4.3.4.2 Write-down and conversion power

Noteworthy in the context of the bail-in is the write-down and conversion power. 1This power – provided for in Art. 59 BRRD2 – can be exercised independently of any resolution action; but it can also be exercised in combination with a resolution tool.3 Although the write down and conversion instrument is not a resolution tool, it is part of the resolution authority’s toolbox. If a bank can become viable again if the write down and conversion power is applied, then the resolution authority is required to exercise the write down and conversion power. In the resolution-stage, the resolution authority is required to exercise the write down and conversion power if the resolution action would result in losses being borne by creditors.4

The term ‘bail-in’ is sometimes used as an umbrella term for the resolution tool (Art. 43 BRRD) and the write down and conversion power (Art. 59 BRRD).5 However, the write down and conversion instrument is more limited in scope than the bail-in tool, since it only covers AT1 and Tier 2 capital instruments.6