What the EU is doing and why
A bank resolution occurs when authorities determine that, contrary to normal insolvency proceedings, resolution would better protect financial stability, depositors and minimise the recourse to public funds (so called public interest assessment).
To manage the bank's failure in an orderly manner, authorities use resolution tools that
- ensure the continuity of the bank's critical functions
- maintain financial stability
- restore the viability of parts or all of the bank – or transfer them to another bank
Meanwhile, any part of the bank that cannot be made viable again goes through normal insolvency proceedings.
After the 2007-2009 global financial crisis, the EU adopted a number of measures to harmonise and improve the tools for dealing with bank crises.
Policy making timeline
- 18 April 2023Legislative proposal - Bank recovery and resolution
- 20 May 2020Legislation - Bank recovery and resolution
Adoption of the Bank Recovery and Resolution Directive II
- 2 December 2020Commission notice - Revised bank resolution framework
- 29 September 2020Commission notice - Revised bank resolution framework
- 30 April 2019Report - Bank Recovery and Resolution Directive
- 23 November 2016Legislative proposal - Bank recovery and resolution
The Bank Recovery and Resolution Directive II (BRRD II) was adopted on 7 June 2019. It includes measures that will further strengthen the European resolution framework and enable relevant authorities to resolve banks in a way that safeguards financial stability and public funds.
Basic information
Transposition by EU Member States
The BRRD II was transposed by all EU Member states into their national law.
Legislative history
The Bank Recovery and Resolution Directive (BRRD) was adopted in spring 2014 to provide authorities with
- comprehensive and effective measures for dealing with failing banks at national level
- measures to tackle cross-border banking failures
The directive requires banks to prepare recovery plans to tackle financial distress. It also grants national authorities powers to ensure an orderly resolution of failing banks with minimal costs for taxpayers.
The directive includes rules to set up a national resolution fund that must be established by each EU country. All financial institutions have to contribute to these funds. Contributions are calculated on the basis of the institution's size and risk profile.
The EU's bank resolution rules ensure that the banks' shareholders and creditors pay their share of the costs through a "bail-in" mechanism. If that is still not sufficient, the national resolution funds set up under the BRRD can provide the resources needed to ensure that a bank can continue operating while it is being restructured.
Basic information
- Text of the BRRD (2014/59/EU)
- Summary of the legislation: Addressing troubled financial institutions’ problems
Delegated and implementing acts
Transposition by EU Member States
- The BRRD was transposed by all EU Member states into their national law.
- Transposition history of the BRRD by EU Member States
- European Banking Authority interactive single rulebook