EBA · 2018_3698 Rejected question

Clarification regarding the consideration in Article 42(6)

Regulation
Directive 2014/59/EU (BRRD)
Article
42, para. 6
Topic
Resolution tools and powers
Submitted by
Competent authority
Submitted
2018-02-07

Question

Can you please clarify Article 42(6) of Directive 2014/59/EU (BRRD); regarding that the consideration can have a nominal or negative value? Does effect of this mean that the asset management vehicle (AMV) must owe a debt to the institution under resolution?

Background

Article 42(6) of Directive 2014/59/EU (BRRD) provides that “When applying the asset separation tool, resolution authorities shall determine the consideration for which assets, rights and liabilities are transferred to the asset management vehicle in accordance with the principles established in Article 36 and in accordance with the Union State aid framework. This paragraph does not prevent the consideration having nominal or negative value.” We note that there is no rule about what happens with the proceeds from the sale of the AMV (except for the rule in Article 37(7)(c), that the resolution authority or any financing arrangement must pay the resolution expenses as a ‘preferred creditor’) etc. thus once a resolution authority pays any loans to the AMV (e.g. from the financing arrangement), Member States are free to keep that money, use it to repay expenses of resolution or return it to the institution under resolution or anything else they wish?
No answer published yet.

Original source: European Banking Authority, Q&A ID 2018_3698

This Q&A is published by European Banking Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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