Recital 9

(9) When drawing up resolution plans and assessing the resolvability of resolution groups, resolution authorities may consider that a subsidiary institution or entity qualifies as a liquidation entity where the resolution plan foresees that it is feasible and credible that the institution or entity would be wound up under normal insolvency proceedings or where the resolution plan does not envisage the exercise of write-down and conversion powers in respect of that institution or entity. To take into account specificities of entities permanently affiliated to a central body, the resolution authority may consider that such an entity qualifies as a liquidation entity where the resolution plan does not envisage any other measures, such as a merger of affiliates, to be taken by the central body or the resolution authority with respect to such an entity. In those cases, it might not be necessary for a subsidiary institution or entity to hold own funds and eligible liabilities in excess of its own funds requirements. In order to ensure the resolvability of the group while respecting the principle of proportionality, in some cases, depending on the materiality of the holdings of own funds instruments issued by liquidation entities relative to the loss absorbing capacity of the intermediate entity, holdings held in the form of own funds instruments should be subject to deduction. To avoid cliff edge effects, the ratio of those holdings to the loss-absorbing capacity of the intermediate entity should be calculated as of the end of each calendar year as an average over the previous 12 months. However, the intermediate entity should not be required to deduct liabilities that would meet the conditions for compliance with the internal MREL and that do not qualify as own funds instruments. In the event of failure of a liquidation entity, the resolution plan does not envisage that the liquidation entity would be recapitalised by the resolution entity. That means that the upstreaming of losses above the existing own funds from the liquidation entity to the resolution entity, via the intermediate entity, would not be expected, and neither would the downstreaming of capital in the opposite direction. That adjustment to the scope of the holdings to be deducted in the context of the indirect subscription of internal MREL eligible resources would thus not affect the prudential soundness of the framework.

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Source: EUR-Lex (Cellar) · retrieved 2026-10-16 · Text as adopted (Official Journal); later amendments are not incorporated in this text.