1. Member States shall ensure that resolution authorities exercise the write-down or conversion powers in relation to a liability arising from a derivative only upon or after closing out the derivatives. Upon entry into resolution, resolution authorities shall be empowered to terminate and close out any derivative contract for that purpose. Where a derivative liability has been excluded from the application of the write-down or conversion tool under Article 35(8), resolution authorities shall not be obliged to terminate or close out the derivative contract.