The key differences between the write-down power in Article 59 and the bail-in tool are the following:

- The write-down or conversion in Article 59 is not a do not qualify resolution action, while the exercise of the bail-in tool constitutes a resolution action;
- The write-down or conversion in Article 59 BRRD can be applied independently of resolution action and must is,  in such case, to be applied when the entity or institution will no longer be viable unless that power is exercised;
- the write-down or conversion in Article 59 applies to relevant capital instruments (AT1 and T2) and, outside the context of a resolution action, to liabilities eligible for internal MREL, as referred to in Article 59(1a), while the bail-in tool applies to eligible bail-inable liabilities as defined in Article 2(1), point (71);
- while the write down or conversion power in Article 59 power does not allow any exemption, the bail-in tool leaves the option to exempt certain eligible liabilities under the conditions in Article 44(3) to (5).

Both the write-down power and the bail-in tool are aimed at absorbing losses and recapitalising an institution or an entity that meets the conditions for resolution is failing or likely to fail and for which no private or supervisory measure would address that failure in a timely manner. Concretely a resolution authority must first exercise the write down before using (if necessary) the bail-in tool. If, following the write-down the institution is still failing or likely to fail (for example because the write down or conversion alone was not sufficient to ensure the return to viability) and the conditions of Article 32, 32a or 33 are met, the resolution authority can use the bail-in tool (provided that other resolution tools are not more appropriate in the specific case).

This conclusion is based on the combined reading of Article 59(2) and (3), Article 32 and Article 37(2). Article 59(3), point (a), of Directive 2014/59/EU (BRRD) requires that resolution authorities exercise the power to write down or convert relevant capital instruments when conditions for resolution have been met and before any resolution action is taken. Accordingly, Article 37(2) provides that when a resolution authority decides to apply a resolution tool and that resolution action would result in losses being borne by their creditors or their claims being converted, the write down and conversion power of Article 59 must is to be exercised immediately before or together with the application of the resolution tool.

Disclaimer:

The answers clarify provisions already contained in the applicable legislation. They do not extend in any way the rights and obligations deriving from such legislation nor do they introduce any additional requirements for the concerned operators and competent authorities. The answers are merely intended to assist natural or legal persons, including competent authorities and Union institutions and bodies in clarifying the application or implementation of the relevant legal provisions. Only the Court of Justice of the European Union is competent to authoritatively interpret Union law. The views expressed in the internal Commission Decision cannot prejudge the position that the European Commission might take before the Union and national courts.