The process has four stages:
- Regular supervision: the bank is not in (financial) difficulties and complies with all requirements.
- Recovery plan: the bank's situation deteriorates, and using its recovery plan it takes the necessary measures to address the problems.
- Early intervention: the bank's situation deteriorates further and DNB imposes additional measures to address the problems.
- Resolution or liquidation: the bank fails, and it either goes into liquidation or into resolution.
If the bank's situation deteriorates very rapidly, one of the intermediate stages may be skipped.
The banks themselves are responsible for drawing up an annual recovery plan. DNB on the other hand is responsible for drawing up the resolution plans for banks, in cooperation with the Single Resolution Board. The recovery plan describes how a bank's actual situation can be assessed in the event of difficulties and which measures can be taken to resolve the problems. DNB reviews the banks' recovery plans for their effectiveness and feasibility, and can require adjustments to maximise recovery options.
If a bank has taken inadequate or insufficient measures, or has failed to take any measures at all, DNB will intervene at the earliest possible stage and impose its own recovery measures. DNB may require a bank to:
- sell business units
- replace members of the management board
- change the corporate strategy or structure
- negotiate with creditors about debt restructuring (e.g. a voluntary conversion of debt into shares)
Resolution or liquidation
If recovery or a private solution, such as a voluntary sale, is no longer an option, the bank will go into resolution or liquidation. In the first case DNB will apply resolution tools, in the latter DNB will file for the bank's liquidation. The court will then appoint a liquidator to liquidate the bank. DNB will also activate the deposit guarantee scheme and proceed to payment of the guaranteed deposits.