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Information on Bank Resolution and Bail-in

On 1 January 2017 the European Bank Recovery and Resolution Directive ("BRRD") and the European Regulation establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund ("SRM Regulation") entered into force. They were introduced to provide a uniform framework for all Member States within the European Union for the prevention of banking crisis and the management of distressed banks.

The BRRD was implemented in Austria via the Federal Act on the Recovery and Resolution of Banks (BaSAG).

The BRRD inter alia requires each EU member state to establish a national resolution authority with certain rights for the recovery and resolution of credit institutions.

The details of the measures the resolution authorities may take on a national level may differ. Below, we explain possible resolution measures that may be applied in Austria as an example. Resolution procedures in other countries, in particular outside Europe, may deviate and be more incisive.

In which case will I be affected?

You may be affected as a shareholder or creditor of a bank if you hold financial instruments issued by the bank (e.g. shares, bonds or certificates) or have claims against the bank as a contracting party (e.g. transactions subject to a master agreement for financial derivatives transactions).

Securities, held in a custody account and not issued by the custodian bank, are not subject to a resolution measure against this bank. In the case of the resolution of a custodian bank, your proprietary rights in these financial instruments booked in the securities account remain unaffected.

Who is the resolution authority?

In order to ensure a controlled resolution in the event of a crisis, resolution authorities have been established.

The Single Resolution Board (“SRB”, German “Einheitlicher Abwicklungsausschuss”) and the Austrian Financial Market Authority (FMA) are the responsible resolution authorities in Austria. For ease of reference, we will not differentiate between the SRB and the FMA in the following.

Under certain resolution conditions, the resolution authority responsible for the affected bank has the power to order resolution measures.

When will bank resolution and bail-in occur?

The resolution authority may order certain resolution measures in the event of the following resolution conditions:

  • The affected bank’s existence is endangered. This assessment is made in accordance with legal requirements and applies if the bank no longer complies with the legal requirements for obtaining authorisation for the taking up of the business of credit institutions due to losses suffered.
  • There is no prospect of preventing the bank’s default with alternative measures in the private sector or other measures from the resolution authorities.
  • The measure is required in the public interest, i.e. necessary and proportionate, and liquidation in regular insolvency proceedings is no viable alternative.

Which measures may the resolution authority take?

If all resolution conditions are met, the resolution authority can adopt – prior to insolvency – comprehensive resolution measures that may have a negative effect on the bank’s shareholders and creditors:

  • The sale of business tool: The resolution authority may transfer shares, assets, rights or liabilities of the failing institution as a whole or in parts to a third party. To the extent shareholders and creditors are affected by the sale of business, their new counterparty will be another existing institution.
  • The bridge institution tool: The resolution authority may transfer shares in the bank or parts or the whole of the bank’s assets or liabilities to a so-called bridge institution. This may affect the bank’s capability to meet its payment and delivery obligations vis-à-vis the creditors and it may reduce the value of shares in the bank.
  • The asset separation tool: Assets, rights or liabilities are transferred to an asset management vehicle. Assets are to be managed with the objective of maximizing their value until their future sale or liquidation. Similar to the sale of business tool, the creditor will have to deal with a new debtor after the transfer.
  • The bail-in tool – applicable as of 1 January 2016: The resolution authority may, as a whole or in parts, write down and / or convert into common equity (stocks or other company shares) certain financial instruments or liabilities of the bank in order to stabilise the bank.

The resolution authority may amend the terms and conditions of financial instruments issued by the bank by means of an official order as well as existing receivables, for example due to a change in the maturity date or the interest rates at the expense of the creditor. Furthermore, payment and delivery obligations may be modified so that they can be temporarily suspended. Termination and other contractual rights that arise for creditors from financial instruments or liabilities may also be temporarily suspended.

In which case does bail-in affect me as a creditor?

Whether you as a creditor are affected by the bail-in resolution tool depends on the scope of the ordered measure and on the category your financial instrument or liability can be allocated to.

Certain types of financial instruments and liabilities are legally exempted from bail-in:

These include deposits of up to EUR 100,000 covered by the statutory deposit protection scheme and secured liabilities (e.g. covered bonds).

Within the scope of bailin, financial instruments and liabilities are distinguished in different categories depending on a legal order of priorities in terms of liability (so-called liability cascade).

For the shareholders and creditors involved in the respective categories, the following principles apply: Only if a category of liabilities has been used completely and this is insufficient to compensate for losses in order to stabilise the bank, the following category in the liability cascade may be written down or converted:

  1. The resolution measures first apply to the Common Equity Tier 1 apital and thus the bank’s shareholders (owners of stocks and other company shares).
  2. Then, creditors of Additional Tier 1 capital are involved (owners of unsecured perpetual subordinated bonds and silent partnerships that may be written down or converted and are subordinated to Tier 2 capital).
  3. This is followed by Tier 2 capital. This applies to creditors of subordinated liabilities (e.g. owners of subordinated loans).
  4. In the liability cascade, unsecured subordinated )financial instruments / liabilities that do not meet the Additional Tier 1 capital or Tier 2 capital requirements are the next to be used.
  5. These are followed by unsecured unsubordinated financial instruments and liabilities (other unsecured financial instruments / liabilities, such as senior bonds).
  6. Finally, deposits held by natural persons or small and medium size enterprises may also be used if they exceed the statutory deposit protection scheme of generally EUR 100,000 - (Österreichische Raiffeisen-Einlagensicherung eGen).

Which consequences may the resolution measures have for me as a creditor?

If the resolution authority orders or takes a measure following these rules, creditors are not permitted to terminate the financial instruments and liabilities based on this measure alone or claim any other contractual rights.

This applies as long as the bank complies with its substantive contractual obligations from the terms and conditions of financial instruments and liabilities, including payment and delivery obligations.

If the resolution authority takes the measures described above, a total loss of affected shareholders’ and creditors’ investment is possible.

Shareholders and creditors of financial instruments and liabilities may therefore completely lose the price paid for the purchase of financial instruments and liabilities plus other costs related to the purchase.

The very possibility of resolution measures to be ordered alone may complicate the sale of a financial instrument or a liability on the secondary market.This could mean that the shareholder and creditor can only sell the financial instrument or liability at a considerable discount. Even with existing repurchase obligations from the issuing bank, there is the risk of a significant discount in the event of a sale of such financial instruments.

In the event of bank resolution, shareholders and creditors are not to be placed in a less favourable position than in normal insolvency proceedings affecting the bank.

If resolution measures nonetheless lead to a situation where a shareholder or creditor is placed in a worse position than would have been the case in the bank’s normal insolvency proceedings, the shareholder or creditor is entitled to compensation.

Where can I get more information?

The Austrian National Bank and the Austrian Financial Market Authority published information on the recovery and resolution rules applicable in Austria:

Austrian National Bank:
Recovery and Resolution of Banks

Österreichische Finanzmarktaufsicht:
Recovery and Resolution in Austria

List of authorized Signature

You need a user name and a password to access the list of authorized signatures of the Raiffeisen Bank International AG.

List of authorized signatures

If you have any question regarding the list of authorized signatures or how to get a password, please contact:

Richard Vettori
Group Services
Tel.: +43-1-71707-2574
E-Mail: richard.vettori@rzb.at

FATCA

FATCA at Raiffeisen Bank International

The Foreign Account Tax Compliance Act (FATCA) is a US legislation that was enacted in March 18, 2010 and became effective on July 1, 2014. FATCA is essentially a regulatory reporting requirement for foreign financial institutions on their US account holder base. All units of RBI-Group have recognized the importance of FATCA and comply with the FATCA requirements.

Raiffeisen Bank International AG, Austria has already registered itself on the U.S. IRS website with the FATCA Status “Participating Financial Institution not covered by an IGA; or a Reporting Financial Institution under a Model 2 IGA” and has received "28CWN4.00000.LE.040" as Global Intermediary Identification Number (GIIN).

In addition Austria is one of the jurisdictions that have signed an intergovernmental agreement and are treated by U.S. as having an intergovernmental agreement Model 2 in effect.

Withholding certificates (W8 forms) can be downloaded by following the links below.

W-8BEN-E
W-8IMY

FATCA Consent to Report (to be provided by FATCA relevant customers holding FATCA reportable accounts!):

Consent to Report 

We would like to emphasize that, in accordance with the requirements set forth in § 1.1441-1(e)(4)(iv)B) of the U.S. treasury regulations, the filing and the transmission of withholding certificates may be conducted electronically  as PDF document since February 2014.

If you have any further questions, please contact the FATCA Responsible Officer.
fatca@rbinternational.com

CRS/GMSG

What is the Common Reporting Standard (CRS)?
In 2014 the Organisation for Economic Cooperation and Development (OECD) has published a global Standard for the Automatic Exchange of Financial Account Information. The so called Common Reporting Standard (CRS) essentially constitutes a regulatory reporting requirement for Financial Institutions seated in participating jurisdictions (currently more than 100 jurisdictions) and pursues the aim to avoid tax evasion.

In December 2014 the CRS was implemented in the EU-Directive on Administrative Assistance in Tax Matters. Due to that European Member States were obligated to implement the provisions into national law. In Austria this Standard was implemented into national law with the "Gemeinsamer Meldestandard-Gesetz" (GMSG) on 14 August 2015.

Customer Identification, Documentation and Reporting Obligation of Austrian FIs
According to the provisions set forth in the GMSG Financial Institutions seated in Austria are obligated to implement appropriate measures to identify their customer’s tax residence (relevant customers are private individuals, entities and under certain circumstances controlling persons) and the Tax Identification Number of the respective jurisdiction of tax residence. Financial Institutions are further required to report financial accounts maintained by customers who are resident for tax purposes in a participating jurisdiction to the national tax authority which again may exchange the information with the tax authorities of another country or countries in which the customer (or in certain cases the controlling persons) may be tax resident.

Reportable Data according to CRS/GMSG
The report of financial accounts includes certain data about the account holder (in certain cases also about the controlling person) as well as data about the account.

According to the provisions of the GMSG the following information has to be reported to the tax authority:

  • Name
  • Address
  • Jurisdiction(s) of Residence
  • Tax identification number(s)
  • Date and place of birth (for natural persons)
    • account number(s) for savings, depository, giro and custodial accounts
    • account balances or values as of the end of the calendar year or the closure of the account
    • the total gross amount of income, dividends or other income generated with respect to the assets held in the account, as well as total gross proceeds from the sale or redemption of financial assets, in each case paid or credited to the account during the calendar year or other reporting period
  • In the case of entities additionally the controlling person(s) of the entity, identified in accordance with the provisions of the GMSG:
    • Name
    • Address
    • Jurisdiction(s) of Residence
    • Tax Identification Number(s)
    • Date and place of birth


Non reportable "excluded" accounts
In this regard the legislator has also defined certain exemptions in § 87 GMSG as well as in § 2 of the “Verordnung zur Durchführung des Gemeinsamer Meldestandard-Gesetzes” for accounts which are no reportable financial accounts.

Non reportable persons
Furthermore an exemption exists for specific customers who are not defined as “reportable persons” according to § 89 GMSG. These are Financial Institutions, Governmental Entity, International Organizations, Central Banks, Corporations the stock of which is regularly traded on one or more established securities markets (or a related entity thereof).

Austria committed to participate in the OECD Automated Exchange Of Information (AEOI) and to implemented CRS in local jurisdiction
Starting on 1 October 2016 Financial Institutions seated in Austria are obligated to implement procedures and measures in order to meet the due diligence obligations according to GMSG. Hence all customers who want to open a new account are required to provide a reasonable Self-Certification to determine their tax residence(s) and their respective Tax Identification Number(s).

Under certain circumstances also for Pre-existing Accounts/Pre-existing Customers that do not open a new account are also required to provide a reasonable Self-Certification in order to clearly determine their tax residence(s) and their Tax Identification Number(s). In general the necessary TIN information to be provided by the customer correlates with the unlimited income tax liability of the tax resident in the country of tax residence.

Mandatory Self-Certifications for all (new) Accounts/Customers
It should be pointed out that the obligation to provide a reasonable Self-Certification applies for all customers, irrespective of their tax residence, thus, also for customers who are exclusively tax resident in Austria.

If customers are unsure about their tax residence(s), they should consult their tax adviser in order to clarify their residence(s) for tax purposes.  Moreover, customers may also consult certain information centers of the Austrian tax authority. It is important to emphasize that Financial Institutions are prohibited from providing any tax or legal advice.

Further information about the OECD Common Reporting Standard can be found on the Automatic Exchange Portal of the OECD.

CRS-Forms:

Self-Certification for Entities for CRS and FATCA

Self-Certification for private individuals and sole traders for CRS and FATCA

FATCA-Forms:

W-9

W-8BEN

W-8BEN-E

W-8IMY

Consent to Report

Further documents and links:

Information Financial Markets Money Laundering Act

Gemeinsamer Meldestandard-Gesetz (GMSG – refer to Article 4)

Durchführungsverordnung zum Gemeinsamen Meldestandard-Gesetz

OECD Standard for the Automatic Exchange of Financial Account Information

TIN (Tax Identification Number)

Online-Module to verify Tax Identification Numbers für Steueridentifikationsnummern (TIN)

Jurisdictions intended to implement the CRS

FAQs regarding the Common Reporting Standard/Gemeinsamer Meldestandard-Gesetz

Legal Entity Identifier (LEI) and Global Intermediary Identification Number (GIIN)

Legal Entity Identifier (LEI):
9ZHRYM6F437SQJ6OUG95

Global Intermediary Identification Number (GIIN):
28CWN4.00000.LE.040

 

Thomas Sternbach

Legal Services
Raiffeisen Bank International AG
Am Stadtpark 9, 1030 Wien
Tel: +43-1-71707-1541
Fax: +43-1-71707-761541
thomas.sternbach@rbinternational.com
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