[ParlTrack]

Martin SCHIRDEWAN, Matt CARTHY, Miguel VIEGAS, Marisa MATIAS

Proposal for a directive
Recital 5

(5) Member States should ensure that institutions have sufficient loss absorbing and recapitalisation capacity to ensure smooth and fast absorption of losses and recapitalisation in resolution with a minimum impact on financial stability and ~~taxpayer~~without taxpayer bail-outs. That should be achieved through compliance by institutions with an institution-specific minimum requirement for own funds and eligible liabilities ('MREL') as provided in Directive 2014/59/EU.

2018/01/29
Committee: ECON

Martin SCHIRDEWAN, Matt CARTHY, Miguel VIEGAS, Marisa MATIAS

Proposal for a directive
Recital 7

(7) Eligibility criteria for bail-inable liabilities for the MREL should be closely aligned with those laid down in Regulation (EU) No 575/2013 for the TLAC minimum requirement, in line with the complementary adjustments and requirements introduced in this Directive. In particular, certain debt instruments with an embedded derivative component, such as certain structured notes, should be eligible to meet the MREL to the extent that they have a fixed principal amount repayable at maturity while only an additional return is linked to a derivative and depends on the performance of a reference asset. In view of their fixed principal amount, those instruments should be highly loss-absorbing and easily bail-inable in resolution. Eligible liabilities should be clearly subordinated to other liabilities in order to avoid any ‘no creditor worse off’ issues.

2018/01/29
Committee: ECON

Martin SCHIRDEWAN, Matt CARTHY, Miguel VIEGAS, Marisa MATIAS

Proposal for a directive
Recital 7 a (new)

(7 a) Recent cases of bank bail-outs with public money have highlighted fundamental shortcomings of the current recovery and resolution framework, which was drafted with the intention that no socialisation of losses should take place. It is therefore appropriate to close existing loopholes, namely precautionary recapitalisation, which enable authorities to inject public money into failing banks.

2018/01/29
Committee: ECON

Martin SCHIRDEWAN, Matt CARTHY, Miguel VIEGAS, Marisa MATIAS

Proposal for a directive
Recital 8

(8) The scope of liabilities to meet the MREL includes, in principle, all liabilities resulting from claims arising from unsecured non-preferred creditors (non- subordinated liabilities) unless they do not meet specific eligibility criteria provided in this Directive. To enhance the resolvability of institutions through an effective use of the bail-in tool, resolution authorities should ~~be able to~~ require that the MREL is met with subordinated liabilities, in particular when there are clear indications that bailed-in creditors are likely to bear losses in resolution that would exceed their potential losses in insolvency. The requirement to meet MREL with subordinated liabilities should be requested only for a level necessary to prevent that losses of creditors in resolution are above losses that they would otherwise incur under insolvency. Any subordination of debt instruments requested by resolution authorities for the MREL should be without prejudice to the possibility to partly meet the TLAC minimum requirement with non-subordinated debt instruments in accordance with Regulation (EU) No 575/2013 as permitted by the TLAC standard.

2018/01/29
Committee: ECON

Martin SCHIRDEWAN, Matt CARTHY, Miguel VIEGAS, Marisa MATIAS

Proposal for a directive
Recital 9

(9) The MREL should allow institutions to absorb losses expected in resolution and recapitalise the institution post-resolution. The resolution authorities should, on the basis of the resolution strategy chosen by them, duly justify the imposed level of the MREL in particular as regards the need and the level of the requirement referred to in Article 104a of Directive 2013/36/EU in the recapitalisation amount. As such, that level should be composed of the sum of the amount of losses expected in resolution that correspond to the institution's own funds requirements and the recapitalisation amount that allows the institution post- resolution to meet its own funds requirements necessary for being authorised to pursue its activities under the chosen resolution strategy. The MREL should be expressed as a percentage of the total risk exposure and leverage ratio measures, and institutions should meet simultaneously the levels resulting from the two measurements. The resolution authority should be able to adjust the recapitalisation amounts in cases duly justified to adequately reflect also increased risks that affect resolvability arising from the resolution group’s business model, funding profile and overall risk profile and therefore in such ~~limited~~necessary circumstances require that the recapitalisation amounts referred to in the first subparagraph of Article 45c(3) and (4) are exceeded.

2018/01/29
Committee: ECON

Martin SCHIRDEWAN, Matt CARTHY, Miguel VIEGAS, Marisa MATIAS

Proposal for a directive
Recital 10

(10) To enhance their resolvability, resolution authorities should be able to impose an institution-specific MREL on G- SIIs in addition to the TLAC minimum requirement laid down in Regulation (EU) No 575/2013~~. That institution-specific MREL may only be imposed where the TLAC minimum requirement is not sufficient to absorb losses and recapitalise a G-SII under the chosen~~ when deemed necessary by the resolution ~~strateg~~authority.

2018/01/29
Committee: ECON

Martin SCHIRDEWAN, Matt CARTHY, Miguel VIEGAS, Marisa MATIAS

Proposal for a directive
Recital 11

(11) When setting the level of MREL, resolution authorities should consider the degree of systemic relevance of an institution and the potential adverse impact of its failure on the financial stability. They should take into account the need for a level playing field between G-SIIs and other comparable institutions with systemic relevance within the Union. Thus MREL of institutions that are not identified as G-SIIs but the systemic relevance within the Union of which is comparable to the systemic relevance of G-SIIs should not diverge disproportionately from the level and composition of MREL generally set for G-SIIs and may also exceed that level.

2018/01/29
Committee: ECON

Martin SCHIRDEWAN, Matt CARTHY, Miguel VIEGAS, Marisa MATIAS

Proposal for a directive
Recital 12

(12) Similarly to powers conferred to competent authorities by Directive 2013/36/EU, this Directive should allow resolution authorities to require institutions to meet higher levels of MREL while addressing in a more flexible manner any breaches of those levels, in particular by alleviating the automatic effects of those breaches in the form of limitations to the Maximum Distributable Amounts (MDAs). Resolution authorities should be able to give guidance to institutions to meet additional amounts to cover losses in resolution that are above the level of the own funds requirements as laid down in Regulation (EU) No 575/2013 and Directive 2013/36/EU, and/or to ensure sufficient market confidence in the institution post-resolution. To ensure consistency with Directive 2013/36/EU, guidance to cover additional losses may only be given where the 'capital guidance' has been requested by the competent supervisory authorities in accordance with Directive 2013/36/EU and should not exceed the level requested in that guidance. For the recapitalisation amount, the level requested in the guidance to ensure market confidence should enable the institution to continue to meet the conditions for authorisation for an appropriate period of time, including by allowing the institution to cover the costs related to the restructuring of its activities following resolution. The market confidence buffer should not exceed the combined capital buffer requirement under Directive 2013/36/EU unless a higher level is necessary to ensure that, following the event of resolution, the entity continues to meet the conditions for its authorisation for an appropriate period of time. Where an entity consistently fails to have additional own funds and eligible liabilities as expected under the guidance, the resolution authority should be able to require that the amount of the MREL be increased to cover the amount of the guidance. For the purposes of considering whether there is a consistent failure, the resolution authority should take into account the entity's reporting on the MREL as required by this Directiveen deemed necessary for resolution.

2018/01/29
Committee: ECON

Martin SCHIRDEWAN, Matt CARTHY, Miguel VIEGAS, Marisa MATIAS

Proposal for a directive
Recital 14

(14) Institutions that are not resolution entities should comply with the MREL at individual level. Loss absorption and recapitalisation needs of those institutions should be generally provided by their respective resolution entities through the acquisition by resolution entities of eligible liabilities issued by those institutions and their write-down or conversion into instruments of ownership at the point where those institutions are no longer viable. As such, the MREL applicable to institutions that are not resolution entities should be applied together and consistently with the requirements applicable to resolution entities. That should allow resolution authorities to resolve a resolution group without placing certain of its subsidiary entities in resolution, thus avoiding potentially disruptive effects on the market. Subject to the agreement of the resolution authorities of the resolution entity and of its subsidiary, it should be possible to replace the issuance of eligible liabilities to resolution entities with collateralised guarantees between the resolution entity and its subsidiaries, that can be triggered when the timing conditions equivalent to those allowing the write down or conversion of eligible liabilities are met. The resolution authorities of subsidiaries of a resolution entity should also be able to fully waive the application of the MREL applicable to institutions that are not resolution entities if both the resolution entity and its subsidiaries are established in the same Member State. The application of the MREL to institutions that are not resolution entities should comply with the chosen resolution strategy, in particular it should not change the ownership relationship between institutions and their resolution group after those institutions have been recapitalised.

2018/01/29
Committee: ECON

Martin SCHIRDEWAN, Matt CARTHY, Miguel VIEGAS, Marisa MATIAS

Proposal for a directive
Article 1 – paragraph 20 a (new)

Directive 2014/59/EU
Article 32 – paragraph 4 – subparagraph 1 – point d

(d) extraordinary public financial support is required except when, in order to remedy a serious disturbance in the economy of a Member State and preserve financial stability, the extraordinary public financial support takes any of the following forms: (i) facilities provided by central banks according to the central banks’ conditions; (ii) liabilities; or (iii) an injection of own funds or purchase of capital instruments at prices and on terms that do not confer an advantage upon the institution, where neither the circumstances referred to in point (a), (b) or (c) of this paragraph nor the circumstances referred to in Article 59(3) are present at the time the public support is granted. 20 a. In Article 32(4), point (d) is replaced by the following: (d) public financial support would be required to continue the operation of the institution. a State guarantee to back liquidity a State guarantee of newly issued Or. en (http://eur-lex.europa.eu/legal-content/en/TXT/?uri=celex%3A32014L0059)

2018/01/29
Committee: ECON

Martin SCHIRDEWAN, Matt CARTHY, Miguel VIEGAS, Marisa MATIAS