- Question ID
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2017_3118
- Legal act
- Directive 2014/59/EU (BRRD)
- Topic
- Resolution tools and powers
- Article
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43(3), 43(5)(a), 44(2), 46(1)(b), 75, and 101(2)
- COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
- Not applicable
- Article/Paragraph
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n.a.
- Type of submitter
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Competent authority
- Subject matter
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Exercise of the power to convert liabilities towards creditors
- Question
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For the purpose of resolution, may the resolution authority exercise the power to convert liabilities towards creditors that would not incur losses under normal insolvency proceedings, where the power of write down has previously been exercised to ensure that the net asset value of the institution under resolution is equal to zero? More generally, how can the needs for recapitalisation be met when the total amount of remaining liabilities which are not excluded or protected by NCWO is not sufficient and the total losses are lower than 8% of the total liabilities?
- Background on the question
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May the resolution financing arrangement contribute to pay compensation to such shareholders or creditors in accordance with Article 75 and 101 of Directive 2014/59/EU (BRRD) under the No Creditor Worse Off (NCWO) principle? Is this possible before the 8% threshold referred to in Article 43(5)(a) has been reached? If not, how can the ability in Article 43(3) BRRD be exercised when the total losses are lower than 8% of the total liabilities and creditors remaining are protected by principle NWCO or the total amount of remaining liabilities to be converted could not meet the needs for recapitalization?
- Submission date
- Rejected publishing date
-
- Rationale for rejection
-
Please note that as part of adjustments to the Single Rulebook Q&A process, agreed by the EBA and the European Commission, it has been decided to reject outstanding questions submitted before 1 January 2020, when the Q&A process was updated as part of the last ESAs Review. In particular, the question that you have submitted has now regrettably been rejected and will not be addressed.
If you believe your question would still benefit from clarification, you are invited to resubmit your question, adapting it to reflect any legislative, regulatory or other relevant developments that may have occurred since the initial date of submission. The EBA will aim to address resubmitted questions as a matter of priority. When considering to resubmit, you are kindly requested to observe the updated admissibility criteria agreed in the context of the adjustment of the Q&A process, available in the Additional background and guidance for asking questions. We hope for your understanding.
For further information please refer to the press release and the updated Q&A page.
- Status
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Rejected question