Circular NBB_2024_17 / EBA Guidelines on crisis management

NBB_2024_17 – 19 novembre 2024 Circulaire – P. 1/9 boulevard de Berlaimont 14 – BE-1000 Bruxelles tél. +32 2 221 54 65 numéro d’entreprise: 0203.201.340 RPM Bruxelles www.bnb.be Circulaire Bruxelles, 19 novembre 2024 Référence: NBB_2024_17 vos correspondants:
Claire Renoirte tél. +32 2 221 53 50 claire.renoirte@nbb.be Sara Pauwels tél. +32 2 221 55 45 sara.pauwels@nbb.be EBA Guidelines on crisis management Scope This circular applies to:

• Belgian credit institutions referred to in Article 1, § 3, first paragraph, of the Banking Act and entities referred to in Article 424, 2° to 4° of the Banking Act,
• Belgian stock exchange companies referred to in Article 2 of the Act on the status and supervision of stock exchange companies and falling within the scope of Article 13, § 2, of the same Act and entities referred to in Article 270 of the Act on the status and supervision of stock exchange companies, read in combination with Article 424, 2° to 4° of the Banking Act
  (collectively referred to hereinafter as “institutions”).
  Who, as regards the recovery of credit institutions and early interventions, do not fall under the direct competence of the European Central Bank in accordance with Article 6, fourth paragraph, of Regulation (EU) No 1024/20131, and who, as regards resolution, do not fall under the direct competence of the Single Resolution Board pursuant to Article 7, paragraphs 2, 4 and 5, of Regulation (EU) No 806/20142. Summary/Objective Circular NBB_2023_06 / EBA Guidelines on crisis management is repealed and replaced by this circular. This circular implements various guidelines of the European Banking Authority (EBA) on crisis management. 1 Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions. 2 Regulation (EU) No 806/2014 of the European Parliament and of the Council of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the context of a Single Resolution Mechanism and a Single Resolution Fund, and amending Regulation (EU) No 1093/2010. 01 Banque nationale de la Banque VAN BELGIE Eurosystem

Circulaire – P. 2/9 NBB_2024_17 – 19 novembre 2024 Madame, Monsieur, By this circular, the National Bank of Belgium (hereinafter the “Bank”) intends to communicate that the European Banking Authority’s (hereinafter the “EBA”) guidelines on crisis management are integrated into its supervisory practice and/or resolution authority practice. The circular contains a brief explanation of the various EBA guidelines, accompanied by a link to the documents in question. Each guideline indicates whether it is addressed to the Bank as a competent authority, to the Bank as a resolution authority and/or to institutions as such.
I. Context
a. Guidelines on the provision of information in summary or collective form for the purposes of applying Article 84, paragraph 3, of Directive 2014/59/EU These guidelines are addressed to the Bank as a competent authority and as a resolution authority, as well as to institutions. The guidelines indicate what is meant by the provision of information in summary or collective form. These guidelines are available via the following link:
https://www.eba.europa.eu/documents/10180/1523874/EBA-GL-2016-03+GL+on+the+provision+of+information+in+summary+or+collective+form_FR.pdf/5ae6a7c8-dca6-4d4d89b5-9e2e1c2d47ce.
II. Recovery and Resolution Plans
a. Recovery Plans
The guidelines on indicators for recovery plans and the guidelines on the range of scenarios to be applied in recovery plans (both addressed to the Bank as a competent authority and to institutions) are integrated into the new communication NBB_2024_06 containing the Guidelines concerning recovery plans. This new communication replaces the previous communication NBB_2022_07 by incorporating the new EBA guidelines on overall recovery capacity in the context of recovery planning (Communication NBB_2024_06 / Guidelines concerning recovery plans). This new communication also applies to stock exchange companies and can be found at the following link: Communication NBB_2024_06 / Guidelines concerning recovery plans. Affected credit institutions, banking groups and stock exchange companies are invited to draw up their recovery plan in accordance with this communication. The guidelines can be consulted here:
Indicators:
https://www.eba.europa.eu/sites/default/documents/files/document_library/Publications/Guidelines/2021/ EBA-GL-2021-11%20Guidelines%20on%20recovery%20plan%20indicators%20/Translations/1025387/Guidelines%20o n%20recovery%20plan%20indicators_FR.pdf

NBB_2024_17 – 19 novembre 2024 Circulaire – P. 3/9 Scenarios:
https://www.eba.europa.eu/sites/default/documents/files/documents/10180/984909/6fed691e-305e-45fe8130-ebed2b38cdf1/EBA_2014_FR.pdf?retry=1 Overall recovery capacity:
GLs overall recovery capacity in recovery planning (EBA GL 2023 06)_FR_COR.pdf (europa.eu) Institutions that have been authorized by the Bank to draw up a simplified recovery plan may do so using communication NBB_2024_07 / Guidelines on simplified recovery plan obligations for credit institutions and using Communication NBB_2024_07 / Guidelines on simplified recovery plan obligations for stock exchange companies. The Bank may authorize certain credit institutions and certain stock exchange companies to draw up a simplified recovery plan in application of, respectively, Article 113, § 4 of the Banking Act and Article 116, §1st of the Act of 20 July 2022 on the status and supervision of stock exchange companies, as specified in Commission Delegated Regulation (EU) No 2019/348 of 25 October 2018 supplementing Directive 2014/59/EU of the European Parliament and of the Council by regulatory technical standards specifying the criteria to be applied to assess the impact of the failure of an institution on financial markets, on other institutions and on financing conditions and in the EBA guidelines of 7 July 2015 (EBA/GL/2015/16) on the application of simplified obligations under Article 4, paragraph 5, of Directive 2014/59/EU (as addressed to the Bank as a competent authority). These guidelines are available via the following link:
https://www.eba.europa.eu/documents/10180/1232502/EBA-GL-2015-16+GLs+on+simplified+obligations-FR.pdf/9734d4ed-3089-4887-8ce8-5250314ffe79. b. Resolution Plans The Bank may, under the conditions set out in Article 229, § 4, of the Banking Act, derogate from the obligations regarding the content of a resolution plan, the frequency of updating the plan or the information to be provided by the institution. The conditions for the application of such simplified obligations are specified in the guidelines on simplified obligations for certain institutions pursuant to Article 4, paragraph 5, of Directive 2014/59/EU (as addressed to the Bank as a resolution authority). These guidelines are available via the following link:
https://www.eba.europa.eu/documents/10180/1232502/EBA-GL-2015-16+GLs+on+simplified+obligations-FR.pdf/9734d4ed-3089-4887-8ce8-5250314ffe79.
A part of the work carried out when drawing up a resolution plan by the resolution authority consists of verifying to what extent an institution is resolvable in accordance with Article 230 of the Banking Act. If the review reveals that the resolution of the failure of a credit institution is not deemed possible, the Bank has various possibilities to remedy obstacles to resolvability. Without prejudice in particular to the provisions of the Royal Decree of 5 March 2017 implementing the Act of 25 April 2014 on the status and supervision of credit institutions and stock exchange companies, as regards the drawing up of resolution plans and group resolution plans and the assessment of resolvability, the Bank relies on the guidelines on the definition of measures to reduce or eliminate obstacles to resolvability and the circumstances in which each measure may be applied under Directive 2014/59/EU.

Circulaire – P. 4/9 NBB_2024_17 – 19 novembre 2024 These guidelines must be read together with the regulatory technical standards on resolution planning and resolvability assessment3.
These guidelines are available via the following link:
https://www.eba.europa.eu/documents/10180/1110533/EBA-GL-2014-11+GL+on+Powers+to+address+resolvability_FR.pdf/f8a284c6-8f22-4d17-aa96-72cee1a2c71a.
III. Early Intervention
a. Guidelines on the triggering conditions for early intervention measures under Article 27, paragraph 4, of Directive 2014/59/EU These guidelines are addressed to the Bank as a competent authority.
Article 27 of Directive 2014/59/EU, transposed by Article 234 of the Banking Act, provides for a series of early intervention measures that the supervisory authority may take if a credit institution breaches or is likely in the near future to breach its regulatory obligations.
These guidelines specify the triggering conditions that the Bank will use to assess whether an early intervention measure is on the agenda. The ratings assigned under the SREP play an important role in this assessment.
These guidelines are available via the following link:
https://www.eba.europa.eu/documents/10180/1151520/EBA-GL-2015-03_+FR_GL+on+early+intervention+measures.pdf/f601b964-22d1-44b7-984f-0ece8890597b. b. Guidelines specifying the preconditions for group financial support under Article 23 of Directive 2014/59/EU These guidelines are addressed to the Bank as a competent authority and to institutions. They implement Articles 438/1 et seq. of the Banking Act. They specify the conditions under which an entity of a group may provide financial support to another entity of the group when the latter meets the conditions for early intervention by the supervisory authority. They must be read together with the articles of Chapter III of Delegated Regulation (EU) 2016/1075, which sets out a series of conditions relating to the provision of the aforementioned financial support. These guidelines are available via the following link:
https://www.eba.europa.eu/documents/10180/1137032/EBA-GL-2015-17+GLs+on+financial+support_FR.pdf.
3 Commission Delegated Regulation (EU) 2016/1075 of 23 March 2016 supplementing Directive 2014/59/EU of the European Parliament and of the Council by regulatory technical standards specifying the content of recovery plans, resolution plans and group resolution plans, the minimum criteria that the competent authority must take into account when assessing recovery plans and group recovery plans, the preconditions for group financial support, the requirements relating to the independence of evaluators, the conditions for the contractual recognition of write-down and conversion powers, the procedural and content requirements concerning notifications and the notice of suspension as well as the functioning of resolution colleges, OJ L 184 of 8.7.2016, p. 1.

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IV. Resolution
a. Guidelines for institutions and resolution authorities on improving resolvability in accordance with Articles 15 and 16 BRRD (resolvability guidelines) These guidelines are addressed to the Bank as a resolution authority as well as to institutions.
The guidelines aim to implement existing international resolvability standards and to review the best practices developed so far by EU resolution authorities in the field of resolvability. In particular, these guidelines set out requirements to improve resolvability in the areas of operational continuity in resolution, access to IMF, financing and liquidity in resolution, execution of bail-in, business reorganization and communication. The guidelines are supplemented by a section on resolvability testing. Resolvability capabilities must be adapted to comply with the guidelines on resolvability and transferability. In particular, institutions should, at least every two years, prepare a report in which they conduct a self-assessment to determine whether they meet the resolvability capabilities. Some institutions should also develop a general procedures manual (master playbook). Resolution authorities should adopt a multi-year resolvability testing program for institutions under their competence. The guidelines on resolvability as well as the guidelines modifying them are available via the following links:
GL on improving resolvability for institutions and resolution authorities.
(https://www.eba.europa.eu/sites/default/files/2024-08/3d6be1c7-b94f-4943-a1f7-9736f2e95be7/GL%20on%20improving%20resolvability%20for%20institutions%20and%20resolution%20authorities_FR_COR.pdf) GL resolvability testing (EBA GL 2023 05)_FR_COR.pdf (europa.eu) b. Guidelines on transferability to complement the resolvability assessment for transfer strategies These guidelines are addressed to the Bank as a resolution authority as well as to institutions. The guidelines specify the specific measures that institutions and resolution authorities should take to improve the resolvability of institutions, groups and resolution groups within the framework of the resolvability assessment carried out by resolution authorities in accordance with Articles 15 and 16 of Directive 2014/59/EU, in particular when transfer tools are foreseen in the resolution strategy. These guidelines must be read together with the guidelines on resolvability. They are available via the following link:
GL transferability (EBA GL 2022 11)_FR.pdf (europa.eu)
c. Guidelines on the interpretation of the various situations in which the failure of an institution is considered to be established or likely in accordance with Article 32, paragraph 6, of Directive 2014/59/EU
These guidelines are addressed to the Bank as a competent authority and as a resolution authority.

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Article 244, § 1st, of the Banking Act provides that the resolution authority applies resolution instruments against a credit institution when a series of conditions are met. Thus, pursuant to Article 244, § 1st, 1°, it must have been established that the failure of the credit institution is established or likely.
These guidelines provide further information regarding the notion of “established (or likely) failure”.
They are available via the following link:
https://www.eba.europa.eu/documents/10180/1156219/EBA-GL-2015-07_FR_GL+on+failing+or+likely+to+fail.pdf/0b2ac56e-0056-45c7-83b5-300b35803004. d. Guidelines on the types of tests, examinations or studies that may lead to support measures referred to in Article 32, paragraph 4, point d), iii), of the Directive establishing a framework for the recovery and resolution of credit institutions and investment firms These guidelines are addressed to the Bank as a competent authority.
Article 244, § 2, 4°, of the Banking Act provides that the failure of a credit institution is deemed to be established or likely if exceptional public financial support for the credit institution is required. Pursuant to Article 244, § 4, of the Banking Act, the Royal Decree of 5 March 2017 implementing the Act of 25 April 2014 on the status and supervision of credit institutions and stock exchange companies, as regards exceptional public financial support and resolution instruments, provides, under strict conditions, an exception for exceptional support provided in order to avoid or remedy a serious disturbance to the economy of a Member State and to preserve financial stability. If the support measure takes the form of a capital injection or the purchase of equity instruments at prices and conditions that do not confer an advantage on the institution, this support measure may not be granted without the failure of the institution being deemed, established or likely only if it is necessary to cover the capital deficiencies identified in stress tests, asset quality reviews or equivalent studies conducted by the European Central Bank, the EBA or national authorities at the level of the country, the Union or the SSR.
These guidelines explain in more detail the types of tests, examinations or studies that are relevant for the application of this provision.
They are available via the following link:
https://www.eba.europa.eu/documents/10180/986331/EBA_2014_FR.pdf/cf539dec-be6f-4120-ad0fedf11da0e14f. e. Guidelines on the circumstances constituting a significant threat to financial stability and on the elements relating to the effectiveness of the sale of business under Article 39, paragraph 4, of Directive 2014/59/EU These guidelines are addressed to the Bank as a resolution authority. When applying the business transfer instrument, the resolution authority must ensure that the sales process meets the conditions set out in Article 257, § 1st, of the Banking Act. The resolution authority may, however, derogate from these conditions – in the cases provided for in paragraph 2 of the same article – to the extent that the Bank concludes that compliance with them would be likely to compromise the achievement of one or more of the resolution objectives. The guidelines specify the circumstances constituting a significant threat to financial stability resulting from – or exacerbated by – the failure or threat of failure of an institution subject to resolution proceedings within the meaning of Article 39, paragraph 3, point a), of Directive 2014/59/EU and the elements for which compliance with the requirements concerning the sale of the institution, as provided for in Article 39, paragraph 1, of Directive 2014/59/EU, would risk harming the effectiveness of the business transfer instrument by limiting its ability to address the threat or achieve the resolution objectives referred to in Article 31, paragraph 2, point b), of Directive 2014/59/EU. They are available via the following link:
https://www.eba.europa.eu/documents/10180/1156647/EBA-GL-2015-04_FR_GL+sale+of+business+tool.pdf/40ef977d-b463-4853-9079-fb952baac9d8. f. Guidelines on the minimum list of services or infrastructure necessary to enable a receiving entity to effectively exercise the activities transferred to it under Article 65, paragraph 5, of Directive 2014/59/EU These guidelines are addressed to the Bank as a resolution authority. When resolution authorities transfer certain activities to a third party as part of a resolution procedure, they may, in accordance with Article 279 of the Banking Act, require the institution in liquidation or the entities of its group to provide all operational services and infrastructure necessary for it to effectively exercise the activities transferred to it. These guidelines explain the elements that the Bank is required to evaluate in this context. They are available via the following link:
https://www.eba.europa.eu/documents/10180/1155932/EBA-GL-2015-06_FR_GL+minimum+list+of+services.pdf/0fc2152-9517-4c8d-96dc-54a67736120f. g. Guidelines on determining the circumstances in which the liquidation of assets or liabilities under normal insolvency procedures would be likely to have a negative effect on one or more financial markets under Article 42, paragraph 14, of Directive 2014/59/EU These guidelines are addressed to the Bank as a resolution authority. The Bank as a resolution authority may only resort to the asset separation instrument under the conditions set out in Article 265, § 1st, of the Banking Act. One of these conditions relates to the fact that the situation in the market for the assets in question is such that their liquidation as part of a normal insolvency procedure could have a negative effect on one or more financial markets. These guidelines explain in more detail to the Bank the assessment of the aforementioned condition. They are available via the following link:
https://www.eba.europa.eu/documents/10180/1156565/EBA-GL-2015-05_FR_GL+on+asset+separation+tool.pdf/6192bd4d-483f-42cf-9874-1b515a900db4. h. Guidelines concerning the conversion rate of debts into equity under a bail-in These guidelines are addressed to the Bank as a resolution authority. These guidelines, established in accordance with Article 50, paragraph 4, of Directive 2014/59/EU, concern the setting of debt-to-equity conversion rates during a bail-in. They indicate to resolution authorities when they must compensate creditors when applying the bail-in instrument to an institution, an entity or claims or debt instruments that are transferred to a bridge institution or within the

Circular – P. 8/9 NBB_2024_17 – 19 November 2024

the framework of the activity transfer instrument or the asset separation instrument, and therefore make use of the possibility of setting differentiated conversion rates.

Furthermore, they also apply to the conversion of relevant equity instruments at the point of non-viability, insofar as Article 60(3)(d) of Directive 2014/59/EU subordinates the conversion of relevant equity instruments to compliance with the principles set out in Article 50 of Directive 2014/59/EU as well as in the EBA Guidelines.

They are available via the following link:
https://www.eba.europa.eu/documents/10180/1903962/Guidelines+on+the+rate+of+conversion++%28EB A-GL-2017-03%29_FR.pdf/57625e28-29b4-40f8-ba63-fba37380c097.

i. Guidelines on the treatment of shareholders when using the bail-in instrument, the write-down or conversion of equity instruments

These guidelines are addressed to the Bank as the resolution authority.

The guidelines are intended for resolution authorities when they use the bail-in instrument or exercise the power to write down or convert relevant equity instruments at the point of non-viability in an institution and explain in particular the circumstances in which it appears appropriate to cancel, transfer or heavily dilute shares or other ownership instruments.

They are available via the following link:
https://www.eba.europa.eu/documents/10180/1904221/Guidelines+on+the+treatment+of+shareholders+i n+bail-in+%28EBA-GL-2017-04%29_FR.pdf/7249fe98-79a5-4409-a204-8c42ddeed266.

j. Guidelines concerning the links between the BRRD hierarchy of write-downs and conversions and the CRR/CRD

These guidelines are addressed to the Bank as the resolution authority.

These guidelines are addressed to resolution authorities when they use the bail-in instrument or exercise the power to write down or convert equity instruments at the point of non-viability in an institution. In accordance with Article 48(6) of Directive 2014/59/EU, these guidelines deal with the links that exist between the provisions of said Directive 2014/59/EU and those of Regulation (EU) No 575/2013 and Directive 2013/36/EU for the purposes of the hierarchy of write-downs and conversions. The guidelines clarify these links for the purposes of Article 48 of Directive 2014/59/EU, which governs the hierarchy of write-downs and conversions in the use of the bail-in instrument. They are also relevant for Article 60 of Directive 2014/59/EU concerning the hierarchy of write-downs and conversions of equity instruments at the point of non-viability.

They are available via the following link:
https://www.eba.europa.eu/documents/10180/1903744/Guidelines+on+interrelationship+BRRD_CRR+ %28EBA-GL-2017-02%29_FR.pdf/65c84a0e-f82e-43f0-ada3-6993b5f23d68.

k. Guidelines on the minimum criteria that a business reorganization plan must meet

These guidelines are addressed to the Bank as the competent authority and as the resolution authority.

Institutions to which the bail-in instrument has been applied are required to draw up a business reorganization plan within one month following the application of said resolution instrument and submit it for approval to the Bank in its capacity as resolution authority.

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These guidelines specify the minimum criteria that a business reorganization plan must meet to be approved by the resolution authority under Article 52(7) of Directive 2014/59/EU, as transposed by Article 267/11 of the Banking Law.

They are available via the following link:
https://www.eba.europa.eu/documents/10180/1468967/EBA-GL-2015- 21+GLs+on+Business+Reorganisation+Plans_FR.pdf/214dd936-9df3-41fc-b27e-e1df444373dd.

l. Guidelines concerning the publication of the mechanism applicable to write-downs and conversions, and to bail-in

These guidelines are addressed to the Bank as the resolution authority.

The guidelines indicate what data resolution authorities are required to publish at a minimum concerning the predetermined manner in which they will apply the power to write down and convert and the bail-in tool in accordance with Articles 43 and 44, 46 to 50 and 59 to 62 of Directive 2014/59/EU. The data published under this obligation is indicative and the actual application of the instruments may differ from the description.

They are available via the following link:
Guidelines of the bail-in mechanics_FR.pdf (europa.eu)

V. Final Provisions

A copy of this circular is sent to the commissioner(s), approved auditor(s) of your institution.

Please accept, Madam, Sir, the expression of my distinguished consideration.

Pierre Wunsch
Governor
President of the Resolution College