Power to prohibit certain distributions

(1) The resolution authority has the power to prohibit an undertaking from making distributions that exceed the maximum distributable amount calculated under subsection (4) in relation to the minimum requirement for own funds and eligible liabilities, where the undertaking meets the combined capital buffer requirement, having regard to the requirements referred to in section 10i(1a), points 1 to 3, of the Banking Act, but does not meet it when considered in addition to the requirements under sections 49c and 49d, insofar as these are calculated under section 49(2), point 1. Where a prohibition is imposed, the distribution may not be made by way of
1. a distribution connected with Common Equity Tier 1 capital,
2. an obligation to pay variable remuneration or discretionary pension benefits, or payment of variable remuneration, where the obligation concerned was entered into at a time when the undertaking did not meet the combined capital buffer requirement, or
3. payments in respect of Additional Tier 1 instruments. Where an undertaking does not meet the combined capital buffer requirements within the meaning of the first sentence, it notifies the resolution authority of this without delay.
(2) The resolution authority responsible for the undertaking decides, without delay and after consulting the competent supervisory authorities, whether to make use of the power under subsection (1), first sentence, as soon as the conditions for a prohibition set out there are satisfied. In making the decision under the first sentence, the resolution authority has particular regard to the following criteria:
1. the cause, duration, and extent of the non-compliance, and its effects on resolvability;
2. developments in the undertaking's financial position and the likelihood that it will meet the conditions under section 62(1), first sentence, point 1, in the foreseeable future;
3. the prospect that the undertaking will be able to ensure that the requirements under subsection (1) are met within a reasonable period;
4. whether the undertaking is able to replace liabilities that no longer satisfy the eligibility or maturity criteria laid down in Articles 72b and 72c of Regulation (EU) No 575/2013, in section 49b, or in section 49f(2), and whether that inability is idiosyncratic in nature or attributable to general market disruptions; and
5. whether exercising the power referred to in subsection (1) is the most suitable and proportionate course of action to address the undertaking's situation, having regard to its possible effects on both the undertaking's funding conditions and its resolvability. The resolution authority reviews, at least monthly, during the period in which the undertaking does not meet the requirement under subsection (1), first sentence, whether the prohibition of distributions remains necessary.
(3) Where the resolution authority determines that the requirements under subsection (1), first sentence, remain unmet nine months after the undertaking's notification under subsection (1), third sentence, the competent resolution authority, after consulting the supervisory authority, prohibits the distribution referred to in subsection (1), unless it determines, following an assessment, that at least two of the following conditions are satisfied:
1. the non-compliance is attributable to a serious disturbance in the functioning of the financial markets that leads, on a broad basis, to strains in various segments of the financial markets;
2. the disturbance referred to in point 1 leads not only to increased price volatility in own funds instruments and eligible liabilities instruments of the undertaking, or to increased costs for the undertaking, but also to a full or partial closure of the market, preventing the undertaking from issuing own funds instruments and eligible liabilities instruments in those markets;
3. the market closure referred to in point 2 is observed not only in respect of the undertaking concerned, but also in respect of several other undertakings;
4. the disturbance referred to in point 1 prevents the undertaking concerned from issuing own funds instruments and eligible liabilities instruments in order to remedy the non-compliance; or
5. the exercise of the power under subsection (1), first sentence, leads to negative spillover effects on parts of the banking sector that could undermine financial stability. Where the resolution authority, following its assessment, concludes that it will not make use of its power to prohibit certain distributions, it notifies the competent authority of this in writing, stating its reasons. Subsection (2), second sentence, applies correspondingly.
(4) The maximum distributable amount under subsection (1), first sentence, is calculated by multiplying the sum calculated under subsection (5) by the factor determined under subsection (6). The maximum distributable amount is reduced by each measure carried out under subsection (1), second sentence, points 1, 2 or 3.
(5) The sum to be multiplied under subsection (4) comprises
1. interim profits not included in Common Equity Tier 1 capital under Article 26(2) of Regulation (EU) No 575/2013, less any distributions of profits or payments arising from the measures under subsection (1), second sentence, points 1, 2 or 3, plus
2. year-end profits not included in Common Equity Tier 1 capital under Article 26(2) of Regulation (EU) No 575/2013, less any distributions of profits or payments arising from the measures under subsection (1), second sentence, points 1, 2 or 3, less
3. amounts that would be payable by way of tax if the profits referred to in points 1 and 2 were retained.
(6) The factor referred to in subsection (4) is determined as follows:
1. where the Common Equity Tier 1 capital held by an undertaking, and not used to meet any requirements under Article 92a of Regulation (EU) No 575/2013 and under sections 49c and 49d, expressed as a percentage of the total risk exposure amount calculated under Article 92(3) of Regulation (EU) No 575/2013, falls within the first, that is the lowest, quartile of the combined capital buffer requirement, the factor is 0;
2. where that Common Equity Tier 1 capital falls within the second quartile of the combined capital buffer requirement, the factor is 0.2;
3. where that Common Equity Tier 1 capital falls within the third quartile of the combined capital buffer requirement, the factor is 0.4;
4. where that Common Equity Tier 1 capital falls within the fourth, that is the highest, quartile of the combined capital buffer requirement, the factor is 0.6.
(7) The lower and upper bounds of each quartile of the combined capital buffer requirement are calculated as follows: Lower bound of quartile = Combined capital buffer requirement × (Qn – 1) ÷ 4; Upper bound of quartile = Combined capital buffer requirement × Qn ÷ 4; where Qn = the ordinal number of the quartile concerned.