Recital 10

(10)The close-out of derivative contracts may crystallise additional losses that are not reflected in the going-concern valuation, stemming for example from actual replacement costs incurred by the counterparty that would increase the close-out costs owed by the institution under resolution, or from costs incurred by the institution under resolution in re-establishing trades on exposures subject to open market risk resulting from the close-out. If the losses incurred or expected to be incurred from the close-out of derivatives exceed the share of the corresponding liabilities that would be effectively available for bail-in, the excess loss may increase the burden of bail-in for other creditors of the institution under resolution. In such cases, the amount of losses that would be borne by liabilities not arising from derivative contracts in a bail-in would be higher than without the close-out and bail-in of derivative contracts, and therefore the resolution authority may consider exempting derivative contracts from bail-in in accordance with Article 44(3)(d) of Directive 2014/59/EU and with the Commission Delegated Regulation (EU) 2016/860 ² adopted under Article 44(11) of that Directive. Any exercise of the bail-in power in relation to such liabilities should be subject to the exemptions set out in Article 44(2) of Directive 2014/59/EU and to the discretionary exemptions laid down in Article 44(3) of that Directive as specified in the Delegated Regulation (EU) 2016/860.