Resolution tools

DNB has four tools at its disposal, which can be used in any combination to resolve a failing institution.


DNB beschikt over vier resolutie-instrumenten

Under the bail-in tool, the cost of a bank's failure is borne by its shareholders and creditors. This is in contrast to a bail-out, where the government uses taxpayers' money to save the bank. A bail-in consists of two steps:  

  • Step 1: Passing on losses to shareholders and creditors. 

First, DNB passes on the bank's losses to the shareholders. Their shares then become worthless. If this fails to cover all losses, the bank's creditors are expected to step in by writing off part of their claim on the bank. 

  • Step 2: Ensuring that the bank has sufficient capital to continue its activities 

DNB converts part of the bank's remaining debts into shares, in order to generate sufficient capital to continue its activities. The creditors whose debts are converted effectively become the bank's new shareholders. Not all debts can be converted into shares, however. Savings deposits up to EUR 100,000 are never converted, for example. 

In its Communication concerning the application of the bail-in tool, DNB describes how it intends to apply the bail-in tool on the basis of a hypothetical and simplified case. A previous version of the Communication was published in 2016. The link to the Communication can be found here.         


DNB may sell the bank or part of it without having to obtain consent from its shareholders or having to comply with other procedural requirements. This concerns shares, but also assets, rights and liabilities. For example, deposits can be sold together with high quality assets. This ensures that account holders retain access to their payments and savings accounts. DNB determines the price in the customary way and the sales process is carried out as transparently as possible. 

Temporary transfer to a bridge bank

DNB can transfer a failing bank or part of it to a bridge bank, which is partially or fully publicly owned. The bridge bank is an independent entity with its own banking licence. The part of the failing bank that remains is then declared bankrupt. A bridge bank is a temporary solution between a bank's failure and its sale to a market party. This allows the critical functions of the bank to continue and at the same time prevents the bank from being sold at an excessively low price or not at all due to time constraints. 

The bridge bank's shareholder is a bridging foundation. DNB is responsible for appointing its management. A bridging foundation can be the shareholder of multiple bridge banks. DNB is not a direct shareholder of the bridge bank, since this may lead to a conflict of interests between its central bank and supervisory tasks. However, DNB can monitor the bridging foundation and impose binding instructions on it. 

Temporary transfer to an asset and liability management vehicle

An asset and liability management vehicle resembles a bridge bank. Here too, part of a failing bank is transferred to another entity to allow the bank to recover. The transfer usually involves bad assets. The main difference from a bridge bank is that an asset and liability management vehicle does not contain deposits. The vehicle is not sold, but its assets are gradually disposed of and the vehicle eventually ceases to exist. The vehicle's shareholder is a bridging foundation.

Structure of bridge banks


There are two resolution funds to enable effective implementation of resolution instruments.