Public funding of failing banks in the European Union (LBF vol. 19) 2020/7.4.3.3:7.4.3.3 Deviation from the burden-sharing requirement

Public funding of failing banks in the European Union (LBF vol. 19) 2020/7.4.3.3

7.4.3.3 Deviation from the burden-sharing requirement

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 State aid regime for the banking sector and the resolution framework provide for certain deviations from the burden-sharing requirements. These deviations and the consequences thereof for burden-sharing are summarised in Table 17.

Table 17: Deviation from burden-sharing requirements

Burden-sharing requirement

Deviation

Results of deviation for burden-sharing

Exercise of PONV conversion power

The exercise of the PONV conversion power is not triggered in case of precautionary recapitalisation

The burden shifts towards Member States for the benefit of the holders of share capital and eligible liabilities. However, the burden-sharing principle under the State aid regime does apply.

Use of bail-in tool

1 The application of the NCWO principle.

2. Certain eligible liabilities are excluded from the scope of the bail-in tool.

3. The resolution authority can exclude eligible liabilities from the scope of the bail-in tool; and

4. The deposit guarantee schemes contribute to the resolution for the amount of covered deposits that would have been in scope of the bail-in tool, if these were not excluded.

5. The national resolution funds and the SRF can be used without triggering a bail-in, unless they are used for loss absorption or recapitalisation.

1. The burden shifts towards the resolution funds for the benefit of the holders of eligible liabilities.

2. The burden shifts to holders of eligible liabilities that are not excluded.

3. The burden shifts to holders of eligible liabilities that are not excluded or towards the resolution funds for the benefit of holders of eligible liabilities that are excluded from the scope of bail-in.

4. The burden shifts towards the deposit guarantee funds for the benefit of holders of covered deposits.

5. The burden shifts towards the resolution funds for the benefit of holders of eligible liabilities.

Application of burden-sharing principle under the State aid regime

1. The application of the NCWO principle.

2. The burden-sharing principle can be deviated from when implementing burden-sharing measures would endanger financial stability or lead to disproportionate results.1

1. The State aid regime for the banking sector does not specify what the consequences are of the application of the NCWO principle. The author assumes that this leads to a shift of the burden to the Member State.

2. The burden shifts towards Member States for the benefit of holders of share capital and/or subordinated debt.

Deze functie is alleen te gebruiken als je bent ingelogd.