French Monetary and Financial Code
In forceI. - Where a commitment governed by the law of a third country is not excluded under I of Article L. 613-55-1 or does not constitute a deposit mentioned in the first indent of 6° of I of Article L. 613-55-5, the persons mentioned in I of Article L. 613-34 include in the contract governing this commitment a clause stipulating that the creditor acknowledges that the commitment may be converted or its value reduced and agrees to be bound by any measure to reduce the principal or the outstanding amount, to convert or to cancel carried out by the College of Resolution in the exercise of its prerogatives.
The College of Resolution may require the persons concerned to provide the authorities with a legal opinion as to the enforceability and effectiveness of any such clause.
The above provisions shall be applied in a proportionate manner to the extent necessary to ensure the resolvability of the persons referred to in I of Article L. 613-34. They shall not apply where the resolution board finds that the commitments or instruments may be subject to its powers of depreciation and conversion pursuant to the legislation of a third country or a binding agreement concluded with it. The resolution board may provide that the above provisions are applied according to a timetable that it determines for each category of commitments.
II - The obligation to include such a clause in the contract does not apply when the resolution college determines that the minimum capital requirement and eligible commitments correspond to the loss absorption amount and provided that the commitments concerned are not included in this requirement.
III - Where a person referred to in I of Article L. 613-34 finds that it is impossible, legally or in practice, to include such a clause in the contract, it shall notify the resolution college, specifying the category of commitment concerned. It shall state the reasons for this finding. Receipt of this notification suspends the obligation to include such a clause in the contract. The resolution college shall request from the person concerned, within a reasonable time following receipt of the notification, any information it considers necessary.
Where the resolution college concludes, within a reasonable period following receipt of the notification and taking into account the need to ensure the possibility of the person concerned being wound up or subject to one or more resolution measures, that it is not legally or practically impossible to insert such a clause in the contract, it shall require its insertion. It may also require the person concerned to change its practices regarding the use of the exemption from contractual recognition of internal bail-in as defined in this Article.
The resolution college shall specify, where appropriate, the categories of commitments for which the person concerned may find it impossible, legally or in practice, to incorporate the contractual clause referred to in I, on the basis of the technical standards drawn up by the European Banking Authority.
IV.- The following may not benefit from the exemption from the contractual clause provided for in the first paragraph of III:
1° Additional Tier 1 capital instruments;
2° Tier 2 capital instruments;
3° Debt securities, where they are unsecured;
4° Other commitments which, in the event of compulsory liquidation, rank below the commitments mentioned in 3° of I of Article L. 613-30-3.
V.-When the collège de résolution notes that, within a category of eligible commitments, the amount of commitments that do not include the contractual clause mentioned in the first paragraph of I and of commitments that may not, pursuant to I of Article L. 613-55-1, be written down or converted, or which are likely to be in this situation pursuant to II of Article L. 613-55-1, corresponds to more than 10% of this category, it shall immediately assess the impact of this finding on the ability of the persons concerned to be wound up or to be subject to one or more resolution measures under the conditions mentioned in Article L. 613-41. This assessment shall include the possible infringement of the principle set out in I of Article L. 613-57 when the resolution board applies the powers of depreciation and conversion to eligible commitments.
Where, following this assessment, the resolution board concludes that the commitments mentioned in the first paragraph that do not include the contractual clause thereby create a significant obstacle to the ability of the person concerned to be wound up or to have one or more resolution measures applied, it shall apply the powers provided for in II and III of Article L. 613-42.
VI - Commitments for which the person concerned fails to include in the contractual provisions the clause required under I, or for which this requirement does not apply under II or the first paragraph of III, are not counted for the purposes of the minimum capital requirement and eligible commitments.
VII. - The absence of the clause required by the first paragraph of I does not prevent the collège de résolution from exercising its prerogatives.
