Titel II – Objektive Anhaltspunkte für die Feststellung, dass ein Institut ausfällt oder wahrscheinlich ausfällt

In accordance with Article 32(4)(a) and (b) of Directive 2014/59/EU, an institution should be considered as failing or likely to fail if it does or if there are objective elements to support a determination that in the near future it will:

• a. infringe own funds requirements, including requirements imposed according to Article 104(1)(a) of Directive 2013/36/EU, relating to the continuing of the authorisation, in a way that would justify the withdrawal of its authorisation by the competent authority, including but not limited to, on grounds that it has incurred or is likely to incur losses that will deplete all or a significant amount of its own funds; or
• b. have assets which are less than its liabilities.

When assessing the assets and liabilities of the institution in the near future and when assessing whether the institution will comply in the near future with the own funds requirements, the determination should be based on objective elements including among other things:

• a. the level and composition of own funds held by an institution and whether it meets the minimum and additional own funds requirements imposed on the institution in accordance with Article 92 of Regulation (EU) No 575/2013 and Article 104(1)(a) of Directive 2013/36/EU;
• b. the results of an asset quality review, including a national/Union/Single Supervisory Mechanism (‘SSM’) review, indicating a significant decrease in asset value leading to infringement of own funds requirements, where available;
• c. results of any valuation conducted in order to inform whether the conditions for resolution are met in accordance with Article 36(4)(a) of Directive 2014/59/EU, where available; or
• d. the results of any other institution specific assessment of the value of its assets and liabilities which has been prepared, whether conducted by an independent valuer or resolution authority or any other person, to the extent that the valuation methodology applied is consistent with Article 36 of Directive 2014/59/EU, supporting a determination that the assets of the institution are less than its liabilities or that this is likely to occur in the near future. Elements of the valuation results may be used in the determination whether the institution infringes or is likely to infringe in the near future the own funds requirements set out in Directive 2013/36/EU and Regulation (EU) No 575/2013 in a way that justifies a withdrawal of its authorisation, where available.

Additional elements that should be considered, when carrying out the determination specified in paragraph 19, where they are relevant to the characteristics of the institution, include:

• a. threats to institution’s capital position and viability stemming from a significant non-temporary increase in the cost of funding of the institution to a level which is unsustainable for the institution;
• b. the likely materialisation of the institution’s significant off-balance sheet items (i.e. contingent liabilities) in the near future, causing substantial loss threatening the institution’s capital position and viability;
• c. significant adverse developments in the macro-economic environment that could threaten the institution’s capital position and viability, including relevant developments in interest rates, real estate values or economic growth. Such developments should significantly adversely affect the business model of the institution, the outlook for its profitability, capital position and viability;
• d. significant deterioration of market perception of an institution reflected by indicators suggesting that the solvency of the institution is severely impaired and its capital position and viability threatened, as reflected in, among other things, a collapsing price-to-book level or a rapidly increasing level of the economic leverage (i.e. the economic leverage measured as the ratio of total assets to market value of equity). The development of both ratios could be compared with the institution’s peer group duly considering distortions that may arise from differences in accounting standards; or
• e. a significant non-temporary deterioration in the absolute and relative evolution of market indicators including, where available, equity-based indicators (for instance share price and book-to-market equity ratio) or debt-based indicators (for instance credit default swaps or subordinated debt spreads) indicating that an institution is likely to incur losses that could threaten its capital position and viability.

With reference to paragraph 19(b) the extreme case of inadequate capital position would be considered to materialise when the institution has insufficient assets to cover its liabilities. The likelihood of such a situation can be assessed on the basis of the circumstances and events listed in paragraphs 20 and 21.