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Annual report of the Bank Guarantee Fund
2020
5.1 Rules for carrying out resolution
The BFG Act sets out the principles for carrying out the resolution against banks, credit unions and certain investment
firms, including, inter alia, a set of instruments and powers necessary to intervene quickly and effectively with respect
to an entity at risk to ensure the continuous performance of its functions that are of key importance for the customers and
for the economy (critical functions), to protect financial stability and covered deposits, and to limit the use of public funds.
The Fund carries out resolution in a situation where the following conditions have been met cumulatively:
an entity is failing or likely to fail,
there is no reasonable prospect that any available supervisory measures and alternative private sector measures would
prevent the failure of the institution within a reasonable timeframe,
measures must be taken in the public interest .
3
As part of the resolution proceedings, the Fund may apply one or several tools described in detail in the BFG Act:
sale of business,
bridge institution,
write-down or conversion of liabilities (bail-in),
asset separation (only jointly with another resolution tool).
Before applying any of the resolution tools referred to in Article 110(1) of the BFG Act, the Fund shall write down
or convert the capital instruments of the entity subject to the resolution. In addition, for the purpose of applying resolution
tools, the Fund ensures that the valuation referred to in Article 137(1) of the BFG Act is prepared . After the use of the
instrument, the Fund additionally ensures that the valuation referred to in Article 241 of the BFG Act is prepared.
3
Measures are taken in the public interest when the bankruptcy of the institution might have serious adverse effects on the safety of its customers and
their funds, financial stability (including the operation of financial markets or the economy), continuity of critical functions performed by the entity or its
bankruptcy would entail the need to use (or increase the use) the public funds to meet the abovementioned objectives.
4
These estimates are, depending on the scope of information contained therein, referred to in the Report as Estimate 1, Estimate 2 or Estimate 3.
Resolution consists
Resolution consists in the restructuring financial institution that are failing or likely to fail where its bankruptcy could
have a serious negative impact on its customers, the functioning of the financial markets or the economy.
Contents
Annual report of the Bank Guarantee Fund
2020
5.1 Rules for carrying out resolution
The BFG Act sets out the principles for carrying out the resolution against banks, credit unions and certain investment
firms, including, inter alia, a set of instruments and powers necessary to intervene quickly and effectively with respect
to an entity at risk to ensure the continuous performance of its functions that are of key importance for the customers and
for the economy (critical functions), to protect financial stability and covered deposits, and to limit the use of public funds.
The Fund carries out resolution in a situation where the following conditions have been met cumulatively:
an entity is failing or likely to fail,
there is no reasonable prospect that any available supervisory measures and alternative private sector measures would
prevent the failure of the institution within a reasonable timeframe,
measures must be taken in the public interest .
3
As part of the resolution proceedings, the Fund may apply one or several tools described in detail in the BFG Act:
sale of business,
bridge institution,
write-down or conversion of liabilities (bail-in),
asset separation (only jointly with another resolution tool).
Before applying any of the resolution tools referred to in Article 110(1) of the BFG Act, the Fund shall write down
or convert the capital instruments of the entity subject to the resolution. In addition, for the purpose of applying resolution
tools, the Fund ensures that the valuation referred to in Article 137(1) of the BFG Act is prepared . After the use of the
instrument, the Fund additionally ensures that the valuation referred to in Article 241 of the BFG Act is prepared.
3
Measures are taken in the public interest when the bankruptcy of the institution might have serious adverse effects on the safety of its customers and
their funds, financial stability (including the operation of financial markets or the economy), continuity of critical functions performed by the entity or its
bankruptcy would entail the need to use (or increase the use) the public funds to meet the abovementioned objectives.
4
These estimates are, depending on the scope of information contained therein, referred to in the Report as Estimate 1, Estimate 2 or Estimate 3.
Resolution consists
Resolution consists in the restructuring financial institution that are failing or likely to fail where its bankruptcy could
have a serious negative impact on its customers, the functioning of the financial markets or the economy.
Contents
