French Monetary and Financial Code
In forceI. - Before implementing a measure to reduce the nominal value or conversion of own funds instruments and eligible commitments or a resolution measure, the resolution college shall ensure that a fair, prudent and realistic valuation of the assets and liabilities of the person concerned is carried out by an independent expert.
II. - When all the requirements set out in I and IV to IX have been met, the valuation for resolution purposes is considered final.
III. - In the event that the valuation by an independent expert provided for in I is not possible, the collège de résolution may proceed with a provisional valuation of the assets and liabilities of the person concerned pursuant to X.
IV. - The purpose of the valuation is to estimate the value of the assets and liabilities of a person referred to in I of Article L. 613-34 that meets the conditions for triggering a resolution procedure referred to in II of Article L. 613-49 or, where applicable, those of I and II of Article L. 613-49-1.
V. - Valuation has the following objectives:
1° To provide information making it possible to verify whether the conditions for implementing a measure to reduce the nominal value or convert eligible own funds instruments and commitments or for triggering a resolution procedure pursuant to the provisions of sub-sections 9 and 10 of this section have been met;
2° Provide, in cases where the conditions for triggering a resolution procedure have been met, information enabling a decision to be taken on the resolution measures to be implemented;
3° Provide, where applicable, the information required to decide on the amount of the cancellation or dilution of the equity securities referred to in Chapter II of Title I of Book II or other ownership securities or the amount of the reduction in nominal value or conversion of the relevant equity instruments and eligible commitments concerned;
4° In the event that an internal bailout measure as referred to in Article L. 613-55 is decided, provide the information needed to determine the amount of the reduction in value or the conversion of the liabilities that may be used for internal bailout purposes;
5° Where a bridge institution or an asset management structure is set up, provide the information needed to decide on the transfer of assets, rights, obligations or capital securities or other forms of ownership and the value of the consideration to be paid to the person subject to the resolution procedure or, where applicable, to the holders of capital securities or other forms of ownership;
6° In cases where a business transfer measure is implemented, provide the information needed to decide on the transfer of assets, rights, obligations or equity or other ownership interests and provide the information needed for the resolution board to determine the commercial terms of the transaction for the purposes of I of Article L. 613-50-6 ;
7° To ensure that any loss of value recorded on the assets of a person subject to a resolution procedure is fully taken into account when the resolution measures or the reduction in nominal value or conversion of own funds instruments are applied.
VI. - Without prejudice to the Union's legal regime on State aid, where appropriate, the valuation shall be based on prudent assumptions, including default rates and loss magnitudes. The valuation does not take into account the possibility of either exceptional public financial support or urgent provision of liquidity or unconventional conditions by a central bank from the time at which the measure of write-down or conversion of relevant capital instruments and eligible liabilities takes place.
In addition, the valuation takes into account the fact that, if a resolution measure is implemented, the resolution college may, pursuant to Article L. 613-50-8, recover from the person subject to a resolution procedure the sums corresponding to any reasonable expenses properly incurred. The valuation also takes into account the fact that loans or guarantees from the Fonds de Garantie des Dépôts et de Résolution are granted in return for payment.
VII. - The valuation shall be accompanied by the following information contained in the accounting documents of the person concerned:
1° An updated balance sheet and a report on the financial situation ;
2° An analysis and estimate of the book value of the assets;
3° A list of outstanding liabilities due on the balance sheet and off-balance sheet in the books and records of the person concerned, with an indication of the corresponding creditors and the order of priority of claims referred to in Article L. 613-55-5.
VIII. - The information mentioned in 2° of VII may, if necessary, be supplemented by an analysis and estimate of the value of the assets and liabilities of the person concerned based on their market value.
IX. - The valuation shall specify the breakdown of receivables into different categories according to the order of priority of receivables referred to in Article L. 613-55-5. It shall indicate the treatment that each category of holder of equity securities mentioned in Chapter II of Title I of Book II or of other ownership securities and each category of creditor would have been likely to receive if the person in question had been the subject of a judicial liquidation pursuant to the provisions of Book VI of the Commercial Code.
X. - Where, due to urgency, it is not possible to comply with the requirements set out in VII and IX or where III applies, a provisional valuation must be carried out. This valuation must comply with the requirements set out in IV and, as far as is reasonably possible in the circumstances, with the requirements set out in I, VII and IX. It takes into account the possibility of further losses on the basis of appropriate justification.
XI. - A valuation is considered provisional until an independent expert has carried out a valuation that fully complies with all the above requirements. This definitive valuation is carried out as soon as possible. It may be carried out independently or simultaneously with the valuation referred to in II of Article L. 613-57 and be performed by the same independent expert.
The purpose of the final valuation is to
1° Ensure that any loss incurred on the assets of the person concerned is fully taken into account in that person's accounts;
2° Provide the information needed to decide whether to increase the value of the receivables written off or to increase the value of the consideration paid pursuant to XII.
XII. - In cases where the estimate of the value of the net assets of the person concerned resulting from the final valuation is higher than the estimate resulting from the provisional valuation of the net assets of that person, the collège de résolution may decide:
1° To increase the value of claims or Tier 2 own funds instruments, as well as additional Tier 1 own funds instruments whose nominal value has been reduced in application of an internal bail-out measure provided for in sub-section 10 of this section ;
2° Where applicable, to instruct the bridge institution or the asset management structure set up to pay additional consideration to the person subject to the resolution procedure whose assets, rights or obligations have been transferred or to the holders of the equity securities or other ownership rights of the person concerned.
XIII. - Notwithstanding the provisions of I, a provisional valuation may be used as the basis for any resolution measure decided by the collège de résolution or for the implementation of a measure to reduce the nominal value or to convert eligible own funds instruments and liabilities.
XIV. - The valuation is not subject to a right of appeal separate from the decision to take a resolution measure or to exercise the power of write-down or conversion referred to in I of Article L. 613-38 and may only be challenged in an appeal against such a measure.
