AI Summary of Article 32 Conditions for resolution
Member States must ensure resolution authorities take action only where three cumulative conditions are met: (a) the institution is failing or likely to fail; (b) there is no reasonable prospect that alternative private-sector measures, including IPS support, preventive measures under Directive 2014/49/EU, supervisory or early-intervention action, or write-down/conversion of relevant capital instruments, would prevent failure within a reasonable timeframe; and (c) resolution action is necessary in the public interest. The competent authority shall assess (a) after consulting the resolution authority, though Member States may permit the resolution authority to assess (a) after consulting the competent authority and receiving requested information. The resolution authority shall assess (b) in close cooperation with the competent authority, which must promptly provide requested information and seek up-to-date input from the deposit guarantee scheme or relevant IPS; prior early intervention is not a precondition.
An institution is deemed to be failing or likely to fail if it breaches or is likely to breach continuing authorisation requirements (including losses depleting own funds), if assets are or will be less than liabilities, if it is or will be unable to pay debts as they fall due, or if extraordinary public financial support is required (excluding forms in Article 32c). A resolution action is unnecessary in the public interest if winding up under normal insolvency would not put resolution objectives at risk; where objectives would be at risk, resolution is necessary if it is necessary and proportionate and winding up would not meet the objectives more effectively. Resolution authorities must compare any reasonable expectation of extraordinary public financial support in resolution and in winding up, consider costs, and seek to minimise and avoid destruction of value. EBA shall issue guidelines by 3 July 2015 to promote convergence on the interpretation of circumstances when an institution is failing or likely to fail.
Article 32 Conditions for resolution
1. Member States shall ensure that resolution authorities take a resolution action in relation to an institution if resolution authorities determine, upon receiving a communication pursuant to paragraph 2, or on their own initiative, and considering the need to implement effectively the resolution strategy, that all of the following conditions are met:
(a) the institution is failing or is likely to fail;
(b) having regard to the timing and other relevant circumstances, there is no reasonable prospect that any alternative private sector measures, including measures by an IPS, preventive measures as referred to in Article 11(3) of Directive 2014/49/EU, supervisory action, early intervention measures, or the write-down or conversion of relevant capital instruments and eligible liabilities as referred to in Article 59(2) of this Directive, taken in respect of the institution, would prevent the failure of the institution within a reasonable timeframe;
(c) a resolution action is necessary in the public interest pursuant to paragraph 5.
2. Member States shall ensure that the competent authority makes an assessment of the condition referred to in paragraph 1, point (a), after having consulted the resolution authority.