Contractual recognition of the creditor participation instrument and of the instrument for the participation of holders of relevant capital instruments in third countries

(1) Institutions and group entities are obliged to agree, in the contractual terms of liabilities governed by the law of a third country, that the creditor, or the party to the agreement giving rise to the liability, 1. recognises that the creditor participation instrument may be applied to the liability, and 2. consents to both a partial and a full write-down of the nominal amount or outstanding principal amount, and to a conversion into shares or other Common Equity Tier 1 instruments, carried out by the resolution authority in applying the creditor participation instrument. The absence of a term within the meaning of the first sentence does not prevent the resolution authority from applying the creditor participation instrument to the liability concerned.
(2) On request, the institution or group entity must provide the resolution authority with a legal opinion regarding the legal enforceability and effectiveness of that contractual term.
(3) The obligation under subsection (1) does not apply to 1. liabilities excluded from the scope of the creditor participation instrument under section 91(2), 2. liabilities arising from deposits under section 46f(4), point 2, of the Banking Act, and 3. liabilities already created before 1 January 2015.
(3a) The resolution authority may determine that the obligation under subsection (1) does not apply to institutions or group entities for which the minimum requirement for own funds and eligible liabilities under section 49(1) corresponds to the loss absorption amount under section 49c(2), first sentence, point 1. Where a determination is made under the first sentence, the liabilities may not be counted towards the minimum requirement for own funds and eligible liabilities.
(4) The resolution authority may exempt liabilities governed by the law of a specific third country or third countries from the obligation under subsection (1), insofar as liabilities are subject to the resolution authority's write-down and conversion powers under the law of the third country concerned or under a binding agreement with that third country. The resolution authority may withdraw this exemption at any time where the conditions under the first sentence are no longer satisfied.
(5) Subsections (1), (2) and (3), point 3, and subsections (3a) and (4), apply correspondingly to the instrument for the participation of holders of relevant capital instruments.
(6) Where an agreement required under subsection (1) is missing from the contractual terms of a liability that is not exempted from the scope of subsection (1) under subsection (3) or subsection (4), and it is, for legal or other reasons, impracticable for an institution or group entity to include a corresponding agreement in the contractual terms of that liability, the institution or group entity notifies the resolution authority of this circumstance. That notification must also state the liability class of the liability concerned and the reason why including an agreement under subsection (1) is not possible. The resolution authority may, having regard to the regulatory technical standards adopted under Article 55(8) of Directive 2014/59/EU, set more detailed requirements for the form and content of the notification under the first sentence. Once the notification has been made, the institution's or group entity's obligation under subsection (1) is suspended for those liabilities. Subsection (11) remains unaffected.
(7) Within a reasonable period after receiving a notification under subsection (6), the resolution authority may request from an institution or group entity all information it needs to review the circumstances that make it impracticable, for legal or other reasons, to include the agreement required under subsection (1) in the contractual terms of a liability, and the effects of the notification on the resolvability of the institution or group entity.
(8) Where the resolution authority, having regard to the need to ensure the resolvability of the institution or group entity, comes to the assessment that no legal or other reasons preclude including an agreement required under subsection (1) in the contractual terms, it requires, within a reasonable period after receiving the notification under subsection (6), that the agreement required under subsection (1) be included. The resolution authority may, further, require the institution or group entity to change its approach to exemption from the contractual recognition of the creditor participation instrument.
(9) Subsection (6) applies only to liabilities that rank, in normal insolvency proceedings, ahead of the debt instruments referred to in section 46f(6), first sentence, and (9), of the Banking Act, insofar as they are not exempted from the scope of subsection (1) under subsection (3). Subsection (6) does not apply to relevant capital instruments, to unsecured subordinated liabilities that rank, in normal insolvency proceedings, below the debt instruments referred to in section 46f(6), first sentence, and (9), of the Banking Act, or to the debt instruments referred to in section 46f(6), first sentence, and (9), of the Banking Act.
(10) Where the resolution authority determines, in connection with the assessment of resolvability of an institution or group entity, or at another time, that at least 10 per cent of the liabilities of a liability class, including the liabilities of that liability class, is composed of 1. liabilities whose contractual terms, in accordance with subsection (6), do not contain the agreement referred to in subsection (1), and 2. liabilities excluded from the application of the creditor participation instrument under section 91(2), or expected to be excluded under section 92, the resolution authority promptly assesses the effects on the resolvability of that institution or group entity. In doing so, the resolution authority also assesses the effects on resolvability that would arise, on exercising the power to write down and convert eligible liabilities, from the risk of breaching the creditor protection provisions under section 68(1), point 1.
(11) Where the resolution authority concludes, on the basis of the assessment under subsection (10), that one or more contracts relating to liabilities that, in accordance with subsection (6), do not contain an agreement within the meaning of subsection (1), give rise to a material impediment to resolvability, it may make use of the powers under section 59 or section 60.
(12) Where an agreement required under subsection (1) is missing from the contractual terms of a liability, or the obligation under subsection (1) has ceased to continue under subsection (6), fourth sentence, on account of the notified impracticability, that liability may not be counted towards the minimum requirement for own funds and eligible liabilities.
(13) The resolution authority may, having regard to the regulatory technical standards adopted under Article 55(6) of Directive 2014/59/EU, specify categories of liabilities in respect of which an institution or group entity may reach the determination referred to in subsection (6).