Application of the minimum requirement for own funds and eligible liabilities to undertakings that are not themselves resolution entities

(1) Institutions that are subsidiary undertakings of a resolution entity, or of a parent undertaking domiciled in a third country, but are not themselves resolution entities, must comply with the requirements under section 49c on an individual basis. After consulting the supervisory authority, the resolution authority may decide to impose the requirement on a group entity that is a subsidiary undertaking of a resolution entity but is not itself a resolution entity. By way of derogation from the first sentence, EU parent undertakings that are not themselves resolution entities, but are subsidiary undertakings of parent undertakings domiciled in a third country, must comply with the requirements under sections 49c and 49d on a consolidated basis. In resolution groups determined under section 2(3), point 3b, letter b, the following undertakings must comply with the requirements under section 49c(7) to (9) on an individual basis:
1. CRR credit institutions that are permanently affiliated to a central body but are not themselves resolution entities,
2. a central body that is not a resolution entity, and
3. all resolution entities not subject to the requirements under section 49e(3).
(1a) By way of derogation from subsection (1), first and second sentences, the resolution authority may decide to determine the requirement set out in section 49c on a consolidated basis for subsidiary undertakings referred to in subsection (1), where the resolution authority concludes that all of the following conditions are satisfied:
1. the subsidiary undertaking satisfies one of the following conditions:
a) the subsidiary undertaking is held directly by the resolution entity, and aa) the resolution entity is an EU parent financial holding company or a mixed EU parent financial holding company, bb) both the subsidiary undertaking and the resolution entity are established in the same Member State and are part of the same resolution group, cc) the resolution entity does not, apart from the subsidiary undertaking concerned, directly hold as a subsidiary undertaking any group entity that is subject to the requirements of this section or to the requirement under section 49c, and dd) the subsidiary undertaking would be disproportionately affected by the deductions required under Article 72e(5) of Regulation (EU) No 575/2013, or
b) the subsidiary undertaking is subject to the requirement referred to in section 6c of the Banking Act only on a consolidated basis, and determining the requirement under section 49c on a consolidated basis would not result in the recapitalisation needs of the sub-group consisting of undertakings within the relevant scope of consolidation being set too high for the purposes of section 49c(1), point 2, in particular where that scope of consolidation is predominantly composed of wind-down entities, and
2. compliance with the requirement set out in section 49c on a consolidated basis, instead of compliance with that requirement on an individual basis, does not materially affect any of the following:
a) the credibility and feasibility of the group resolution strategy,
b) the subsidiary undertaking's ability to satisfy its own funds requirement following exercise of the write-down and conversion powers, and
c) the adequacy of the internal loss transfer and recapitalisation mechanism, including the write-down or conversion of relevant capital instruments and eligible liabilities of the subsidiary undertaking concerned, or of other undertakings of the resolution group, under sections 65 and 89.
(1b) For an undertaking referred to in subsection (1) or subsection (1a), sections 49c, 49d, 50 and 159 apply to determining the requirement under section 49(1).
(2) The requirement referred to in section 49(1) for undertakings within the meaning of subsection (1) is met with one or more of the following:
1. liabilities
a) issued to, and acquired by, the resolution entity, either directly or indirectly through other undertakings of the same resolution group that have acquired the liabilities from the undertaking subject to this section, or issued to, and acquired by, an existing shareholder that is not part of the same resolution group, provided that the resolution entity's control over the subsidiary undertaking is not impaired by exercise of the power to write down or convert under sections 65, 66, 77, 89 and 96 to 101,
b) that satisfy the eligibility criteria set out in Article 72a of Regulation (EU) No 575/2013, with the exception of those in Article 72b(2)(b), (c), (k), (l) and (m) and (3) to (5) of that Regulation, c) that rank, in normal insolvency proceedings, below liabilities that do not satisfy the condition under letter a and that cannot be taken into account for own funds requirements, d) that are subject to the power to write down or convert under sections 65, 66, 77, 89 and 96 to 101, in a manner consistent with the resolution group's resolution strategy and that, in particular, does not impair the resolution entity's control over the subsidiary undertaking, e) whose acquisition is not funded, directly or indirectly, by the undertaking, f) that are subject to terms that neither explicitly nor implicitly indicate that the undertaking would prematurely cancel, redeem, repay, or repurchase the liabilities other than in the event of the undertaking's insolvency or liquidation, and the undertaking does not otherwise give any indication to that effect, g) that are subject to terms that do not entitle the holder to accelerate the scheduled future payment of interest or principal, other than in the event of insolvency or liquidation of the undertaking subject to this section, h) that are subject to terms under which the amount of any interest or dividend payments due on the liabilities is not adjusted on account of the credit standing of the undertaking or its parent undertaking,
2. Common Equity Tier 1 own funds, and
3. other own funds that
a) are issued to, and acquired by, undertakings of the same resolution group, or
b) are issued to, and acquired by, undertakings that are not part of the same resolution group, provided that the resolution entity's control over the subsidiary undertaking is not impaired by exercise of the power to write down or convert under sections 65, 66, 77, 89 and 96 to 101.
(2a) Where an undertaking referred to in subsection (1) satisfies the requirement referred to in section 49(1) on a consolidated basis under subsection (1), third sentence, or subsection (1a), the amount of that undertaking's own funds and eligible liabilities also includes the following liabilities, issued under subsection (2), point 1, by a subsidiary undertaking established in the Union and included in the consolidation of that undertaking:
1. liabilities issued to, and acquired by, the resolution entity, either directly or indirectly through other undertakings of the same resolution group that are not included in the consolidation of the undertaking that satisfies the requirement referred to in section 49(1) on a consolidated basis, or
2. liabilities issued to an existing shareholder that is not part of the same resolution group.
(2b) The liabilities referred to in subsection (2a) may not exceed the amount resulting from deducting, from the amount of the requirement referred to in section 49(1) applicable to the subsidiary undertaking included in the consolidation, the sum of:
1. the liabilities issued to, and acquired by, the undertaking that satisfies the requirement referred to in section 49(1) on a consolidated basis, either directly or indirectly through other undertakings of the same resolution group that are included in the consolidation of the undertaking concerned, and
2. the amount of own funds issued under subsection (2), points 2 and 3.
(3) A subsidiary undertaking that is not a resolution entity may be exempted by the competent resolution authority from the requirements under subsections (1) and (2) where
1. both the subsidiary undertaking and the resolution entity are domiciled in Germany and are part of the same resolution group,
2. the resolution entity satisfies the requirement under section 49e,
3. there is no material practical or legal impediment, actual or foreseeable, to the prompt transfer of own funds or the repayment of liabilities by the resolution entity to the subsidiary undertaking in respect of which a determination has been made under sections 65 and 66, in particular where resolution actions are taken in respect of the resolution entity,
4. the resolution entity satisfies the supervisory authority's requirements regarding the prudent management of the subsidiary undertaking and has declared, with the supervisory authority's consent, that it guarantees the commitments entered into by its subsidiary undertaking, or the risks posed by the subsidiary undertaking are negligible,
5. the resolution entity's risk assessment, measurement and control procedures also cover the subsidiary undertaking, and
6. the resolution entity holds more than 50 per cent of the voting rights attached to the subsidiary undertaking's shares or interests, or has the right to appoint or remove a majority of the members of the subsidiary undertaking's management body.
(4) A subsidiary undertaking that is not a resolution entity may likewise be exempted by the resolution authority from the minimum requirement for own funds and eligible liabilities under subsections (1) and (2), where
1. both the subsidiary undertaking and its parent undertaking are domiciled in Germany and are part of the same resolution group,
2. the parent undertaking satisfies the requirement under section 49(1) on a consolidated basis,
3. there is no material practical or legal impediment, actual or foreseeable, to the prompt transfer of own funds or the repayment of liabilities by the parent undertaking to the subsidiary undertaking in respect of which a determination has been made under sections 65 and 66, in particular where resolution actions are taken, or powers under sections 65, 66 and 77(2) are exercised, in respect of the parent undertaking,
4. the parent undertaking satisfies the supervisory authority's requirements regarding the prudent management of the subsidiary undertaking and has declared, with the supervisory authority's consent, that it guarantees the commitments entered into by its subsidiary undertaking, or the risks posed by the subsidiary undertaking are negligible,
5. the parent undertaking's risk assessment, measurement and control procedures also cover the subsidiary undertaking, and
6. the parent undertaking holds more than 50 per cent of the voting rights attached to the subsidiary undertaking's shares or interests, or has the right to appoint or remove a majority of the members of the subsidiary undertaking's management body.
(5) Where both the subsidiary undertaking and the resolution entity are domiciled in Germany and are part of the same resolution group, and the resolution entity satisfies the requirement under section 49e, the resolution authority responsible for the subsidiary undertaking may permit the requirement under section 49(1) to be met, wholly or partly, by means of a guarantee provided by the resolution entity that satisfies the following conditions:
1. the amount of the guarantee is at least equal to the requirement to be covered,
2. the guarantee becomes due where the subsidiary undertaking is unable to pay its debts or other liabilities as they fall due, or where a determination has been made in respect of the subsidiary undertaking under sections 65 and 66,
3. the guarantee is collateralised, to the extent of at least 50 per cent, by financial collateral within the meaning of Article 2(1)(a) of Directive 2002/47/EC,
4. the collateral backing the guarantee satisfies the requirements of Article 197 of Regulation (EU) No 575/2013 and, after appropriately conservative haircuts, is sufficient to cover the guaranteed amount collateralised under point 3,
5. the collateral backing the guarantee is unencumbered and, in particular, is not used as collateral for other guarantees,
6. the collateral has an effective maturity satisfying the same maturity requirement as that set out in Article 72c(1) of Regulation (EU) No 575/2013, and
7. there is no legal, regulatory or operational impediment to the transfer of the collateral from the resolution entity to the subsidiary undertaking concerned, including where resolution actions are taken in respect of the resolution entity. For the purposes of the first sentence, point 7, the resolution entity, on request of the resolution authority, provides an independent, written and reasoned legal opinion, or otherwise credibly demonstrates, that there is no legal, regulatory or operational impediment whatsoever to the transfer of the collateral from the resolution entity to the subsidiary undertaking concerned.