4.1 Introduction

The term ‘resolution’ has a new meaning as of 1 January 2015, when the BRRD entered into force. From that date on, it is commonly used to explain the situation that a bank is failing or likely to fail, but, instead of being wound up in normal insolvency proceedings, it is ‘resolved’ through administrative, non-judicial procedures and tools for the restructuring or managed dissolution of failing banks while preserving insured deposits and other services essential for maintaining financial stability, such as payment services.1 The primary objective of resolution is to maintain financial stability and minimize losses for the society, in particular taxpayers. For this reason, certain critical stakeholders and functions (such as depositors and payment systems) need to be protected and maintained as operational, while other parts, which are not considered key to financial stability, may be allowed to fail in the normal way. Resolution is not available for each and every bank. Only, if the resolution authority decides that there is a ‘public interest’ to put a bank in resolution this can take place.

At the time of writing this dissertation, the resolution regime is still in its infancy. The different authorities involved in resolution scan the boundaries of their mandates and powers, the Member States try to find loopholes to comply with the resolution regime, while keeping their electors satisfied, and the resolution regime faces an upgrade (through BRRD II, BRRD II bis and SRMR II). Against that background, this chapter describes the resolution framework for banks and banking groups. Section 4.2 starts with a description of the development of the resolution framework. Section 4.3 subsequently discusses the legal outline and scope of the resolution framework. It also analyzes the relationship between the two main legislative instruments of this framework: the BRRD and SRMR. Section 4.4 subsequently sets out the concept of resolution. Section 4.5 describes the process of resolution, while also paying attention to the complex relationship between the SRB and the national resolution authorities as the competent resolution authorities. Section 4.6 discusses the provisions of the resolution framework in relation to group resolution. Sections 4.7 and 4.8 describe the treatment of the bank in resolution and third parties (such as shareholders and creditors of a bank) involved therein. Section 4.9 swiftly discusses the judicial protection available for banks and third parties against decisions of the SRB and national resolution authorities. Section 4.10 concludes this chapter.

This chapter does not discuss the provisions of the resolution regime that deal with the award and assessment of public funding. These provisions are discussed in Chapters 5 to 7.