7.5.1 Impact of the resolution framework on the restructuring process of a failing bank

- When rescue aid is not reimbursed within two months and/or more structural aid (restructuring aid) is required a bank becomes subject to the restructuring process set out in the State aid regime for the banking sector.

- The starting point for restructuring is the restructuring plan (or winding up or integration plan) submitted by the Member State to the Commission for its approval, as preceded or accompanied by the capital raising plan.

- The resolution framework only provides for a restructuring process when the bail-in tool is used as a going concern solution. In that case a business reorganisation plan has to be drafted by the bank and assessed by the competent authority and resolution authority.

In none of the cases in which State aid was awarded after the introduction of the resolution framework was a restructuring process triggered under the resolution framework. This restructuring was, in all cases, covered by the State aid regime for the banking sector.

- The resolution framework introduced ex ante restructuring measures.

- It is the Member State that decides on the scope and nature of the restructuring, in consultation with the beneficiary bank. The Commission however has a decisive influence on the nature and scope of restructuring that is requested from the bank, taking into account that the Commission has the exclusive power to authorize the State aid measure.

- If a beneficiary bank or its shareholders/creditors are unhappy with the requested restructuring, they can challenge the decision from the Commission at the EU Courts.

- The resolution framework introduced the resolution authority as restructuring authority.

- The resolution framework introduced the possibility for competent authorities and resolution authorities to impose ex ante restructuring measures.

- If a beneficiary bank or its shareholders/creditors are unhappy with the requested restructuring, they may have to challenge multiple decisions from multiple authorities, both at national and EU level.

- The burden-sharing principle applies as part of the assessment by the Commission of the State aid measure.

- Burden-sharing is restricted to share capital and subordinated debt.

- It is possible to deviate from the burden-sharing requirement under the State aid regime for the banking sector when burden-sharing measures would endanger financial stability or lead to disproportionate results.

- The resolution authorities can (or have to, depending on the circumstances) exercise the PONV conversion power and/or apply the bail-in tool to impose the burden-sharing requirement.

- Burden-sharing can include senior debt.

- Certain eligible liabilities are excluded from the scope of the bail-in tool or may be excluded by the resolution authority.

- The resolution framework requires a bail-in of 8% of total liabilities and own funds of the bank when certain public funding sources are used. When the ESM DRI or alternative financing sources are used, all unsecured, non-preferred liabilities, other than eligible deposits, have to be written down or converted in full.