Sede Electrónica
Sede Electrónica

Resolution tools

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Resolution tools

Following the non-viability of an institution and once the resolution procedure begins, the authorities may use one or more of the following tools to ensure the continuity of its critical economic and financial functions, minimizing the impact that this non-viability could have on the economy and the financial system:

SALE OF BUSINESS, ASSET SEPARATION, BRIDGE INSTITUTION, BAIL-IN
  • SALE OF BUSINESS: This allows resolution authorities to force the sale (partial or complete) of certain assets, liabilities or shares of an institution.
  • BRIDGE INSTITUTION: Segregated assets or liabilities are temporarily transferred to a bridge company, in order to protect the continuity of the institution’s critical functions.
  • ASSET SEPRATION: Transfer of problematic assets and, when applicable, liabilities to an asset management company (AMC) in exchange for a transfer price.  The AMC will manage the assets so as to maximise their value.
  • BAIL–IN: This makes it possible to subject an institution’s shareholders and/or creditors to a reduction in the amount of their shares and/or debt instruments or their conversion to capital in order to absorb losses and, as the case may be, recapitalise the institution in resolution. With this, the burden in resolution will be assumed by the shareholders and creditors of the institution, instead of the taxpayer.

In an effort to reinforce transparency and predictability of the written down and conversion of capital instruments and internal recapitalization, as well as to facilitate the coordination of the different actors involved, FROB has developed and published the document “Write-down and Conversion and Bail-in Mechanic in Spain”, in compliance with the requirements of the Council of Financial Stability (in its principles for the execution of internal recapitalization) and by the EBA (in its Guidelines on the publication of the exchange mechanism for amortization and conversion and for internal recapitalization). This document describes in a general and indicative way FROB’s approach to implement operationally this measure, which is part of its powers as a resolution authority.