• 1. Prevention Key preparatory and preventive measures: Plans and standards All banks in the EU must prepare their own recovery plans and update them each year. The plans have to contain measures that the banks would take if their situation were to deteriorate seriously. National resolution authorities must prepare resolution plans for each bank. These plans lay out the actions that they would take if resolution were to become necessary. The European Banking Authority is given the task of developing binding technical standards, guidelines and reports on the main areas of recovery and resolution.
  • 2. Early intervention The national resolution authorities have powers to intervene before the situation of a bank deteriorates irreparably. They can: require the implementation of urgent reforms require the bank to draw up a plan for restructuring of debt with its creditors make changes in the bank's management and appoint special managers or temporary administrators The aim is to ensure continuation of the bank's essential operations and its fast recovery.
  • 3. Resolution If the bank's situation becomes so distressed that its recovery within an appropriate time limit becomes unrealistic, the national resolution authorities have the power to: sell a part of the business set up a bridge bank to continue the most important functions (i.e. temporarily transfer good bank assets to a government-managed entity) separate good assets from bad ones (the impaired assets would be transferred to an asset management entity) apply bail-in measures: i.e. convert debt to shares or write it down - in this way, losses are imposed, according to an established order, on bank shareholders and creditors, not on taxpayers
  • When a bank needs to be resolved, the costs will first be borne by bank shareholders and creditors ('bail-in') and then financed from a resolution fund. Deposits of natural persons and small and medium-sized enterprises are exempt from this rule. Such deposits will be given preferential treatment, i.e. they will come at the very end of the bail-in sequence. Citizens' and small and medium-sized businesses' deposits of up to €100 000 will be exempt from any loss and protected by the deposit guarantee scheme. Other liabilities that are permanently excluded from bail-in are covered deposits and bonds. The resolution fund can be used only once losses constituting at least 8% of a bank's total liabilities have been imposed on its shareholders and creditors.