Considerations on the application of the NCWO principle under the SRM Regulation

24 Pages Posted: 19 Mar 2021

See all articles by Christos Gortsos

Christos Gortsos

National and Kapodistrian University of Athens

Date Written: January 31, 2021


The aim of this article is to make certain specific considerations on the application of the
‘no creditor worse off (NCWO) principle’ (or safeguard) under the Regulation governing the Single
Resolution Mechanism and the Single Resolution Fund (SRMR). Even though the field of application
of the SRMR also covers other financial firms, the article’s focus, which is structured in four sections, is (solely) on credit institutions.

Section 1 overviews the provisions of the SRMR dealing with the third resolution condition, namely
the public interest criterion, on the basis of which the decision is taken by the Single Resolution
Board whether a credit institution determined as failing or likely to fail should be resolved or wound
up. It is only when the public interest criterion is met and the Board takes a decision on the resolution of the credit institution concerned, that the NCWO principle is applicable. Section 2 discusses the provisions governing the NCWO principle under international and EU banking law. In this respect, after a brief overview of the international financial standards adopted by the Financial Stability Board (FSB) on banking resolution, including on the NCWO principle (under 2.1), this principle is analysed as a general principle governing resolution under the SRMR; its perimeter of application and the obligations imposed on national resolution authorities (NRAs) in this respect are also discussed (under 2.2). The following two sections deal then, in turn, with two specific aspects of application of the NCWO principle under the SRMR: mandatory and optional exclusion of deposits from bail-in (Section 3), as well as ex-ante and ex-post valuations for the purposes of resolution (Section 4). The final Section 5 concludes.

Keywords: Resolution of credit institutions, NCWO principle, Charter of Fundamental Rights of the European Union, SRM Regulation, Financial Stability Board (FSB), Key Attributes, public interest assessment (PIA), failing or likely to fail (FOLF), bail-in, covered deposits, Valuations 1, 2 and 3

JEL Classification: G01, G21, G28, G33, K23, K33, N20, N24

Suggested Citation

Gortsos, Christos, Considerations on the application of the NCWO principle under the SRM Regulation (January 31, 2021). European Banking Institute Working Paper Series 2021 - no. 88, Available at SSRN: or

Christos Gortsos (Contact Author)

National and Kapodistrian University of Athens ( email )

Akadimias 45
Athens, 10672

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