Single Rulebook Q&A

Question ID: 2017_3558
Legal act : Directive 2014/59/EU (BRRD)
Topic : Recovery and Resolution
Subject area: Resolution tools and powers
Article: 63
Paragraph: 1
Subparagraph: k
Article/Paragraph : n.a.
COM Delegated or Implementing Acts/EBA RTS/EBA ITS/EBA GLs: Not applicable
Subject matter : Reference to Article 49 in Article 63(1)(k)
Question:

Is the reference to Article 49 in Article 63(1)(k) only related to the close out and termination of derivatives? Is the power to close out and terminate financial contracts valid for the purposes of applying all the Directive and not only Article 49?

Background on the question:

According to Article 63(1)(k) of Directive 2014/59/EU (BRRD), the resolution authority has “the power to close out and terminate financial contracts or derivatives contracts for the purposes of applying Article 49”.

Can you confirm that the reference to Article 49 is only related to the close out and termination of derivatives?

Can you confirm that the power to close out and terminate financial contracts could be used for the purposes of applying all the directive and not only Article 49?

Date of submission: 12/10/2017
Published as Final Q&A: 10/11/2017
EBA answer:

The reference to Article 49 in Article 63(1)(k) of Directive 2014/59/EU (BRRD) only relates to the power to close out and terminate financial contracts and the power to close out and terminate derivatives. With respect to derivatives, the provision makes specific reference to the termination and close-out only for the purposes of applying the write-down and conversion powers to liabilities arising from derivatives as foreseen in Article 49.

However, this provision must be read in the context of the general provision contained in Article 63(1) which states that "Member States shall ensure that the resolution authorities have all the powers necessary to apply the resolution tools to institutions and to entities referred to in points (b), (c) and (d) of Article 1(1) that meet the applicable conditions for resolution. In particular, the resolution authorities shall have the following resolution powers, which they may exercise individually or in any combination: (a) […]". As a result, the list of resolution powers in Article 63(1) is not meant to be exhaustive.

Disclaimer:

This question goes beyond matters of consistent and effective application of the regulatory framework. A Directorate General of the Commission (Directorate General Financial Stability, Financial Services and Capital Markets Union) has prepared the answer, albeit that only the Court of Justice of the European Union can provide definitive interpretations of EU legislation. This is an unofficial opinion of that Directorate General, which the European Banking Authority publishes on its behalf. The answers are not binding on the European Commission as an institution. You should be aware that the European Commission could adopt a position different from the one expressed in such Q&As, for instance in infringement proceedings or after a detailed examination of a specific case or on the basis of any new legal or factual elements that may have been brought to its attention.

Status: Final Q&A
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