Tier 2

Bail-in

Write-down and conversion powers of the Relevant Resolution Authority

If the conditions for initiating a resolution proceeding of an institution are met, the Relevant Resolution Authority may be required to write-down common equity tier 1, additional tier 1 and tier 2 instruments (together, the “Capital Instruments”) or convert them to equity prior to the opening of a resolution proceeding or without a resolution proceeding. Once resolution proceedings are initiated, the Relevant Resolution Authority may use the “bail-in” resolution tool (the “Bail-in Tool”) to write-down or convert to equity any remaining Capital Instruments and any Eligible Liabilities (as defined below), to the extent necessary to restore the financial condition of the institution. The write-down and conversion powers and the Bail-in Tool are to be implemented so that losses are borne in the order of their claims in normal insolvency proceedings, subject to certain exceptions. As a consequence, losses are to be borne initially by holders of Capital Instruments qualifying as common equity tier 1 instruments, then holders of Capital Instruments qualifying as additional tier 1 instruments, then holders of Capital Instruments qualifying as tier 2 instruments, and thereafter creditors. French law also provides for certain safeguards, including the “no creditor worse off than under normal insolvency proceedings” principle, whereby creditors of the institution under resolution should not incur greater losses than they would have incurred had the institution been wound up under a liquidation proceeding.