12.2.1 Why is this a relevant characteristic?

As set out in section 6.8, this PhD-study distinguishes between several contexts. The C-context means that the beneficiary bank continues as a standalone entity. The T-context means that the bank is taken over by another bank. The W-context means that the bank will be wound down. The S/T/W-context means that the bank is split-up into a bad bank (to be wound-down) and a good bank (to be sold). The S/C/W-context means that the bank is split-up into a bad bank (to be wound down) and a good bank (that continues to exist as a standalone entity).

These different contexts illustrate that the rescue and restructuring of banks can take place in many ways. There is no standard way of rescuing a failing bank. If the bank is likely to become viable again, then the bank will be restructured in such a way that it can continue as a standalone entity. If, on the contrary, there are no prospects that the bank can return to viability, one of the other scenarios will be chosen: either a sale to another bank, a break-up of the bank or a complete wind-down.

So there are alternative scenarios. Whichever scenario is chosen, it should be the least costly alternative. This follows from point 23 of the Restructuring Communication which stipulates that any restructuring or liquidation aid should be limited to the minimum necessary. To this end, Member States should analyse and compare different scenarios when rescuing and restructuring a failing bank. Furthermore, Member States should demonstrate that the alternative that they have chosen is the least costly one. This also follows from point 9 of the Restructuring Communication which stipulates that the restructuring plan should include a comparison with alternative options.