Such restructuring can provide for an orderly wind-down of the bank or restore the viability of all or part of the institution and is used only in cases where a bank cannot be resolved through normal insolvency proceedings without inflicting damage on the real economy and causing financial instability.
Resolution occurs at the point where the authorities determine that a bank is failing or likely to fail, that there is no other supervisory or private sector intervention that can restore the institution to viability (for example by applying measures set out in a so-called recovery plan, which all banks are required to draft) within a short timeframe and that normal insolvency proceedings would cause financial instability while having an impact on the public interest.
If it is decided to resolve a bank facing serious difficulties, its resolution will be managed efficiently, with minimum costs to taxpayers and the real economy. In extraordinary circumstances, the Single Resolution Fund (SRF), financed by the banking sector itself, can be accessed. The SRF will be set up under the control of the SRB. The total target size of the Fund will equal at least 1% of the covered deposits of all banks in Member States participating in the Banking Union.