The European Securities and Markets Authority has published a central counterparty resolution briefing that gives National Resolution Authorities practical, non-binding guidance on how to operationalise the write-down and conversion of instruments tool when drawing up resolution plans. The methodology is intended to help authorities prepare to write down equity and, where needed, convert debt instruments or other unsecured liabilities to absorb losses, recapitalise a central counterparty and support other resolution tools, while promoting more consistent resolution practices across jurisdictions. The briefing covers the minimum data NRAs should obtain from central counterparties, the calibration of available loss-absorbing and recapitalisation resources, the assessment of impacts on shareholders, creditors, clearing members, linked financial market infrastructures and group entities, and the execution steps needed to implement the tool. It notes that the write-down and conversion of instruments tool is generally mandatory before or alongside government stabilisation tools and before or alongside other resolution tools that impose losses on clearing members, unless a different sequence would better meet resolution objectives and minimise deviations from the no creditor worse off principle. ESMA also sets out expectations on readiness for third-country recognition issues, post-resolution reorganisation and the operational steps needed to issue new shares, suspend or delist instruments, and complete related notifications. The briefing follows ESMA’s earlier work on central counterparty critical functions and resolution cash calls as part of its effort to build a single resolution rulebook. If the tool is applied, the central counterparty must submit a business reorganisation plan within one month, extendable to two months, and the NRA must assess whether it restores long-term viability within one month of submission.
European Securities and Markets Authority 2026-05-13
European Securities and Markets Authority issues non-binding briefing on operationalising central counterparty write-down and conversion tool
The European Securities and Markets Authority has issued a non-binding briefing for National Resolution Authorities on operationalising the write-down and conversion of instruments tool in central counterparty resolution plans, covering methodologies for loss absorption, recapitalisation and impact assessment. The guidance sets minimum data requirements, calibrates loss-absorbing resources, sequences the tool relative to other resolution and government stabilisation tools, and details operational steps such as issuing new shares and handling listings. It forms part of ESMA’s work on a single resolution rulebook and requires a business reorganisation plan and subsequent viability assessment if the tool is applied.