Can it be clarified as to whether in cases where there has been bail-in of at least 8% of the total liabilities, and on all liabilities other than liabilities excluded by Article 44(2) the settlement financing scheme (or alternative financing sources in accordance with Article 44(7)) cannot make a contribution if the liabilities has not been excluded under Article 44(3)? This also seems to follow from Article 101(1)(c).

How are further losses covered? The guarantee scheme can only provide limited funds in accordance with Article 109(5).

The contribution from the resolution financing arrangement in accordance with Article 44(4) to (6) of Directive 2014/59/EU (BRRD) (as well as alternative financing sources, contained in Article 44(7), seems to presuppose that the resolution authority should have excluded obligations of bail-in pursuant to Article 44(3).

Indeed, in a bail-in context, any contribution of the resolution fund can only be made (i) after there has been bail-in of at least 8 % of the total liabilities, and (ii) only to cover losses not absorbed by liabilities which are excluded by the resolution authority pursuant to Article 44(3) (whereas there is no need to formally exclude those other liabilities already excluded by Article 44(2) as they are already excluded on an "automatic" basis.

With regards to recapitalisation, Article 44(5) is lex specialis in relation to Article 101(2), so that, once 8% of losses has been absorbed by creditors, the Resolution Fund may intervene for recapitalisation, taking into account a maximum of 5% of the liabilities of an institution. . In principle, after the use of the fund to that amount (the 5%) the bail-in should continue. But there is also the possibility to use alternative financing sources thereafter in line with Article 44(7) if all the conditions specified in that Article are fulfilled.

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.