French Monetary and Financial Code
In forceI.-Pursuant to VI of Article L. 613-44, when the resolution plan provides that a resolution measure must be taken, or that the power mentioned in Article L. 613-48 must be exercised according to the relevant scenario mentioned in II of Article L. 613-38, the minimum requirement mentioned in this VI corresponds to an amount sufficient to ensure that:
1° The losses that the resolution entity would incur are fully absorbed;
2° The resolution entity and its subsidiaries, which are persons mentioned in Article L. 613-34 but are not resolution entities, are recapitalised up to the level necessary to enable them to continue to meet the conditions for their authorisation and to carry on the activities for which they are authorised under Article L. 613-34. 613-34 but are not resolution entities, are recapitalised up to the level necessary to enable them to continue to fulfil the conditions of their authorisation and to carry on the activities for which they have been authorised pursuant to Article L. 511-10 or Article L. 532-2, for an appropriate period not exceeding one year.
Where the resolution plan provides for the resolution entity to be the subject of proceedings under Book VI of the Commercial Code, the resolution college shall assess whether it is justified to limit the minimum requirement referred to in this I to an amount sufficient to absorb losses in accordance with 2° of this same I. As part of this assessment, the collège de résolution evaluates the effects of this limitation on financial stability and on the risk of contagion to the financial system.
II.For resolution entities, the minimum requirement for own funds and eligible commitments mentioned in I of Article L. 613-44 corresponds to the following amounts:
1° For the calculation of the minimum requirement for own funds and eligible commitments expressed in 1° of I of Article L. 613-44, the sum of:
a) The amount of losses to be absorbed in the event of resolution corresponding to the requirements set out in Article 92(1)(c) of Regulation (EU) No 575/2013 or, where applicable, Article 11(1) of Regulation (EU) 2019/2033 and II of Article L. 511-41-3 or, where applicable, Article L. 533-4-4 by the resolution entity at the consolidated level of the resolution group;
b) An amount of recapitalisation enabling the resolution group, in its state resulting from the implementation of the preferred resolution strategy, to comply at consolidated level with the total capital requirement set out in the same Article 92(1)(c) or, where applicable, Article 11(1) of Regulation (EU) 2019/2033 and the requirement referred to in II of Article L. 511-41-3 or, where applicable, Article L. 533-4-4;
2° For the calculation of the minimum capital requirement and eligible commitments as expressed in 2° of I of Article L. 613-44, the sum of:
a) The amount of losses to be absorbed in the event of resolution corresponding to the leverage ratio requirement of the resolution entity set out in the same Article 92(1)(d) at the consolidated level of the resolution group;
b) An amount of recapitalisation enabling the resolution group, in its state resulting from the implementation of the preferred resolution strategy, to comply at consolidated level with the leverage ratio requirement set out in the same Article 92(1)(d).
II bis.The percentage referred to in the second paragraph of I of Article L. 613-44 is expressed as follows:
1° The amount calculated in accordance with 1° of II, divided by the total amount of risk exposure;
2° The amount calculated in accordance with 2° of II, divided by the measure of total exposure.
When determining the individual requirement provided for in b of 1° and 2° of II, the collège de résolution shall take into account the requirements mentioned in IV of Article L. 613-55-1.
When determining the amounts of recapitalisation mentioned in the same b of 1° and 2°, the collège de résolution shall use the most recent values declared for the total amount of risk exposure or the measure of total exposure. These amounts are adjusted to take account of any changes resulting from the resolution measures mentioned in the resolution plan.
After consulting the supervisory college and the European Central Bank, the resolution college shall adjust downwards or upwards the amount corresponding to the requirement referred to in II of Article L. 511-41-3 or, where applicable, in Article L. 533-4-4 in force at the time, in order to determine the requirement which must be applied to the resolution entity after implementation of the preferred resolution strategy.
III - The resolution board may increase the recapitalisation requirement provided for in b of 1° of II of this article by an appropriate amount necessary to guarantee, following a resolution, a sufficient level of market confidence in the person concerned for an appropriate period not exceeding one year. In this case, this amount is equal to that of the requirement mentioned in II of Article L. 511-41-1-A which must apply after implementation of the resolution measures. The amount referred to in 1° of II of the same article is deducted from this amount.
The resolution college, after consultation with the supervisory college, shall adjust the amount mentioned in the first paragraph downwards if it considers that a lower amount would be sufficient, after implementation of the resolution strategy, to maintain market confidence and ensure both the continuity of the critical functions of the person and its access to financing without recourse to exceptional public financial support other than contributions from the deposit guarantee and resolution fund, under the conditions mentioned in III of Article L. 312-5 and IV of Article L. 613-55-1.
The resolution college, after receiving the opinion of the supervisory college, shall adjust the amount mentioned in the first paragraph upwards if it considers that a higher amount is necessary to maintain sufficient market confidence and ensure, for an appropriate period not exceeding one year, both the continuity of the critical functions of the person and its access to financing without recourse to exceptional public financial support other than contributions from the deposit guarantee and resolution fund, under the conditions mentioned in III of Article L. 312-5 and IV of Article L. 613-55-1.
IV.For persons that are not resolution entities, the amount mentioned in I of Article L. 613-44 corresponds to the following amounts:
1° For the calculation of the minimum requirement mentioned in 1° of I of Article L. 613-44, the sum of:
a) The amount of losses to be absorbed in the event of resolution corresponding to the requirements applicable to the person and set out in Article 92(1)(c) of Regulation (EU) No 575/2013 or, where applicable, in Article 11(1) of Regulation (EU) 2019/2033 and in II of Article L. 511-41-3 or, where applicable, Article L. 533-4-4;
b) An amount of recapitalisation enabling the person to comply with the total capital requirement set out in the same Article 92(1)(c) or, where applicable, Article 11(1) of Regulation (EU) 2019/2033 and the requirement referred to in II of Article L. 511-41-3 or, where applicable, Article L. 533-4-4 after the implementation of the powers mentioned in Article L. 613-48 or after the resolution of the resolution group.
2° For the purpose of calculating the minimum requirement referred to in 2° of I of Article L. 613-44, the sum of:
a) The amount of losses to be absorbed in the event of resolution corresponding to the leverage ratio requirement set out in Article 92(1)(d) applicable to the person;
b) A recapitalisation amount enabling the person to comply with the leverage ratio requirement set out in Article 92(1)(d) after application of the power referred to in Article L. 613-48 or after resolution of the resolution group.
The minimum requirement for own funds and eligible commitments referred to in 1° of I of Article L. 613-44 shall be expressed as a percentage as the amount calculated in accordance with 1° of this Article, divided by the total amount of risk exposure.
The minimum requirement for own funds and eligible commitments as referred to in 2° of I of Article L. 613-44 shall be expressed as a percentage as the amount calculated in accordance with 2° of this Article, divided by the measure of total exposure.
When setting the individual requirement provided for in b of 1° of this IV, the collège de résolution shall take into account the requirements set out in IV of Article L. 613-55-1.
When determining the amounts of recapitalisation referred to in b of 1° and 2° of this IV, the collège de résolution shall use the most recent values reported for the total amount of risk exposure or the measure of total exposure. These amounts shall be adjusted to take account of any changes resulting from the resolution measures provided for in the resolution plan.
After consulting the supervisory college and the European Central Bank, the resolution college shall adjust downwards or upwards the amount corresponding to the requirement referred to in II of Article L. 511-41-3 in force or, where applicable, in Article L. 533-4-4, in order to determine the requirement which must apply to the person after implementation of the power referred to in Article L. 613-48 or after the resolution of the resolution group.
V.-The resolution college may increase the requirement provided for in b of 1° of IV by an amount necessary to guarantee, following the exercise of the power referred to in Article L. 613-48 or the resolution of the resolution group, a sufficient level of market confidence in the person concerned for an appropriate period not exceeding one year.
In this case, this amount is set at a level equal to the amount of the requirement mentioned in II of Article L. 511-41-1-A, which must apply after the exercise of the power mentioned in Article L. 613-48 or after the resolution of the resolution group, minus the amount mentioned in 1° of II of Article L. 511-41-1-A.
The collège de résolution, after obtaining the opinion of the collège de supervision, shall adjust the amount mentioned in the previous paragraph downwards if it considers that a lower amount would be sufficient to maintain market confidence and ensure, after the exercise of the power mentioned in Article L. 613-48 or after the resolution of the resolution group, both the continuity of the critical functions of the institution or person mentioned in 3° to 6° of Article L. 613-34 and its access to financing without recourse to exceptional public financial support other than contributions from the deposit guarantee and resolution fund, under the conditions mentioned in III of Article L. 312-5 and IV of Article L. 613-55-1.
The resolution college, after receiving the opinion of the supervisory college, shall increase the amount mentioned in the first paragraph if it considers that a higher amount would be necessary to maintain sufficient market confidence and ensure, for an appropriate period not exceeding one year, both the continuity of the critical functions of the person and its access to financing without recourse to exceptional public financial support other than contributions from the deposit guarantee and resolution fund, under the conditions described in III of Article L. 312-5 and IV of Article L. 613-55-1.
VI.-For a resolution entity that is a globally systemically important institution or that is part of a globally systemically important institution, the minimum requirement referred to in I of Article L. 613-44 is made up of:
1° The requirements referred to in Articles 92a and 494 of the aforementioned Regulation (EU) No 575/2013;
2° Any additional capital requirements and eligible commitments that the resolution college determines, taking into account the specific characteristics of the entity concerned. The resolution college shall impose this additional requirement only if it considers that the requirements mentioned in 1° are not sufficient to meet the conditions set out in VI of Article L. 613-44 and only to the extent necessary to meet these conditions.
VII.The minimum capital requirements and eligible commitments of a major subsidiary in the European Union of a global systemically important institution in a third country are made up of :
1° The requirements referred to in Articles 92b and 494 of the aforementioned Regulation (EU) No 575/2013;
2° Any additional capital requirements and eligible commitments that the resolution college determines taking into account the specific features of that subsidiary and which must be met by means of capital and eligible commitments meeting the conditions set out in Article R. 613-46-2. The collège de résolution shall impose such a requirement only if the requirements mentioned in 1° are not sufficient to meet the conditions set out in VI of Article L. 613-44, and only to the extent necessary to meet those conditions.
VIII-For resolution entities that are not covered by Article 92a of the aforementioned Regulation (EU) No. 575/2013 and that are part of a resolution group whose total asset value exceeds 100 billion euros, the level of the requirement mentioned in II is at least equal to:
1° 13.5% when expressed in accordance with 1° of I of Article L. 613-44;
2° 5% when expressed in accordance with 2° of I of Article L. 613-44.
The resolution entities referred to in the first paragraph shall comply with this level of requirement by means of own funds, eligible subordinated commitments or commitments referred to in III of Article R. 613-46-1.
IX - The resolution college may, after receiving the opinion of the supervisory college, decide to apply the requirements mentioned in VIII to a resolution entity covered by VIII which is part of a resolution group with total assets of less than one hundred billion euros and which it considers could reasonably present a systemic risk in the event of failure.
When taking this decision, the resolution college shall take into account:
1° The predominance of deposits and the absence of debt instruments in the financing model of the resolution entity;
2° The limits on the ability of this entity to access capital markets for eligible commitments;
3° The share of Tier 1 capital on which the entity relies to meet the minimum capital requirement and eligible commitments.
X.-Where the collège de résolution determines that certain categories of eligible commitments are not reasonably likely to be used, in whole or in part, pursuant to II of Article L. 613-55-1, for an internal bailout, or that they could be transferred in full to a purchaser in the context of a partial transfer, the minimum requirement for own funds and eligible commitments shall be met by own funds or other eligible commitments which are sufficient to:
1° Cover the amount of the commitments excluded pursuant to II of Article L. 613-55-1;
2° Guarantee compliance with the conditions set out in I of this Article.
XI - The collège de résolution shall give reasons for any decision to impose a minimum capital requirement and eligible commitments pursuant to this article. This statement of reasons shall include a full assessment of the factors referred to in this Article on which the College bases its decision. The decision shall be re-examined without delay by the collège de résolution, under conditions enabling it to take account of any change in the level of the requirement set out in II of Article L. 511-41-3.
For the purposes of II and IV, the resolution board shall determine the capital requirements taking into account the interpretation given to the transitional provisions set out in Part Ten, Title I, Chapters 1, 2 and 4 of Regulation (EU) No 575/2013.
