Determination of the amount of relevant capital instruments and liabilities to be written down or converted

(1) Before applying the instrument for the participation of holders of relevant capital instruments or the creditor participation instrument, the resolution authority determines, on the basis of the valuation carried out under section 69, the following amounts: 1. the aggregate amount of the relevant capital instruments and eligible liabilities under section 65(4), or bail-inable liabilities, of the institution or group entity that are to be written down, in order to a) ensure that the net asset value of the institution or group entity is equal to zero, or b) where a loss is imminent, ensure that the net asset value does not fall below zero, and 2. the aggregate amount of the relevant capital instruments and eligible liabilities under section 65(4), or bail-inable liabilities, of the institution or group entity that are to be converted into shares or other Common Equity Tier 1 instruments in the institution or group entity, in order to a) restore the required Common Equity Tier 1 ratio of the institution or group entity, or b) achieve the required Common Equity Tier 1 ratio of the bridge institution.
(2) Where the net asset value of the institution or group entity is already greater than zero before the instrument for the participation of holders of relevant capital instruments or the creditor participation instrument is applied, and no losses within the meaning of subsection (1), point 1, letter b, are imminent, the resolution authority directs the conversion under section 89(1) and section 90, point 1.
(3) In determining the amount referred to in subsection (1), point 2, the resolution authority determines the following further amounts: 1. the amount necessary to restore, or, in the case of a bridge institution, to achieve, the required Common Equity Tier 1 ratio; 2. where necessary, an additional amount to ensure sufficient market confidence in the institution or group entity under resolution, or in the bridge institution, and to enable it to continue to satisfy the conditions for authorisation and to carry on the activities for which it is authorised under Directive 2013/36/EU or Directive 2014/65/EU, for a period of at least one year. Any capital contributions made by the Restructuring Fund to the bridge institution under section 7 of the Restructuring Fund Act are taken into account.
(4) In the case of section 65(1), first sentence, point 1, a relevant capital instrument or an eligible liability under section 65(4) issued by a subsidiary undertaking is not written down or converted on terms less favourable than those applying to relevant capital instruments or eligible liabilities under section 65(4) of equal rank at the level of the parent undertaking, or to a higher amount.
(5) Where the creditor participation instrument is applied together with the tool of transfer to an asset management vehicle, a reasonable estimate of the capital requirements of the asset management vehicle is taken into account in determining the amount of bail-inable liabilities to be written down.
(6) Where a bail-inable liability, or a category of bail-inable liabilities, is excluded, in whole or in part, under section 92(1), the extent to which other bail-inable liabilities are to be written down or converted may be increased correspondingly. In doing so, the principles under section 68(1), points 3 and 4, must be observed.
(7) Where a conversion of relevant capital instruments and eligible liabilities under section 65(4), or of bail-inable liabilities within the meaning of subsection (1), point 2, is not possible on account of the legal form of the institution or group entity, and a change of legal form under section 77(3) would be disproportionate, it may be assumed, in determining the amounts, that a conversion within the meaning of subsection (1), point 2, does not take place, and that the write-down under subsection (1), point 1, also serves the purposes set out in subsection (1), point 2, letters a or b. The determination is likewise made in accordance with the first sentence where Land law provides for an alternative model in place of a change of legal form under section 77(3), second sentence.