Article 49

Path:
Bank Recovery and Resolution Directive (BRRD) > TITLE IV > CHAPTER IV > Section 5 > Subsection 3 > Article 49
Title:
Article 49
Description: 
Derivatives
Main content: 
1. Member States shall ensure that this Article is complied with when resolution authorities apply the write-down and conversion powers to liabilities arising from derivatives.
 
2. Resolution authorities shall exercise the write-down and conversion powers in relation to a liability arising from a derivative only upon or after closing-out the derivatives. Upon entry into resolution, resolution authorities shall be empowered to terminate and close out any derivative contract for that purpose.
Where a derivative liability has been excluded from the application of the bail-in tool under Article 44(3), resolution authorities shall not be obliged to terminate or close out the derivative contract.
 
3. Where derivative transactions are subject to a netting agreement, the resolution authority or an independent valuer shall determine as part of the valuation under Article 36 the liability arising from those transactions on a net basis in accordance with the terms of the agreement.
 
4. Resolution authorities shall determine the value of liabilities arising from derivatives in accordance with the following:
 
(a) appropriate methodologies for determining the value of classes of derivatives, including transactions that are subject to netting agreements;
 
(b) principles for establishing the relevant point in time at which the value of a derivative position should be established; and
 
(c) appropriate methodologies for comparing the destruction in value that would arise from the close out and bail-in of derivatives with the amount of losses that would be borne by derivatives in a bail-in.