Question ID
2015_2357
Legal act
Directive 2014/59/EU (BRRD)
Topic
Resolution tools and powers
Article
38
Paragraph
5
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
n.a.
Type of submitter
Competent authority
Subject matter
Supplementary transfers when using the sale of business tool
Question

Does the power under Article 38(5) of Directive 2014/59/EU (BRRD) allow the resolution authority to make supplementary transfers even when the conditions for resolution are not met anymore?

Background on the question

Article 38(5) of Directive 2014/59/EU (BRRD) states that "When applying the sale of business tool the resolution authority may exercise the transfer power more than once in order to make supplemental transfers of shares or other instruments of ownership issued by an institution under resolution or, as the case may be, assets, rights or liabilities of the institution under resolution."

It is not clear if it is allowed for the resolution authority to make supplementary transfers in case the conditions for resolution are not met anymore, e.g.: The resolution authority intends to transfer 50% of institution’s assets in two transfers. Due to the first transfer of 30% of assets, the institution does not formally meet conditions for resolution anymore. Would second transfer be allowed under such conditions?

Submission date
Final publishing date
Final answer

In line with a reply given in Q&A 2428 and in the light of Article 38(5) of Directive 2014/59/EU (BRRD), the conditions for resolution are not required to be met in any supplemental transfers as they form part of the continuing resolution, and the authorities will already have determined that the conditions have been met by the failing institution on its entry into resolution. However, a supplemental transfer can only be executed in a manner consistent with the resolution objectives, and the shareholder and creditor safeguards applicable to partial transfers.

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
Answer prepared by
Answer prepared by the European Commission because it is a matter of interpretation of Union law.
Note to Q&A

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.

Disclaimer

The Q&A refers to the provisions in force on the day of their publication. The EBA does not systematically review published Q&As following the amendment of legislative acts. Users of the Q&A tool should therefore check the date of publication of the Q&A and whether the provisions referred to in the answer remain the same.