Failing or likely to fail; authorisation to issue statutory instruments

(1) An institution is failing or likely to fail where 1. the institution infringes the requirements attached to an authorisation under section 32 of the Banking Act in a manner that would justify withdrawal of the authorisation by the supervisory authority, or objective elements indicate that it is likely to do so in the near future, 2. the assets of the institution are less than its liabilities, or objective elements indicate that this is likely to be the case in the near future, or 3. the institution is unable to pay its debts as they fall due, or objective elements indicate that the institution will, in the near future, be unable to meet its existing payment obligations as they fall due, unless there are serious prospects that the institution will be enabled, by guarantees within the meaning of subsection (2), second sentence, points 1 or 2, to meet its existing payment obligations as they fall due.
(2) The failing or likely to fail of an institution is deemed to include the granting of extraordinary public financial support. This does not apply where the extraordinary public financial support is granted in order to remedy a serious disturbance in the economy and to preserve financial stability, in the form of 1. a State guarantee for liquidity facilities provided by the European Central Bank or the Deutsche Bundesbank on their respective terms, 2. a State guarantee for newly issued liabilities, or 3. an injection of own funds or the purchase of capital instruments a) at prices and on terms that do not confer an advantage on the institution, b) for the purpose of closing capital shortfalls established in stress tests at national, Union, or single supervisory mechanism level, in asset quality reviews, or in comparable exercises conducted by the supervisory authority, the European Central Bank or the European Banking Authority, and, where applicable, confirmed by the supervisory authority, c) provided that, at the time of the capital injection, the conditions of section 65(2) are not satisfied. Points 1, 2 and 3 apply only to precautionary, temporary and proportionate measures that are not intended to offset losses that the institution has already incurred or is likely to incur in the near future. This is without prejudice to capital measures by public owners that do not constitute State aid within the meaning of Article 107(1) of the Treaty on the Functioning of the European Union or Article 61(1) of the Agreement on the European Economic Area.
(3) The Federal Ministry of Finance is authorised to issue, by statutory instrument not requiring the consent of the Bundesrat, more detailed provisions on the circumstances in which an institution is failing or likely to fail under subsections (1) and (2). The Federal Ministry of Finance may transfer this authorisation, by statutory instrument, to the resolution authority, on condition that the statutory instrument is issued in agreement with the Federal Financial Supervisory Authority and the Deutsche Bundesbank.