Public funding of failing banks in the European Union (LBF vol. 19) 2020/7.4.3.2:7.4.3.2 A closer look at public funding as trigger for burden-sharing

Public funding of failing banks in the European Union (LBF vol. 19) 2020/7.4.3.2

7.4.3.2 A closer look at public funding as trigger for burden-sharing

Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.

The three burden-sharing requirements have in common that they are triggered when public funding (State aid and/or EPFS) is used. Table 16 makes a further distinction between the different forms of public funding in the recovery, resolution and insolvency phase and the burden-sharing requirement that it triggers. It shows that the burden-sharing requirements differ depending on the type of public funding source that is used.

Table 16: Application of the burden-sharing requirements in case of public funding

Public funding source

Exercise of PONV conversion power

Application of bail-in tool

Application of burden-sharing principle under the State aid regime

Recovery phase

ELA

N/A

N/A

N/A1

DGS support (alternative measures)

N/A2

N/A3

Application of burden-sharing principle, if in the form of restructuring aid4

Precautionary guarantees

Exercise of PONV conversion power

N/A

N/A

Precautionary recapitalisation

N/A

N/A

Application of burden-sharing principle

Resolution phase

NRF/SRF

Exercise of PONV conversion power

Only when the NRF/SRF is used for loss absorption or recapitalisation:

Bail-in of 8% of total liabilities and own funds of the bank5

Application of burden-sharing principle

DGS (resolution financing)

Exercise of PONV conversion power

There is no bail-in threshold in relation to resolution financing by deposit guarantee schemes. Deposit guarantee schemes can however only absorb losses that would have otherwise been suffered by covered depositors6

Application of burden-sharing principle

GFST

Exercise of PONV conversion power

Bail-in of 8% of total liabilities and own funds of the bank7

Application of burden-sharing principle

ESM DRI

Exercise of PONV conversion power

Bail-in of 8% of total liabilities and own funds of the bank

SRF has to contribute 5% of the total liabilities including own funds of the bank in resolution

All unsecured, non-preferred liabilities, other than eligible deposits, have to be written down or converted in full8

Application of burden-sharing principle

Alternative financing sources

Exercise of PONV conversion power

National resolution funds or SRF have to contribute up to 5% of total liabilities

All unsecured, non-preferred liabilities, other than eligible deposits, have to be written down or converted in full9

Application of burden-sharing principle

Insolvency phase

Liquidation aid

N/A

N/A

Application of burden-sharing principle

DGS (pay-out function and other use)

N/A

N/A

N/A

Deze functie is alleen te gebruiken als je bent ingelogd.