# Commission Delegated Regulation (EU) 2016/860 of 4 February 2016 specifying further the circumstances where exclusion from the application of write-down or conversion powers is necessary under Article 44(3) of Directive 2014/59/EU of the European Parliament and of the Council establishing a framework for the recovery and resolution of credit institutions and investment firms, Article 4: Common provisions

Extent: E+W+S+N.I.

1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. A decision by the resolution authority to exclude a liability or class of liabilities from the application of the bail-in tool under section 48B(10) of the Act shall be based on a case-by-case analysis of the institution under resolution and shall not be automatic.
3. When considering exclusions pursuant to section 48B(10) of the Act and before completely excluding a liability or class of liabilities from bail-in, the resolution authority shall first consider the option to partially exclude that liability by limiting the extent of their write-down wherever possible.
4. In its determination as to whether a liability should be excluded pursuant to section 48B(10) of the Act, the resolution authority shall assess whether the conditions therein are met at the time of the application of the bail-in tool to the institution. ...
5. The decision to exclude a liability or class of liabilities from the application of bail-in pursuant to section 48B(10) of the Act shall be based on at least one of the resolution objectives set out in section 4 of the Act.
6. The decision to exclude or partially exclude a liability or class of liabilities from the application of the bail-in tool under section 48B(10) of the Act which would imply the use of the Consolidated Fund or the National Loans Fund, shall be duly justified, taking into account the need for expedience as warranted by the circumstances of the specific case.
7. Where the resolution authority has assumed that a liability or class of liabilities would credibly and feasibly contribute to loss absorption and recapitalisation, and that those liabilities would not meet the requirements for exclusion under section 48B(10) of the Act, that resolution authority shall explain each of the following if it then decides to exclude or partially exclude a liability or class of liabilities pursuant to section 48B(10) of the Act which would involve passing losses onto the Consolidated Fund or the National Loans Fund:
(a) the exceptional circumstances which differ from those at the moment of resolution planning to the effect that those liabilities need to be excluded from bail-in at the moment of taking resolution action;
(b) why the need for exclusion and, in particular, the exceptional circumstances leading to it could not be foreseen in the course of resolution planning;
(c) if the need for exclusion was provided for in the resolution plan, how the resolution authority addressed this need to avoid it constituting an impediment to resolvability.
8. When deciding whether to exclude or partially exclude a liability or class of liabilities pursuant to section 48B(10) of the Act on the ground set out in section 48B(12)(a) of the Act, if the exclusion would involve passing losses onto the Consolidated Fund or the National Loans Fund, the resolution authority shall also explain:
(a) how/whether the requirements laid down in Articles 5 and 6 of this Regulation are satisfied; and
(b) why the need for exclusion could not be addressed by an appropriate method of valuation pursuant to section 6E of the Act.
9. When deciding whether to exclude or partially exclude a liability or class of liabilities in order to preserve the continuity of critical functions and core business lines pursuant to section 48B(10) of the Act on the ground set out in section 48B(12)(b) of the Act, if the exclusion would involve passing losses onto the Consolidated Fund or the National Loans Fund the resolution authority shall also explain:
(a) how/whether the requirements laid down in Article 7 of this Regulation are satisfied.
(b) why the liabilities to be excluded are more relevant for the continuity of clearly specified critical functions or core business lines than liabilities which are not to be excluded.
10. Where the resolution authority excludes or partially excludes a liability or class of liabilities in order to avoid widespread contagion pursuant to section 48B(10) of the Act on the ground set out in section 48B(12)(c) of the Act, if the exclusion would involve passing losses onto the Consolidated Fund or the National Loans Fund the resolution authority shall also explain:
(a) how/whether the requirements laid down in Article 8 of this Regulation are satisfied;
(b) the reasons why the excluded liabilities have a higher likelihood of causing widespread contagion of the type described in section 48B(12)(c) of the Act than those not excluded.
11. Where the resolution authority excludes or partially excludes a liability or class of liabilities pursuant to section 48B(10) of the Act on the ground set out in section 48B(12)(d) of the Act, if the exclusion would involve passing losses onto the Consolidated Fund or the National Loans Fund the resolution authority shall also explain how/whether the requirements laid down in Article 9 of this Regulation are satisfied.

---
Source: https://www.legislation.gov.uk/eur/2016/860/article/4 (the official version)
Page: https://openlegislation.uk/eu-regulation-2016-860/article-4
Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.