Should the valuation according to Article 36(1) of Directive 2014/59/EU (BRRD) be carried out 1) only at the very beginning of the whole process, i.e. before the first application of the resolution tool or the power to write down or convert capital instruments or 2) in the cases where two or more tools or powers are applied should the valuation be carried out before each of them?

For example: The resolution authority wants to apply the bail-in tool and after that it wants to apply the sale of business tool – both on to the same institution. Shall the valuation be carried out only before the application of the bail-in tool or also before the application of the sale of business tool? If the latter shall the valuation be carried out only before the application of those tools and powers which have financial impacts on the institution?

The obligation in Article 36 of Directive 2014/59/EU (BRRD) only provides for an obligation to perform an ex ante valuation at the very beginning of the process. Subsequently the various resolution actions which will be deployed will in principle be based on the ex-ante valuation. Article 36(13) asks that valuation be an integral part of a decision to apply a resolution tool or to exercise a resolution power.                                                                                                          

However, the authorities are not obliged to perform several valuations if several resolution actions are applied, although the resolution authority might have an interest in doing so if a certain timespan has elapsed between the two resolution actions and the basis for valuation is deemed to have evolved.

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.

Update 26.03.2021: This Q&A has been reviewed in the light of the changes introduced to Directive 2014/59/EU (BRRD) and continues to be relevant.