6.4.5 The assessment of resolution schemes

Under the Polish resolution scheme, only cooperative banks and small commercial banks with total assets not exceeding EUR 3 billion are eligible to use the scheme once a resolution procedure has been initiated by the Polish resolution authority. The scheme provides that funds in the Polish deposit guarantee scheme and the Polish resolution fund can be used after write down or conversion of shareholders’ capital and other capital instruments. The bail-in requirements also have to be complied with. The Commission assessed this resolution scheme on the basis of the assessment criteria for liquidation aid and liquidation schemes.2 In Croatia a similar resolution scheme was assessed and approved by the Commission for the resolution of small banks with total assets below EUR 1.5 billion.3 Both Poland and Croatia mentioned the significant role of the (cooperative and) small banks in their financial system. Croatia specifically mentioned that the strong regional presence of the small banks is vital for the provision of loan and deposit services for retail and SMEs.4 Poland specifically mentioned that the cooperative banks have an important role in providing financial services to rural areas and the agricultural sector.5 Both Poland and Croatia therefore anticipate that these banks should be put in resolution instead of being wound up in normal insolvency proceedings.

In that respect, it is interesting that Italy has notified a liquidation scheme to the Commission for the benefit of banks with total assets below EUR 3 billion.6 Contrary to Poland and Croatia, Italy therefore seems to anticipate that these banks will normally not be put in resolution, but wound up in normal insolvency proceedings. It considers the liquidation scheme to be apt to remedy a serious disturbance in the economy of a Member State. It argues that there is a strong regional presence of small banking institutions which are vital for the provision of loan and deposit services for retail and small and medium-sized companies. Pockets of vulnerabilities may remain amongst the small banks in question that can be addressed through the liquidation scheme. The Commission follows the position of the Italian State.7

Although different decisions are made in respect of putting the bank in resolution or winding up the bank in normal insolvency proceedings, all three Member States anticipate that part of the failing bank’s assets and liabilities will be transferred to a purchaser, either under the application of the sale of business tool (Poland, Croatia) or in normal insolvency proceedings (Italy). The outcome of the resolution and liquidation process, respectively, may therefore not be very different in practice. In terms of public funding involved, the difference is that in Italy, the anticipated aid measure involves support from the deposit guarantee scheme only, while in Poland and Croatia support from the national resolution funds is also anticipated.