Regulation (EU) No 575/2013 of the European Parliament and of the CouncilShow full title

[X1 [F1 Article 72b U.K. Eligible liabilities instruments

1 . Liabilities shall qualify as eligible liabilities instruments, provided that they comply with the conditions set out in this Article and only to the extent specified in this Article.

2 . Liabilities shall qualify as eligible liabilities instruments, provided that all the following conditions are met:

( a ) the liabilities are directly issued or raised, as applicable, by an institution and are fully paid up;

( b ) the liabilities are not owned by any of the following:

(i)

the institution or an entity included in the same resolution group;

(ii)

an undertaking in which the institution has a direct or indirect participation in the form of ownership, direct or by way of control, of 20 % or more of the voting rights or capital of that undertaking;

( c ) the acquisition of ownership of the liabilities is not funded directly or indirectly by the resolution entity;

( d ) the claim on the principal amount of the liabilities under the provisions governing the instruments is wholly subordinated to claims arising from the excluded liabilities referred to in Article 72a(2); that subordination requirement shall be considered to be met in any of the following situations:

(i)

the contractual provisions governing the liabilities specify that in the event of normal insolvency proceedings [F2 as defined in section 3(1) of the Banking Act 2009], the claim on the principal amount of the instruments ranks below claims arising from any of the excluded liabilities referred to in Article 72a(2) of this Regulation;

(ii)

the applicable law specifies that in the event of normal insolvency proceedings [F3 as defined in section 3(1) of the Banking Act 2009], the claim on the principal amount of the instruments ranks below claims arising from any of the excluded liabilities referred to in Article 72a(2) of this Regulation;

(iii)

the instruments are issued by a resolution entity which does not have on its balance sheet any excluded liabilities as referred to in Article 72a(2) of this Regulation that rank pari passu or junior to eligible liabilities instruments;

( e ) the liabilities are neither secured, nor subject to a guarantee or any other arrangement that enhances the seniority of the claim by any of the following:

(i)

the institution or its subsidiaries;

(ii)

the parent undertaking of the institution or its subsidiaries;

(iii)

any undertaking that has close links with entities referred to in points (i) and (ii);

( f ) the liabilities are not subject to set-off or netting arrangements that would undermine their capacity to absorb losses in resolution;

( g ) the provisions governing the liabilities do not include any incentive for their principal amount to be called, redeemed or repurchased prior to their maturity or repaid early by the institution, as applicable, except in the cases referred to in Article 72c(3);

( h ) the liabilities are not redeemable by the holders of the instruments prior to their maturity, except in the cases referred to in Article 72c(2);

( i ) subject to Article 72c(3) and (4), where the liabilities include one or more early repayment options, including call options, the options are exercisable at the sole discretion of the issuer, except in the cases referred to in Article 72c(2);

( j ) the liabilities may only be called, redeemed, repaid or repurchased early where the conditions set out in Articles 77 and 78a are met;

( k ) the provisions governing the liabilities do not indicate explicitly or implicitly that the liabilities would be called, redeemed, repaid or repurchased early, as applicable by the resolution entity other than in the case of the insolvency or liquidation of the institution and the institution does not otherwise provide such an indication;

( l ) the provisions governing the liabilities do not give the holder the right to accelerate the future scheduled payment of interest or principal, other than in the case of the insolvency or liquidation of the resolution entity;

( m ) the level of interest or dividend payments, as applicable, due on the liabilities is not amended on the basis of the credit standing of the resolution entity or its parent undertaking;

( n ) for instruments issued after 28 June 2021 the relevant contractual documentation and, where applicable, the prospectus related to the issuance explicitly refer to the possible exercise of the write-down and conversion powers in accordance with [F4 section 12AA of the Banking Act 2009].

For the purposes of point (a) of the first subparagraph, only the parts of liabilities that are fully paid up shall be eligible to qualify as eligible liabilities instruments.

For the purposes of point (d) of the first subparagraph of this Article, where some of the excluded liabilities referred to in Article 72a(2) are subordinated to ordinary unsecured claims under [F5 the insolvency law of the United Kingdom or any part of it], inter alia, due to being held by a creditor who has close links with the debtor, by being or having been a shareholder, in a control or group relationship, a member of the management body or related to any of those persons, subordination shall not be assessed by reference to claims arising from such excluded liabilities.

3 . In addition to the liabilities referred to in paragraph 2 of this Article, the resolution authority may permit liabilities to qualify as eligible liabilities instruments up to an aggregate amount that does not exceed 3,5 % of the total risk exposure amount calculated in accordance with Article 92(3) and (4), provided that:

( a ) all the conditions set out in paragraph 2 except for the condition set out in point (d) of the first subparagraph of paragraph 2 are met;

( b ) the liabilities rank pari passu with the lowest ranking excluded liabilities referred to in Article 72a(2) with the exception of the excluded liabilities that are subordinated to ordinary unsecured claims under [F6 the insolvency law of the United Kingdom] referred to in the third subparagraph of paragraph 2 of this Article; and

( c ) the inclusion of those liabilities in eligible liabilities items would not give rise to a material risk of a successful legal challenge or of valid compensation claims as assessed by the resolution authority in relation to the principles referred to in [F7 United Kingdom legislation which immediately before IP completion day gave effect to] point (g) of Article 34(1) and Article 75 of Directive 2014/59/EU.

4 . The resolution authority may permit liabilities to qualify as eligible liabilities instruments in addition to the liabilities referred to in paragraph 2, provided that:

( a ) the institution is not permitted to include in eligible liabilities items liabilities referred to in paragraph 3;

( b ) all the conditions set out in paragraph 2, except for the condition set out in point (d) of the first subparagraph of paragraph 2, are met;

( c ) the liabilities rank pari passu or are senior to the lowest ranking excluded liabilities referred to in Article 72a(2), with the exception of the excluded liabilities subordinated to ordinary unsecured claims under [F8 the insolvency law of the United Kingdom] referred to in the third subparagraph of paragraph 2 of this Article;

( d ) on the balance sheet of the institution, the amount of the excluded liabilities referred to in Article 72a(2) which rank pari passu or below those liabilities in insolvency does not exceed 5 % of the amount of the own funds and eligible liabilities of the institution;

( e ) the inclusion of those liabilities in eligible liabilities items would not give rise to a material risk of a successful legal challenge or of valid compensation claims as assessed by the resolution authority in relation to the principles referred to in [F9 United Kingdom legislation which immediately before IP completion day gave effect to] point (g) of Article 34(1) and Article 75 of Directive 2014/59/EU.

5 . The resolution authority may only permit an institution to include liabilities referred to either in paragraph 3 or 4 as eligible liabilities items.

6 . The resolution authority shall consult the competent authority when examining whether the conditions set out in this Article are fulfilled.

7 . [F10 The Bank may make] F11 ... technical standards to specify:

( a ) the applicable forms and nature of indirect funding of eligible liabilities instruments;

( b ) the form and nature of incentives to redeem for the purposes of the condition set out in point (g) of the first subparagraph of paragraph 2 of this Article and Article 72c(3).

Those F11 ... technical standards shall be fully aligned with the [F12 technical standards] referred to in point (a) of Article 28(5) and in point (a) of Article 52(2).

F13 ...]]

Editorial Information

X1 Substituted by Corrigendum to Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 27.6.2013, p. 1).

Textual Amendments

F1 Inserted by Regulation (EU) 2019/876 of the European Parliament and of the Council of 20 May 2019 amending Regulation (EU) No 575/2013 as regards the leverage ratio, the net stable funding ratio, requirements for own funds and eligible liabilities, counterparty credit risk, market risk, exposures to central counterparties, exposures to collective investment undertakings, large exposures, reporting and disclosure requirements, and Regulation (EU) No 648/2012 (Text with EEA relevance).

F2 Words in Art. 72b(2)(d)(i) substituted (31.12.2020) by The Capital Requirements (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/1232), regs. 1(3), 26(2)(a)(i); 2020 c. 1, Sch. 5 para. 1(1)

F3 Words in Art. 72b(2)(d)(ii) substituted (31.12.2020) by The Capital Requirements (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/1232), regs. 1(3), 26(2)(a)(ii); 2020 c. 1, Sch. 5 para. 1(1)

F4 Words in Art. 72b(2)(n) substituted (31.12.2020) by The Capital Requirements (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/1232), regs. 1(3), 26(2)(b); 2020 c. 1, Sch. 5 para. 1(1)

F5 Words in Art. 72b(2) substituted (31.12.2020) by The Capital Requirements (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/1232), regs. 1(3), 26(2)(c); 2020 c. 1, Sch. 5 para. 1(1)

F6 Words in Art. 72b(3)(b) substituted (31.12.2020) by The Capital Requirements (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/1232), regs. 1(3), 26(3)(a); 2020 c. 1, Sch. 5 para. 1(1)

F7 Words in Art. 72b(3)(c) substituted (31.12.2020) by The Capital Requirements (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/1232), regs. 1(3), 26(3)(b) (as amended (30.12.2020) by S.I. 2020/1301, regs. 1, 3, Sch. para. 46); 2020 c. 1, Sch. 5 para. 1(1)

F8 Words in Art. 72b(4)(c) substituted (31.12.2020) by The Capital Requirements (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/1232), regs. 1(3), 26(4)(a); 2020 c. 1, Sch. 5 para. 1(1)

F9 Words in Art. 72b(4)(e) inserted (31.12.2020) by The Capital Requirements (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/1232), regs. 1(3), 26(4)(b) (as amended (30.12.2020) by S.I. 2020/1301, regs. 1, 3, Sch. para. 46); 2020 c. 1, Sch. 5 para. 1(1)

F10 Words in Art. 72b(7) substituted (31.12.2020) by The Capital Requirements (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/1232), regs. 1(3), 26(5)(a); 2020 c. 1, Sch. 5 para. 1(1)

F11 Words in Art. 72b(7) omitted (31.12.2020) by virtue of The Capital Requirements (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/1232), regs. 1(3), 26(5)(b); 2020 c. 1, Sch. 5 para. 1(1)

F12 Words in Art. 72b(7) substituted (31.12.2020) by The Capital Requirements (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/1232), regs. 1(3), 26(5)(c); 2020 c. 1, Sch. 5 para. 1(1)

F13 Words in Art. 72b(7) omitted (31.12.2020) by virtue of The Capital Requirements (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/1232), regs. 1(3), 26(5)(d); 2020 c. 1, Sch. 5 para. 1(1)