Decision on Detailed Content of Resolution Plans for Credit Institutions and Group Resolution Plans

[unofficially consolidated translation]
DECISION
ON DETAILED CONTENT OF RESOLUTION PLANS FOR CREDIT INSTITUTIONS AND GROUP RESOLUTION PLANS (OGM 116/20 of 4 December 2020, 132/25 of 12 November 2025)

Subject matter
Article 1
This Decision shall govern in more detail the content of resolution plans for credit institutions having their head offices in Montenegro and resolution plans for a group whose parent credit institution and group members have their head offices in Montenegro. Content of the resolution plan for a credit institution and group resolution plan
Article 2
In addition to elements required pursuant to Articles 18 and 19 of the Law on Resolution of Credit Institutions (OGM 72/19) – (hereinafter: the Law), the resolution plan for a credit institution and a group resolution plan should contain at least the following elements:

a summary of the plan, including a description of the credit institution or group and
a summary of elements specified in items 2) to 8) under this paragraph;
a description of the resolution strategy considered in the plan, including:

identification of the different resolution actions envisaged under the plan;
identification of the entity or entities to which resolution actions would be
applied;
identification of any critical functions or core business lines which will be
maintained and any critical functions or core business lines which are expected to be separated from other functions;
an estimation of the timeframe for executing each material aspect of the plan,
as required pursuant to Article 19 paragraph (2) item 4) of the Law;
a detailed description of any variants of the preferred resolution strategy
considered to address circumstances in which the preferred strategy cannot be implemented;
a description of the decision-making process for implementing the resolution
strategy, including the timeframe required for decisions;
for group resolution plans, additionally, arrangements for cooperation and
coordination between resolution authorities and relevant authorities of third countries in which group entities are located, in line with the written agreements;

a description of the information, and processes for ensuring availability, in an
appropriate time scale, of the information required for the purposes of valuation, in particular pursuant to Articles 45 and 100 of the Law, and marketability, in particular pursuant to the marketing requirements in the case of application of the sale of business or bridge bank tools;
a mapping of critical functions and core business lines to entities which
identifies in particular the critical functions and core business lines carried out by entities subject to resolution actions, and the critical functions or core business lines spread across entities which would be separated by the implementation of the resolution strategy;
a description of the arrangements for the exchange of information with
resolution authorities and other relevant authorities from other countries;
a detailed description of arrangements for ensuring that information referred
to in Article 20 of the Law is up to date and available to the Central Bank when required;

a description of arrangements to ensure operational continuity of access to critical
functions during resolution, including in particular a description of:

critical shared systems and operations which need to be continued to maintain
continuity of critical functions and arrangements for ensuring the contractual and operational robustness of their provision in resolution;
internal and external interdependencies which are critical to the maintenance
of operational continuity;
arrangements for ensuring access to payment systems or other financial
infrastructure necessary to maintain critical functions, including an assessment of the portability of client positions;

a description of the financing requirements and financing sources necessary for
the implementation of the resolution strategy envisaged in the plan, including in particular:

a description of financing, funding and liquidity requirements implied by the
resolution strategy;
a description of potential sources of resolution funding, including the terms of
financing, preconditions for their use, the timing of their availability, the entities to which they may provide financing, and any collateral requirements;
where relevant, a description and analysis of how and when a credit institution
may apply, under the conditions addressed by the resolution plan, for the use of Central Bank facilities (other than emergency liquidity assistance or other assistance on non-standard terms) in resolution, including the identification of available collateral;

for a group, additionally, a description of any principles agreed for sharing
responsibility for financing between sources of funding in different jurisdictions, including principles for sharing responsibility for financing between sources of funding in different states;

plans for communication with critical stakeholder groups, including in particular
with:

the management board, owners, and the employees of the credit institution or
group, including procedures for consultation with the employees and, where applicable, dialogue with social partners in the resolution process, and an assessment of the impact of the plan on the employees;
customers, media and the general public;
depositors, shareholders, bondholders, counterparties, financial market
infrastructures, and other affected market participants;
any administrative or judicial bodies whose actions and decisions may be
critical to the implementation of the resolution strategy;
any advisors required to implement the resolution strategy;

the conclusions of the assessment of resolvability, including in particular:

an assessment of whether or not the credit institution or group is currently
resolvable;
a summary of the conclusions of the assessment of the feasibility of bankruptcy
proceedings carried out in accordance with the Central Bank regulation governing the assessment of resolvability of credit institutions;
a detailed description of any impediments to resolvability identified, and of any
measures proposed by the credit institution or group or required by the Central Bank to address or remove those impediments;

a quantified assessment of any change to minimum requirements for eligible
liabilities, or the appropriate location of eligible liabilities, that is required to remove or address impediments to resolvability, taking into account the criteria for determining minimum requirements for eligible liabilities specified in Article 29 paragraph (1) of the Law, and the relevant Central Bank regulation;
any opinion expressed by the credit institution or group in relation to the resolution
plan;
any additional information necessary for the development of resolution strategy.
Article 2a
For the purposes of drawing up resolution plans, and for the purposes of meeting the requirements referred to in Article 2 paragraph (1) items 2) to 7) of this Decision, a credit institution shall develop the Manual for Bail-In Tool Execution (hereinafter: the Manual) in accordance with the guidance referred to in Annex 1 that is attached to this Decision and makes an integral part thereof.

THE COUNCIL OF THE CENTRAL BANK OF MONTENEGRO

INTRODUCTION
The Manual for Bail-In Tool Execution (hereinafter: the Manual) shall be developed in accordance with this guidance.
DEVELOPMENT OF THE MANUAL
The Manual should at least cover the following areas:

an identification and a description of relevant governance arrangements of credit
institution for the application of the bail-in tool, including the description of lines of responsibilities, reporting channels, roles of involved working bodies of the credit institution and the communication channels;
processes and time limits for the identification of the balance sheet items of the
credit institution for exercising the power to write-down and convert capital instruments and eligible liabilities, and the generation of data used for exercising the write-down and conversion powers;
a detailed description of the steps to be taken for exercising the powers to writedown and convert capital instruments and eligible liabilities of the credit institution;
a detailed description of management information systems (hereinafter: MIS) that
support the processes from the Manual, i.e. MIS capabilities that provide information and data necessary for the efficient implementation of resolution actions;
loss absorption amount and recapitalisation amount (hereinafter: MREL capacity);
third-party inclusion in the execution of bail-in tool;
potential obstacles for the resolution.
The introductory part of the Manual should contain a description of the activities taken for its adoption, its updating and clear description of the respective capital instruments and eligible liabilities. A description of processes is an integral part of this Manual and shall include the following elements:
an identification and a description of the inputs to and outputs of the different
processes: data sheets, specific documents and formats, etc.;
a chronology and a description of events and tasks presented in a table or
flowchart; and
a description of operational procedures (e.g. in a flowchart).

General information and summary
1.1. Basic information
Name and head office of the credit institution Date of adoption Date of revision Date of financial information Point of contact Job title of the point of contact Organisational unit Telephone and e-mail Member of the management board responsible for the content of the Manual Contact information of the member of the management board responsible for the content of the Manual

priority ranking in the case of bankruptcy or winding-up of the credit institution;
type of instruments (e.g. capital items - CET1, AT1, T2, type of bond, creditlinked instrument, and the like) and the amount of instrument as of cut-off date
to which financial information from the Manual relate;
market where the instrument (or eligible liabilities) has been admitted to trading,
and the name of registry where securities are maintained (where applicable). instrument amount (in EUR 000) share in total amount priority ranking Market where it is admitted to trading/securities registry Total A summary of all instruments covered by the Manual should be prepared in this part, which should contain, based on the characteristics from the description, the amount of each instrument and its share in total amount of all instruments to be used for the writedown and conversion in the application of bail-in tool.
2.1. Governance arrangements
2.1.1. Description of governance arrangements and communication
process
Describe the governance arrangements of the credit institution - Credit institutions should have in place robust governance processes that facilitate the preparation and the implementation of the resolution strategy, and the Manual should contain robust governance arrangements for the implementation of the bail-in tool to ensure a timely and accurate provision of relevant information on a regular and ad-hoc basis, effective oversight during both resolution planning and a possible crisis scenario and

the preparatory phase for opening resolution proceedings,
the bail-in execution phase, and
the closing phase.
The Manual should identify and describe the following:
organisational units and working bodies of the credit institutions (the existing or
specifically designed for the resolution of credit institution) that are involved in different phases of bail-in tool implementation.
point of contact1 and an alternate point of contact (with a reference to a job title
and other contact details) for each organisational unit and committee authorised and responsible for the practical implementation of the bail-in tool.
specificities related to the legal structure of the credit institution, if relevant for
the bail-in execution;
the governance set-up, e.g. processes, decision-making time limits, as well as
reporting lines, escalation and formal approval mechanisms, with a clear allocation of responsibilities. The roles and tasks of the different actors and committees and other bodies, as well as the interactions between them should be clearly described, as well as the role of external institutions necessary for the write down and conversion execution;
procedures for:
− identifying the employees to be involved in the operationalisation of the bail-in process; − granting employee of the credit institution and relevant third parties (e.g. valuers) access to premises, IT systems and data; and − ensuring confidentiality from employees of credit institution and third parties involved in the resolution process (e.g. signing confidentiality agreements or secrecy protocols), in particular in the lead-up to the resolution weekend2;
flowcharts and diagrams to visualise the process workflows and the interaction
between the different actors, organisational units and committees or other bodies of the credit institution;
estimation of time limits for the completion of necessary tasks;
1Point of contact means a designated person (or job position) within the bank that is responsible for communication and operational activities related to the bail-in execution. Point of contact must have full functional availability and authority, as well as an alternate in case of unavailability. 2Resolution weekend means a period of time, usually from the end of the business day on Friday to the beginning of the business day on Monday, which is planned and used for the implementation of resolution actions for a credit institution. This timeframe was chosen because financial markets, payment systems and most business activities are closed, allowing key decisions and operational steps to be implemented without disrupting the regular functioning of the market and without causing panic among clients and investors.

bottlenecks and/or operational constraints, or if synergies could be created by merging procedures.
2.1.2. External institutions participating in the bail-in tool execution
Where the execution of the bail-in tool includes external institutions (domestic of foreign), such institutions should be listed in the Manual (e.g. whether these are stock exchanges and other regulated trading venues, and their names; the names of registries; central counterparties when securities are centrally cleared; operational agents for issuing and/or listing securities, and the like)3
2.1.3. Agents for the bail-in tool execution
In the process of the execution of the bail-in tool, a credit institution may engage or designate agents responsible for timely and accurate submission of all relevant information to the Central Bank, and for coordination of activities necessary for efficient implementation of resolution action. Those agents may be external, such as specialised institutions or service providers which have a contractual relationship with a credit institution, or internal agents i.e. organisational units of the credit institution or other entities of the group. Credit institutions shall determine an agent (internal or external) to make sure that they submit to the Central Bank information in the shortest period. Where a credit institution has:

external agent - state whether it has already established the necessary
relationship (including contractual documentation) or whether it uses the agent under business-as-usual conditions (for actions foreseen in the prospectus). The credit institution is also expected to explain whether its contractual documentation includes specific provisions ensuring that the agent would also support the exceptional corporate events stemming from the bail-in, and to which extent the contract may be applied in the case of the resolution of credit institution;
an internal agent - a credit institution is expected to describe in detail the
processes in place to ensure that it can perform the role of the operational agent in case of resolution of credit institution. In particular, it is expected to explain:
− which specific roles the organisational unit or entity within the group performs in business-as-usual and which markets this covers; − how the credit institution plans to ensure that the organisational unit or entity remains operational in resolution of credit institution; 3Operational agents for issuing and/or listing securities mean specialised institutions which, on behalf of the issuer (e.g. credit institution) perform technical and administrative activities necessary for issuing and listing of financial instruments, including the communication with capital market infrastructure (stock exchanges, regulators, central depositories) and ensuring regulatory compliance. Examples include the following: Luxembourg Stock Exchange (LuxSE) – an agent for listing Eurobonds; Euronext – a stock exchange and listing agent for several European markets; Clearstream Banking Luxembourg – for issuing and clearing securities; Deutsche Bank London Branch – as an issuing and paying agent; Monte Titoli (Italy) – central depository and operational agent for securities.

the guiding communication principles, providing an overview of the
communication strategy for bail-in purposes:
− in the preparatory phase for opening the resolution proceedings; − in the bail-in execution phase; and − in the closing phase;
the main communication steps in the overall chronological display of operational
steps, to ensure a comprehensive overview of the process and to identify interdependencies between the steps;
a reference or a link to the bank’s separate stand-alone communication plan,
which should provide more detailed information on the credit institution’s general communication approach and messages in resolution of the credit institution. In order to cover the expectation regarding the time limits of operational steps on communication, the Manual should describe the related internal process, including:
the responsible organisation unit(s) or committee(s);
the tasks to be conducted, including validation steps; and
the flow of information, including communication channels and potential outputs.
For external execution, it should also include which information needs to be communicated with:
internal stakeholder (when the credit institution is using an internal agent), or
external stakeholder (in particular relevant market authorities, trading venues,
agents and registries of securities, which may include their contact details). The Manual should display the information in the form of a flowchart, where applicable.
2.3. Disclosure obligation
The Manual should cover all jurisdictions in which the credit institution has listed securities and which impose disclosure obligations, or whether the credit institution plans to request the application of waivers from certain disclosure requirements for the purpose on undisturbed application of bail-in tool.

Identification of capital instruments and eligible liabilities
The Manual should identify two categories of obligations, as follows:

liabilities excluded from the scope of bail-in pursuant to Article 94 paragraph (3)
of the Law; and
capital instruments and eligible liabilities subject to the write-down and
conversion pursuant to the provisions of Articles 49 and 93 of the Law4. Capital instruments and eligible liabilities are identified depending on their type, priority ranking in the case of credit institution’s bankruptcy/winding-up.
3.1. Additional requirements in identifying capital instruments and
eligible liabilities
Any legal, financial, operational, tax and accounting features that may be relevant to identify capital instruments and eligible liabilities when applying bail-in or when establishing necessary processes should be documented.
3.1.1. Common Equity Tier 1 (CET 1) items
The Manual should make the distinction between the CET 1 items and items not qualifying as CET 1 items, but are ranking pari passu with CET 1 items, including the possibility of their contribution to absorb losses.
3.1.2. Identification of Additional Tier 1 (AT1) and Tier 2 (T2)
Additional Tier 1 (AT1) and Tier 2 (T2) instruments are identified as if they will be fully written down or converted (if necessary), regardless of whether or not they count as capital:
AT1 instruments recognised in accordance with the regulation on the calculation
of capital;
T2 instruments that are only partially included in the calculation of the capital

due to the amortisation regime should be treated in the same way as those T2 instruments, which are fully included.
3.1.3. Identification of accounting and economic hedges
If any hedges impacting CET1 instruments (hedge accounting), AT1/T2 instruments and eligible liabilities exist, for instance:

accounting hedges, under International Financial Reporting Standards (IFRS),
in order to eliminate excessive volatility in the profit and loss account of the credit institution, which are expected to be adjusted post-bail-in;
economic hedges on the interest rate (e.g. floating – fixed) or on foreign
exchange (FX) risk for capital instruments and eligible liabilities covered by bailin tool, which could end up as open positions post-bail-in. Those open positions might generate additional losses. The Manual should also describe how the relevant hedges for the instruments can be identified at the point of resolution of credit institution.
3.1.4. Funding or guarantees by other group entities
The Manual should state liabilities to members of the group (independently of whether they are funded directly or indirectly by the credit institution), as well as the intra-group liabilities guaranteed by the credit institution. The prudential treatment of the

calculating and setting the size of write-down and conversion powers for
resolution strategy;
assessments of the Central Bank, such as assessment to exclude fully or
partially liabilities to achieve the continuity of critical functions or avoid significant adverse effects on market;
implementation of the bail-in.
The list of data necessary for the implementation of bail-in tool is based on minimum data for the purposes of write-down and conversion as established by the regulation governing the reporting to the Central Bank of Montenegro for the purpose of pursuing resolution function. It should also describe credit institution’s MIS capabilities to gather data for the implementation of bail-in tool i.e. to provide different data for different types of instruments. The description should include competent or responsible organisational units of the credit institution, and the interactions6 between IT systems, the outputs and output recipients, and the potential committees/organisational units that should validate the processes. In order to demonstrate the MIS capabilities, it should be described how long it would take to generate the data per type of instrument, to which extent the generation process is automated, and for which items workarounds would be applied.

Execution of the bail-in tool
5.1. Internal execution
The Manual sets out a detailed description of all internal processes related to the decision of the Central Bank to write-down and convert capital instruments and eligible liabilities. This description should be in line with the sequence of write-down events envisaged in
Article 49 of the Law, and to be presented in graphic and/or table.
The responsibilities and tasks per organisational unit (and entities, if relevant) should be listed, as well as the relevant IT systems, the interaction between IT systems, associated information outputs (e.g. specific data report) and the output recipient for 5Examples of such data include: International Securities Identification Numbering system (ISIN), (Central Securities Depository (CSD), principal amount, accrued interest, and the like. 6Credit institutions are encouraged to use flowcharts in order to support the description of interactions.

legal impediments: details on the impact of a bail-in on the articles of association
or articles of incorporation of the credit institution, and clear indication if there are obstacles to the application of the bail-in. The Manual should consider the impact that a change of ownership due to the application of the bail-in can have on:
− authorisations to operate other countries;
− specific notifications (e.g. state aid/regulatory notifications); − qualifying holding assessments; − memberships in group/sectoral contracts and trade associations; − compliance with the relevant regulations7; − approvals of issuances of capital instruments (e.g. CET1 instruments). The Manual should enable the credit institution to provide the relevant 7For instance, where a creditor has limitations regarding ownership of other entities;

[unofficially consolidated translation]
_____________________________________________________________________________________________ Decision on Detailed Content of Resolution Plans for Credit Institutions and Group Resolution Plans (OGM 116/20, 132/25) 14 information to the Central Bank as soon as possible after the application of write-down and conversion powers. − any other authorisations that competent authorities may require for the new shareholders
2) accounting impediments8;
3) tax impact9;
4) instrument-specific features10;
5) special purpose vehicles (SPVs): depending on the importance of the SPV, in
case of write-down or conversion of the liabilities of the credit institution held by the SPV, the credit institution should consider to mirror the economic effects of the write-down or conversion in the SPV’s book and demonstrate how this will be done;
6) hedges: accounting and economic hedges might be considered after application
of write-down and conversion in order to limit the volatility of the P&L after resolution and to deal with the risks weighing after application of bail-in tool. Rehedging should be also considered in the Manual as an operational step for the relevant instruments and the update of the related required hedge documentation;
7) accrued interests: the Manual should contain the explanation of the processes
related to the write-down and conversion of the instrument itself (i.e. principal) and also an explanation of the decrease (partial or full) of the value of the corresponding accrued interest11;
8) liabilities held by the credit institution: credit institution might hold instruments
issued by themselves that fall into write-down and conversion (e.g. treasury shares; subordinated debt kept for market making and funding strategy purposes). Those instruments should be clearly identified and an assessment should be made of any impact on legal risk, tax or balance sheet reduction in the case of application of write-down and conversion.
9) adjustment of assumptions: the credit institution is expected to be able to apply
adjustments to assumptions and accounting policies (i.e. the specific principles, bases, conventions, rules and practices applied by the credit institution to prepare its financial statements) necessary for the preparation of the updated balance sheet in a way that is consistent with the applicable accounting framework as much as possible. This includes production of an updated balance 8Legal and statutory reserves might pose a challenge during application of the write-down and conversion, either because they cannot be written down below a defined minimum level or because they would require specific treatments; Therefore, they should be included in the Manual in accordance with the accounting framework. 9The application of the write-down and conversion might have tax impact and credit institutions should be assessed in the Manual to the extent possible for each operational step. 10Specific features might trigger additional considerations, for example, liabilities issued in foreign currencies might have to undergo an FX conversion before being written down or converted and in that respect, any tax effect should be considered. Another example of specific features might be the structured nature of the liability (e.g. a structured security tied to a specific asset, indices, currencies, and the like). Additional expertise might be required in order to write down/convert such liabilities and apply the correct impact on the ledger. Unlisted instruments might also imply different execution steps. 11This may involve processes, organisational units and IT systems that are different from those for the principal amount.

whether the securities are listed and traded on a regulated market;
whether the securities to be written down and converted and the new securities
to be issued are held within one or several registries;
location (the country) of issuances, if any;
any other relevant national specificities that may arise from the law governing
securities, rules of the exchanges or registries, and the like. If the need for a particular action rests on a decision of the Central Bank, this is clearly stated in the Manual, including the assumptions on what this is based.
5.2.1. Trading suspension and delisting - exchanges
The following shall be determined in the Manual:
whether the security is listed and traded on a regulated market (and/or other
trading venues), and, if yes, on which one, and, for each market, which is the relevant market authority;
whether the security would be cancelled and/or subsequently delisted from the
exchange;
the different steps necessary for suspension and delisting;
which information may be needed by the market operators, and time limits for
the submission.

the ISIN or other codes and the name of the issuances;
the internal and external stakeholders involved, and in particular the registries
where the securities have been issued and are being safekept;
the different steps involved in the write-down of the different securities with, to
the extent possible, the time it would take to execute each step;
the information necessary for the registry to execute the write-down on its books;
the different agent(s) that the credit institution would use to ensure that
operational information is adequately transmitted to the relevant common registries and common service providers;
the governing law;
If the securities are meant to be cancelled, how cancellation would be ensured,
i.e.:
− roles and responsibilities with regard to ensuring that the registry cancels the securities in its books; − under what circumstances the registry would record the cancellation according to its internal rules; − steps and duration of the process.
the expected treatment of forthcoming payment events taking into account the
priority ranking in the collection of claims, the steps to be taken to operationalise such treatment and the information it would provide to the relevant registries.
5.2.3. Conversion of securities and issuance of new shares or other
instruments of ownership - registries
The following shall be determined in the Manual:
the registry/registries where the new equity securities or other instruments of
ownership will be issued and kept in book-entry form. If this registry is different from the registry in which the converted securities have been issued, this is expected to be clearly mentioned;
how the security will be structured with a view to meeting the eligibility
requirements of the relevant registries, including the international registries, if appropriate;
where appropriate, the steps that would be followed (including information to be
prepared, forms to be filled etc.) and time needed to prepare the (new) public invitation or similar document for registration with the registry and obtain ISIN or other codes for the new shares or other instruments of ownership;
the different steps involved in the write-down of the different securities with, to
the extent possible, the time it would take to execute each step.
When the issuing registry differs from the registry executing the write-down and/or conversion - CET1 instruments are usually foreseen to be issued in the relevant domestic registry. Some of the instruments that would be written down or converted

new CET1 instruments included admitted to trading for the first time;
partially converted debt instruments re-admitted to trading or for which the
suspension of trading would be lifted.
In cases where new instruments are foreseen to be admitted to trading on a regulated market, the Manual shall determine:
how it would be described in the information notice, prospectus or other
documentation, as appropriate;
how the new instrument would be structured with a view to meeting (if applicable)
the listing requirements of the relevant regulated market and the eligibility requirements of the relevant central counterparties. In all cases, the Manual should determine:
the operational time limits for ensuring re-admission to trading, and the target
date for submitting the request;
the process for re-admission for trading;
information needed by the exchange (besides the content of the information
notice mentioned above), including consequential obligations of being listed.
5.2.5. Bail-in adjustments - registry of securities
Where the write-down and conversion were executed on the basis of provisional valuation of assets and liabilities, and a definitive valuation is established later in the process, this may have consequences for the extent of the cancellation, transfer or dilution of shares, and of the write-down or conversion of relevant instruments. The Manual should describe the steps a credit institution would take to ensure that the outcome of a possible definitive valuation is adequately reflected in the books of the relevant registry. This may happen, for example, through:
revaluation of bonds by increasing or decreasing the nominal value of the bond
after the initial write-down;
adjustment of pool factor12 and the like.
12The pool factor is a ratio of how much of nominal value of debt instrument (e.g. bonds) remains unpaid, i.e. active after the part of the instrument is written off, written down or partially paid off. It is expressed as a number between 0 and 1, and is used in the calculation of the outstanding value of interest-bearing principal and may be subject to future payments. In the resolution context, pool factor may be adjusted after the definitive valuation of assets and liabilities to ensure accuracy of records in the registries and bank’s ledgers. Example: if a bods is issued at nominal value of EUR 1,000, and pool factor amounts to 0.65, the outstanding amount of bond is EUR 650.

the use of a single operational agent13 across markets;
strict compliance with the decision on the resolution of the credit institution, e.g.
the date of application of the write-down or conversion;
timely information flow to all relevant registries.

Testing
6.1. Objectives and testing scope
Credit institution perform regular simulations i.e. dry-runs of the Manual. No bail-inable liability should be included in the testing.
6.2. Testing methodology
Dry-runs intend to test the operationalisation of the Manual and the MIS capabilities for providing up-to-date and compete information and data for the application of the writedown and conversion, and for testing all processes explained in the Manual. Credit institutions should include all sections of the Manual and MIS capabilities for the write-down and conversion data in the scope of dry-runs, with a particular focus on the areas that are essential for achieving resolvability (e.g. the implementation of the preferred resolution strategy). A staggered approach is to be taken, starting with a dry-run focused on data and a critical review of the internal execution process while other elements of the Manual shall be reflected in further, subsequent tests. Credit institutions should perform the regular testing of the write-down and conversion based on the guidance communicated by the Central Bank. Credit institutions should identify open questions/issues in their dry-runs and in particular technical/operational and legal obstacles for the implementation of the bail-in tool. In addition, the credit institution should provide a report of the dry-run comprising lessons learnt and a gap analysis.
6.3. Dry-run components
6.3.1. Governance and crisis management
Credit institutions must test the governance arrangements in place for the operationalisation of the write-down and conversion in order to evaluate the roles and responsibilities and to practise crisis preparedness, escalation procedures and decision-making process. 13It involves the engagement of an operational agent (whether internal or external) who will, on behalf of the bank, coordinate the implementation of activities related to the write-down and/or conversion of instruments in all relevant markets (e.g. domestic and international), in order to avoid operational inconsistencies, simplify the process and ensure consistent and accurate implementation of resolution decisions.

identifying liabilities which are excluded from the write-down and conversion in
accordance with the law;
indicating certain liabilities that might require the Central Bank’s assessment
concerning discretionary exclusions from the write-down and conversion;
flagging in the banks internal systems of liabilities subject to netting settings and
identifying secured liabilities subject to collateral agreements.
The testing exercise of the internal execution should cover in particular:
sequence of events and operational considerations - credit institutions should
test the sequence of events for the internal execution of the bail-in tool.
accounting and balance sheet considerations - credit institutions should test all
relevant accounting/balance sheet considerations necessary to administer and implement the bail-in, as well as the following aspects:
− the loss recognition in the accounts/records of the credit institution; − the approvals and the time scales for the recognition of the losses in the accounts (e.g. role of the management and supervisory board, internal and external auditors, etc.); − the impact of a write-down on any related hedging arrangements; − the production of a new balance sheet/material line items (postresolution) in line with the applicable accounting standards,
legal considerations - credit institutions should test all legal considerations that
might occur in the context of the internal execution of the bail-in tool (e.g. amendment of the articles of association of the credit institution in resolution proceedings, etc.).
tax considerations - credit institutions should test/simulate (or, at least, critically
reflect on) all fiscal considerations with regard to the credit institution in resolution proceedings,
communication and other considerations - credit institutions should test the

communication to management bodies that has to be prepared with regard to

the internal execution, as well as any other considerations that have to be taken

the responsibility for sending instructions;
the availability of data points required;
the time, tools, templates and responsibilities for preparing instructions; and
the data generation responsibilities and tools used by contributing organisational
units in the credit institution.
6.3.4. MIS capabilities
Successful implementation of the bail-in tool depends fundamentally on the capabilities of the credit institutions to deliver, upon request from the Central Bank, timely, complete and high-quality data at short notice. Credit institutions should prepare their data infrastructure for bail-in and initiate necessary IT projects, i.e. the credit institutions should conduct testing of their MIS capabilities for the ad-hoc provision of data for the application of write-down and conversion. The main elements of the testing exercise should cover:
the availability of the data;
time needed to produce the data in a going concern and a failing or likely to fail
situation;
internal or external processes relevant for the data;
MIS system(s) involved, level of automation, sources as well as any obstacles
encountered.
Credit institutions should be able to produce the data for the execution of the writedown and conversion within 24 hours. Where additional manual input is required to provide data, credit institutions should provide clear evidence on the credibility of these adjustments. Credit institutions should provide a report, which is an integral part of the Manual, summarising the outcome and lessons learnt from the write-down and conversion dryrun and elaborating on the main elements of the testing exercise referred to in paragraph 3 of this part.

Decision on Detailed Content of Resolution Plans for Credit Institutions and Group Resolution Plans

Lineage: In force

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