deemed to be solvent where the ECB or the relevant national competent authority have concluded that no breach has occurred, or is likely to occur in the 12 following months, based on current expectations, of any of the requirements referred to in Article 92(1) of Regulation (EU) No 575/2013, Article 104a of Directive 2013/36/EU, Article 11(1) of Regulation (EU) 2019/2033, Article 40 of Directive (EU) 2019/2034 or the relevant applicable requirements under national or Union law.

AddedFor the purposes of the first subparagraph, point (d), the relevant competent authority shall quantify the losses that the entity has incurred or is likely to incur. That quantification shall be based, as a minimum, on asset quality reviews conducted by the ECB, EBA or national authorities, or, where appropriate, on on-site inspections conducted by the competent authority. Where such exercises cannot be undertaken in due time, the competent authority may base its evaluation on the institution’s balance sheet, provided that the balance sheet complies with the applicable accounting rules and standards, as confirmed by an independent external auditor ▌. The competent authority shall make its best efforts to ensure that the quantification is based on the market value of the institution or entity’s assets, liabilities and off-balance sheet items.

AddedThe support measures referred to in paragraph 1, point (a)(iii), shall be limited to measures that have been assessed by the ECB or the national competent authority as necessary to secure the solvency of the entity by addressing its capital shortfall established in the adverse scenario of national, Union or SSM-wide stress tests or equivalent exercises conducted by the ECB, EBA or national authorities, where applicable, confirmed by the ECB or the relevant competent authority.

AddedBy way of derogation from paragraph 1, point (a)(iii), acquisition of Common Equity Tier 1 instruments shall be exceptionally permitted where the nature of the shortfall identified is such that the acquisition of any other own funds instruments or other capital instruments would not make it possible for the entity concerned to address its capital shortfall established in the adverse scenario in the relevant stress test or equivalent exercise. The amount of acquired Common Equity Tier 1 instruments shall not exceed 2% of the total risk exposure amount of the institution or entity concerned calculated in accordance with Article 92(3) of Regulation (EU) No 575/2013.

AddedIn case any of the support measures referred to in paragraph 1, point (a), is not redeemed, repaid or otherwise terminated in accordance with the terms of the ▌strategy to exit the support measure established at the time of granting such measure, the ECB or the relevant national competent authority shall request the institution or entity to submit a one-time remediation plan. The remediation plan shall describe the steps to be taken in order to maintain or restore compliance with supervisory requirements, the long-term viability of the institution or entity and its capacity to repay the amount provided, as well as the associated timeframe.

AddedWhere the ECB or the relevant national competent authority does not recognise the one-time remediation plan as credible or feasible or where the institution or entity fails to comply with the remediation plan, an assessment of whether the institution or entity is failing or likely to fail shall be conducted in accordance with Article 18.

Added2a. The ECB or the relevant national competent authority shall inform the Board of its assessment whether the conditions referred to in paragraph 2, points (a), (b) and (d), with respect to the entities and groups referred to in Article 7(2), and to the entities and groups referred to in Article 7(4), point (b), and Article 7(5) are met.

AddedBy way of derogation from paragraph 1, point (a)(iii), acquisition of Common Equity Tier 1 instruments shall be exceptionally permitted where the nature of the shortfall identified is such that the acquisition of any other own funds instruments or other capital instruments would not make it possible for the entity concerned to address its capital shortfall established in the adverse scenario in the relevant stress test or equivalent exercise. The amount of acquired Common Equity Tier 1 instruments shall not exceed 2% of the total risk exposure amount of the institution or entity concerned calculated in accordance with Article 92(3) of Regulation (EU) No 575/2013.

AddedIn case any of the support measures referred to in paragraph 1, point (a), is not redeemed, repaid or otherwise terminated in accordance with the terms of the exit strategy established at the time of granting such measure, the ECB or the relevant national competent authority shall conclude that the condition laid down in Article 18(1), point (a), is met in relation to the institution or entity which has received those support measures and shall communicate that assessment to the Commission and to the Board, in accordance with Article 18(1), third subparagraph.’;

Added(21) Article 19 is amended as follows:

Added(a) paragraph 1 is replaced by the following:

Added‘1. Where resolution action involves the granting of State aid pursuant to Article 107(1) TFEU or of Fund aid in accordance with paragraph 3 of this Article, the resolution scheme referred to in Article 18(6) of this Regulation shall not enter into force until such time when the Commission adopts a positive or conditional decision, or a decision not to raise objections, concerning the compatibility of the use of such aid with the internal market. The Commission shall, taking into consideration the need for timely execution of the resolution scheme by the Board, take the decision concerning the compatibility of the use of State aid or of Fund aid with the internal market at the latest when it endorses or objects to the resolution scheme pursuant to Article 18(7), second subparagraph, or when the period of 24 hours referred to in Article 18(7), fifth subparagraph, expires, whichever is earlier. In the absence of such decision within 24 hours of the transmission of the resolution scheme by the Board, the resolution scheme shall be deemed authorised by the Commission and shall enter into force in accordance with Article 18(7), fifth subparagraph.

AddedIn performing the tasks conferred on them by Article 18 of this Regulation, Union institutions shall have in place structural arrangements that ensure operational independence and avoid conflicts of interest that could arise between the functions entrusted with the performance of those tasks and other functions and shall make public in an appropriate manner all relevant information on their internal organisation in this regard.’;

Added(b) paragraph 3 is replaced by the following:

Added‘3. As soon as the Board considers that it may be necessary to use the Fund, it shall informally, promptly, and in a confidential manner contact the Commission to discuss the possible use of the Fund, including legal and economic aspects related to its use. Once the Board is sufficiently certain that the resolution scheme envisaged will entail the use of Fund aid, the Board shall formally notify the Commission of the proposed use of the Fund. That notification shall contain all the information that the Commission needs to make its assessments pursuant to this paragraph, and that the Board has in its possession or which the Board has the power to obtain in accordance with this Regulation.

AddedUpon receiving the notification referred to in the first subparagraph, the Commission shall assess whether the use of the Fund would distort, or threaten to distort, competition by favouring the beneficiary or any other undertaking so as, insofar as it would affect trade between Member States, to be incompatible with the internal market. The Commission shall apply to the use of the Fund the criteria established for the application of State aid rules as enshrined in Article 107 TFEU. The Board shall provide the Commission with the information in its possession, or which the Board has the power to obtain in accordance with this Regulation, and that the Commission deems to be necessary to carry out that assessment.

AddedWhen making its assessment, the Commission shall be guided by all the relevant regulations adopted under Article 109 TFEU, all related and relevant communications and guidance of the Commission, and all measures adopted by the Commission in application of the rules of the Treaties relating to State aid as are in force at the time the assessment is to be made. Those measures shall be applied as if references to the Member State responsible for notifying the aid were references to the Board, and with any other necessary modifications.

AddedThe Commission shall decide on the compatibility of the use of the Fund with the internal market and address that decision to the Board and to the national resolution authorities of the Member State or Member States concerned. That decision may be contingent on conditions, commitments or undertakings in respect of the beneficiary and it shall take into account the need for timely execution of resolution action by the Board.

AddedThe decision may also lay down obligations on the Board, the national resolution authorities in the participating Member State or Member States concerned or the beneficiary, as applicable and to the extent that those obligations fall within their respective remits, to enable compliance with it to be monitored. This may include requirements for the appointment of a trustee or other independent person to assist in monitoring. A trustee or other independent person may perform such functions as may be specified in the Commission decision.

AddedAny decision pursuant to this paragraph shall be published in the Official Journal of the European Union.

AddedThe Commission may issue a negative decision, addressed to the Board, where it decides that the proposed use of the Fund would be incompatible with the internal market and cannot be implemented in the form proposed by the Board. On receipt of such a decision the Board shall reconsider its resolution scheme and prepare a revised resolution scheme.’;

Added(c) paragraph 10 is replaced by the following:

Added‘10. By way of derogation from paragraph 3, the Council may, on an application of a Member State or the Board, within 7 days of such application being made, unanimously decide that the use of the Fund is to be considered compatible with the internal market, where such a decision is justified by exceptional circumstances. The Commission shall take a decision on the case where the Council has not decided within those 7 days.’;

Added(22) Article 20 is amended as follows:

Added(a) paragraph 1 is replaced by the following:

Added‘1. Before determining whether the conditions for resolution, or the conditions for write down or conversion of capital instruments and eligible liabilities as referred to in Article 21(1) are met, the Board shall ensure that a fair, prudent and realistic valuation of the assets and liabilities of an entity as referred to in Article 2 is carried out by a person that is independent from any public authority, including the Board and the national resolution authority, and from the entity concerned.’;

Added(b) the following paragraph 8a is inserted:

Added‘8a. Where necessary to inform the decisions referred to paragraph 5, points (c) and (d), the valuer shall complement the information in paragraph 7, point (c), with an estimate of the value of the off-balance sheet assets and liabilities, including contingent liabilities and assets.’;

Added(c) in paragraph 18, the following point (d) is added:

Added‘(d) when determining the losses that the deposit guarantee scheme would have incurred had the institution been wound up under normal insolvency proceedings, apply the criteria and methodology referred to in Article 11e of Directive 2014/49/EU and in any delegated act adopted pursuant to that Article.’;

Added(23) Article 21 is amended as follows:

Added(a) paragraph 1 is amended as follows:

Added(i) the first subparagraph is amended as follows:

Added— the introductory wording is replaced by the following:

Added‘1. The Board, acting under the procedure laid down in Article 18, shall exercise the power to write down or convert relevant capital instruments, and eligible liabilities as referred to in paragraph 7a, in relation to the entities and groups referred to in Article 7(2), and to the entities and groups referred to in Article 7(4), point (b), and Article7(5) where the conditions for the application of those provisions are met, only where it determines, in its executive session, on receiving a communication pursuant to the second subparagraph or on its own initiative, that one or more of the following conditions are met:’;

Added— point (e) is replaced by the following:

Added‘(e) extraordinary public financial support is required by the entity or group, except where that support is granted in one of the forms referred to in Article 18a(1).’;

Added(ii) the second subparagraph is replaced by the following:

Added‘The assessment of the conditions referred to in the first subparagraph, points (a) to (d), shall be made by the ECB for entities referred to in Article 7(2)(a), or by the relevant national competent authority for entities referred to in Article 7(2)(b), (4)(b) and (5), and by the Board, in its executive session, in accordance with the allocation of tasks pursuant to the procedure laid down in Article 18(1) and (2).’;

Added(b) paragraph 2 is deleted;

Added(c) in paragraph 3, point (b) is replaced by the following:

Added‘(b) having regard to timing, the need to implement effectively the write down and conversion powers or the resolution strategy for the resolution group and other relevant circumstances, there is no reasonable prospect that any action, including alternative private sector measures, supervisory action or early intervention measures, other than the write-down or conversion of relevant capital instruments, and eligible liabilities as referred to in paragraph 7a, would prevent the failure of that entity or group within a reasonable timeframe.’;

Added(d) paragraph 9 is replaced by the following:

Added‘9. Where one or more of the conditions referred to in paragraph 1 are met in relation to an entity referred to in that paragraph, and the conditions referred to in Article 18(1) are also met in relation to that entity or to an entity belonging to the same group, the procedure laid down in Article 18(6), (7) and (8) shall apply.’;

Added(24) Article 27 is amended as follows:

Added(a) paragraph 7 is replaced by the following:

Added‘7. The Fund may make a contribution as referred to in paragraph 6 only where all of the following conditions are met:

Added(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 in accordance with the valuation provided for in Article 20(1) to (15), has been made by shareholders, the holders of relevant capital instruments and other bail-inable liabilities through reduction, write-down, or conversion pursuant to Article 48(1) of Directive 2014/59/EU and Article 21(10) of this Regulation, and by the deposit guarantee scheme pursuant to Article 79 of this Regulation and Article 109 of Directive 2014/59/EU where relevant;

Added(b) the contribution from the Fund does not exceed 5 % of the total liabilities including own funds of the institution under resolution, measured in accordance with the valuation provided for in Article 20(1) to (15).’;

Added▌

Added(c) in paragraph 13, the second subparagraph is replaced by the following:

Added‘The assessment referred to in the first subparagraph shall establish the amount by which bail-inable liabilities need to be written down or converted:

Added(a) to restore the Common Equity Tier 1 capital ratio of the institution under resolution, or, where applicable, establish the ratio of the bridge institution, taking into account any contribution of capital by the Fund made pursuant to Article 76(1), point (d);

Added(b) to sustain sufficient market confidence in the institution under resolution or the bridge institution, taking into account the need to cover contingent liabilities, and enable the institution under resolution to continue to meet, for at least 1 year, the conditions for authorisation and to continue to carry out the activities for which it is authorised under Directive 2013/36/EU or Directive 2014/65/EU.’;

Added(25) Article 30 is amended as follows: