Resolution fund

Credit institutions and investment firms are required to participate in the resolution process by paying financial contributions that the resolution authority may use for the financing of resolution measures. The financial contributions are cumulated in the resolution fund, which constitutes one of the principal elements of the resolution framework.

The main role of the resolution fund is to finance costs arising from the application of resolution tools. Hence the fund is to be used primarily:

• to guarantee the assets or liabilities of the institution under resolution, its subsidiaries, a bridge institution or an asset management vehicle;
• to make loans to the institutions under resolution, its subsidiaries, a bridge institution or an asset management vehicle;
• to purchase assets of the institution under resolution;
• to make contributions to a bridge institution and an asset management vehicle;
• to pay compensation to shareholders or creditors for any losses they have incurred in the resolution process which are greater than the losses they would have incurred under normal insolvency proceedings;
• to make a contribution to the institution under resolution in lieu of the write down or conversion of liabilities of certain creditors, when the bail-in tool is applied and the resolution authority decides to exclude certain creditors from the scope of bail-in.

Financial means of the resolution fund may be lent to resolution funds of other EU Member States on a voluntary basis or used to repay loans or costs related to the fund’s borrowings from such counterparts.

Resolution funds within the Single Resolution Mechanism mirror the structure of resolution authorities, which is why a national resolution fund was established in Slovakia. Furthermore, a Single Resolution Fund, based in Brussels, will be established in 2016, when it will assume responsibility for administration of the financial contributions of all credit institutions.

The resolution fund in Slovakia will be administered by the Deposit Protection Fund (DPF). Financial means of the fund are held in an account with NBS, separate from other funds and assets of the DPF.

The fund consists of financial contributions from credit institutions and investment firms, with the target amount set at 1% of covered deposits. The individual financial contributions to the fund are calculated using a methodology laid down in delegated and implementing regulations of the Commission; this takes into account the size and risk profile of each institution. More information can be found here.