Recital (44)

The contribution of the DGS in resolution should be subject to certain limits. First, the total amount of the contribution of the DGS in any resolution case should not exceed the amount of covered deposits in the credit institution concerned. Second, it should be ensured that any intervention by the DGS in a resolution action which relies primarily on the bail-in tool for the purposes of recapitalisation of the institution under resolution and of the continuation of its activities does not exceed the loss that the DGS would bear in insolvency if it paid out covered depositors and subrogated to their claims over the institution’s assets. Third, where the DGS is used in support of resolution action mainly consisting of the transfer of the business to a purchaser or to a bridge institution, the amount of the contribution of the DGS should not exceed 62,5 % of its target level, unless the designated authority under Directive 2014/49/EU chooses to disapply that limit to avoid adverse effects on financial stability or to preserve the access of depositors to their deposits. Fourth, the amount of the DGS contribution should not exceed the difference between the transferred assets and the transferred deposits and liabilities with the same or a higher priority ranking in insolvency than those deposits. That would ensure that the contribution of the DGS is only used for the purpose of avoiding the imposition of losses on depositors, where appropriate, and not for the protection of creditors that rank below deposits in insolvency. However, where relevant, the contribution might also include an amount necessary to ensure the capital neutrality of the recipient entity.