Write-down and conversion power

Definition

The write-down and conversion power lets resolution authorities cancel or convert a bank's capital instruments — and, since 2019, internal MREL liabilities — at the point of non-viability, before or alongside any resolution tool.

The power

Article 59 BRRD gives authorities the power to write down or convert Common Equity Tier 1, Additional Tier 1 and Tier 2 the moment a bank is determined non-viable — even without opening a full resolution. The sequence follows the creditor hierarchy, and conversion rates must respect it. The 2019 banking package extended the power to eligible liabilities issued internally within groups, making it the transmission mechanism of internal MREL.

Distinct from bail-in

The power overlaps with, but is narrower than, the bail-in tool: bail-in reaches the wider liability stack and is one of the four resolution tools, while the Article 59 power is confined to capital instruments and internal MREL and applies in every resolution as a mandatory first step. Banco Popular was resolved through this power plus the sale-of-business tool — the bail-in tool itself has never been applied.