French Monetary and Financial Code
In forceI. - Notwithstanding any contractual clause providing for the reduction or conversion of the instruments mentioned in 1°, 2° or 3° below and subject to the exclusions mentioned in I and II of Article L. 613-55-1, the resolution college shall implement a write-down measure as part of the internal bail-in under the following conditions:
1° Tier 1 core capital instruments are written down in accordance with Article L. 613-48-3 ;
2° If the reduction made pursuant to 1° above is less than the sum of the amounts mentioned in 2° and 3° of III of Article L. 613-55-4, the collège de résolution shall reduce the principal amount of the additional Tier 1 capital instruments;
3° If the reduction made pursuant to 1° and 2° above is less than the sum of the amounts mentioned in 2° and 3° of III of Article L. 613-55-4, the resolution college shall reduce the principal amount of the Tier 2 capital instruments;
4° If the reduction made pursuant to 1°, 2° and 3° above is less than the sum of the amounts mentioned in 2° and 3° of III of Article L. 613-55-4, the resolution college shall reduce the principal amount of subordinated claims other than additional Tier 1 capital instruments and Tier 2 capital instruments in accordance with the hierarchy of claims applied in the context of a liquidation procedure implemented pursuant to Book VI of the Commercial Code;
5° If the reduction made pursuant to 1° to 4° above is less than the sum of the amounts mentioned in 2° and 3° of III of Article L. 613-55-4, the resolution college shall reduce the principal amount of the remaining commitments usable for internal replenishment, or the sums due in respect thereof, with the exception of those mentioned in 6°, in accordance with the hierarchy of claims applied in the context of a winding-up procedure implemented pursuant to Book VI of the French Commercial Code;
6° If the reduction made pursuant to 1° to 5° above is less than the sum of the amounts mentioned in 2° and 3° of III of Article L. 613-55-4, the resolution college shall reduce the principal amount of the sums due to the preferential creditors or creditors holding a guarantee, in the following order:
- firstly, that part of the deposits of natural persons and micro, small and medium-sized enterprises, within the meaning of Article 2 of the Annex to Commission Recommendation 2003/361/EC of 6 May 2003 defined according to their annual turnover, eligible for the guarantee instituted by Article L. 312-4 which exceeds the ceiling of this guarantee, as well as deposits which would be eligible for the guarantee if they were not made with branches of the institution concerned located in a country outside the European Economic Area ;
- secondly, and according to their ranking, commitments that may be used for an internal bail-in vis-à-vis other preferred or guaranteed creditors that are not excluded pursuant to I and II of Article L. 613-55-1.
The implementation of a conversion measure as part of the internal bailout shall comply with the same requirements.
In the event that the internal replenishment measure should have reached the deposits covered in application of 2° of Article L. 312-16 if they had not benefited from the exclusion mentioned in 1° of I of Article L. 613-55-1, the deposit guarantee and resolution fund is called upon for the sums up to which these deposits should have been reduced or converted. The deposit guarantee and resolution fund, under the deposit guarantee mechanism, shall pay the corresponding sum into the books of the credit institution subject to the internal bailout in accordance with the terms and conditions set by the resolution college, without this sum being greater than that which it would have paid if it had had to intervene to compensate the holders of the deposits covered pursuant to I of Article L. 312-5.
The Deposit Guarantee and Resolution Fund may not be required to contribute to the costs of recapitalising the credit institution concerned or the bridge institution.
The holders of covered deposits for which the deposit guarantee and resolution fund has been substituted shall retain these deposits, with the privilege conferred upon them by Article L. 613-30-3.
II. - Without prejudice to the exclusions provided for in application of I and II of Article L. 613-55-1, when the resolution college implements a write-down or conversion measure, it shall allocate the losses represented by the sum of the amounts mentioned in 2° and 3° of III of Article L. 613-55-4 between each category of own funds and commitments usable for internal replenishment according to their rank in the hierarchy of claims and within each category in proportion to the nominal value of these instruments and commitments or the amount of sums due in respect thereof. In cases where the resolution college implements write-down or conversion measures in a coordinated manner in respect of a central body referred to in L. 511-30 and all its affiliates, it shall ensure that holders of equity securities and creditors ranking pari passu or with identical rights in liquidation are treated equally, in proportion to their admitted claims, regardless of the entity concerned, affiliates and central body combined.
III. - A write-down or conversion measure mentioned in I applies, where applicable, under the same conditions to the residual value of an instrument mentioned in 2° to 4° of I which has already been written down pursuant to contractual stipulations.
IV. - Without prejudice to I and II of Article L. 613-55-1, the resolution college shall not reduce or convert a commitment if other commitments are subordinated to it.
