What happens if a bank or insurance firm fails?

The concept of resolution was created in response to the financial crisis of 2008, when governments in the Netherlands and elsewhere were forced to bail out banks. At the time there was no European supervision and no European legislation for ailing banks. Many banks operate in multiple European countries, so it is important that regulation and supervision are the same in these countries. The European Central Bank (ECB) is supervising all large banks in Europe since 2014. Also, European rules for ailing banks were introduced: the Banking Recovery and Resolution Directives (BRRD and BRRD II) and the Single Resolution Mechanism Regulation (SRMR). This created a central European approach to resolution.

Every country has a resolution authority. In the Netherlands, this is DNB. All these national authorities work in tandem on bank resolution. They do so in the so-called European Single Resolution Mechanism (SRM), under the aegis of the Single Resolution Board (SRB) in Brussels. Resolution colleges handle resolution of central counterparties (CCPs). These colleges comprise the national resolution authorities of various countries. In the Netherlands, DNB decides on the resolution of insurers, for which there is no overarching European organisation.

Yes, they are. We have several divisions for supervision and one for resolution. One member of our Executive Board is responsible for resolution, with no direct responsibility for supervision. We have made this arrangement to avoid conflicts of interest, as required under European regulations.

First, shareholders must help pay for the resolution of a bank or insurer. Their shares consequently fall in value or lose their value entirely. If the losses exceed shareholders’ equity, some creditors will also need to contribute. This involves the full or partial write-off of their claims on the bank or insurer. Sometimes even more money is needed to save a bank or insurer. If a bank is involved, we can call on a European fund: the Single Resolution Fund. All European banks contribute annual fees to this fund. In addition, subject to specific conditions, we may also request a contribution from the Dutch deposit guarantee fund (DGF). If an insurer is involved, policyholders' rights are also reduced. The underlying concept is that the government should not bail out ailing banks and insurers. 

Never so far. Only in exceptional situations will we decide to let a bank or insurer go into resolution. Usually, an institution goes bankrupt. Read more about this on the website in the section headed ‘Criteria for resolution’.

In spring 2022, Amsterdam Trade Bank (ATB) failed. We then activated the Deposit Guarantee Scheme (DGS). Read more about this here. And in 2020, insurer Conservatrix went bankrupt.

No, we do not have the powers to do so. If a pension fund faces adverse conditions, it must prepare a recovery plan and submit it to us. The plan sets out measures to recover financially, e.g. by increasing pension contributions or by refraining from indexing pension benefits.

If you have a question specifically about resolution, just contact our Information Desk. Call 0800 020 1068 (freephone in the Netherlands) or +31 20 524 91 11 (if you call us from abroad) on business days between 9:00 and 17:00. Or email us at info@dnb.nl.

For banks, there are European laws: the Banking Recovery and Resolution Directives (BRRD and BRRD II) and the Single Resolution Mechanism Regulation (SRMR). They have been incorporated into national laws in all EU Member States. In the Netherlands, these laws include the Financial Supervision Act (Wet op het financieel toezicht) and the Bankruptcy Act (Faillissementswet).

For insurers, we have a national law in the Netherlands: the Act on the Recovery and Resolution of Insurers (Wet herstel en afwikkeling van verzekeraars). A European law on insurer resolution is currently under construction: the Insurance Recovery and Resolution Directive (IRRD).

The Regulation on a framework for the recovery and resolution of central counterparties deals with resolution of central counterparties (CCPs). It is further detailed in various Dutch laws such as the Bank Act (Bankwet), the Financial Supervision Act and the Bankruptcy Act.