NCWO principle in a group resolution

According to the no creditor worse off (NCWO) principle no creditor or shareholder shall incur greater losses than they would have incurred if the institution had been wound up under normal insolvency proceedings. The application of the NCWO principle is carried out under Article 74 of Directive 2014/59/EU (BRRD). Article 74(2) of Directive 2014/59/EU (BRRD) states that: " The valuation in paragraph 1 shall determine: (a) the treatment that shareholders and creditors, or the relevant deposit guarantee schemes, would have received if the institution under resolution with respect to which the resolution action or actions have been effected had entered normal insolvency proceedings at the time when the decision referred to in Article 82 was taken; (b) the actual treatment that shareholders and creditors have received, in the resolution of the institution under resolution; and (c) if there is any difference between the treatment referred to in point (a) and the treatment referred to in point (b). " In accordance with Article 2(1)(42) of BRRD, "group resolution" means either of the following: "(a) the taking of resolution action at the level of a parent undertaking or of an institution subject to consolidated supervision, or (b) the coordination of the application of resolution tools and the exercise of resolution powers by resolution authorities in relation to group entities that meet the conditions for resolution; " Accordingly, it follows that a group resolution scenario may involve the resolution of the Union parent undertaking or the resolution of the group entity or entities that meet the conditions for resolution. In this context, the NCWO assessment has to be performed at the level of each group entity subject to resolution measures, and compare the treatment received by creditors in the course of the resolution action with the treatment they would have received under normal insolvency proceedings. For that purpose the national insolvency law that would be applicable had those entities entered normal insolvency proceedings should be taken into account. Accordingly the perimeter of the normal insolvency proceedings should be determined according to the applicable national insolvency law. Should a national insolvency regime provide for specific treatment of groups of companies (for example, recognising the existence of a group interest, or providing for subordination of intragroup creditors) this may affect the outcome of NCWO assessments in that jurisdiction.