Bank resolution protects the public interest

Banks provide important services to citizens, companies and the economy. They also play a crucial intermediary role between the economies of different countries. Consequently, financial difficulties experienced by banks must be resolved quickly, effectively and in a controlled manner. The legal bank resolution framework ensures the continuation of banks’ critical functions, helps maintain their financial stability and aims to minimise costs to taxpayers.

Bank resolution means the restructuring of a credit institution or other institution referred to in the Act on the Resolution of Credit Institutions and Investment Firms (hereinafter referred to as “the institution”) when the institution is in financial difficulties or in the event of a broader financial crisis, for example. Decisions on bank resolution and the use of resolution tools are made by the resolution authority. The authorities may use resolution tools intended to safeguard the public interest.

In Finland, the management of a resolution event and resolution planning are among the main tasks of the Financial Stability Authority. The aim of the Authority is to prepare for crises faced by Finnish institutions with care so as to reduce the probability of default for banks and simultaneously minimise the adverse effects of the crises and their resolution for society as a whole.  The Financial Stability Authority works closely together with the Single Resolution Board (SRB) of the European Banking Union.

Further information on SRB's website

The SRB acts as the banking union’s resolution authority and is responsible for the resolution of large banks.

The Single Resolution Board is the centralised resolution authority of the countries that belong to the banking union. Its basic task is to ensure the systematic restructuring of failing institutions so as to minimise the impacts on the real economy and the financial system as well as the public economies of the Member States participating in the banking union. 

The SRB is responsible for the resolution of Significant Institutions (SI) in the euro area as well as cross-border banking groups located in the banking union. It is responsible for the resolution plans drafted for institutions in this category as well as decision-making in resolution situations. The resolution of Less Significant Institutions is the responsibility of the national resolution authorities, such as the Financial Stability Authority in Finland.

The SRB and the national authorities work closely together on drafting resolution plans for Significant Institutions. The planning efforts are led by the SRB and they take place in Internal Resolution Teams (IRT). The Financial Stability Authority is also represented in the teams.

The institutions under SRB’s remit are listed on the SRB website

The Single Resolution Mechanism harmonises resolution in the banking union 

The SRB and the national resolution authorities in the countries belonging to the banking union together form the Single Resolution Mechanism (SRM). The purpose of the Single Resolution Mechanism is to establish a coherent decision-making system for resolution in the banking union.

The SRB is responsible for the effective and consistent functioning of the Single Resolution Mechanism. The SRB may issue general guidelines and warnings to the national resolution authorities if they do not comply with the SRM Regulation or the instructions issued by the SRB. The SRB may also exercise the previously mentioned authority with regard to Less Significant Institutions.

The national resolution authorities play an important role in the management of the Single Resolution Mechanism. They participate in the administration and operations of the Single Resolution Mechanism in the SRB’s Plenary Sessions and various working groups. 

A national authority also participates in issuing resolution decisions in the SRB’s Executive Sessions when the decisions concern an institution under their remit. If an institution under the SRB’s remit meets the conditions for being placed under resolution, the resolution order must be approved by an SRB Executive Session in which the SRB and the relevant national resolution authority are represented. The national resolution authority in question then executes the decision by means of a national enforcement decision and, where necessary, other supplementary decisions.