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De Nederlandsche Bank (DNB) determines in advance how it will intervene in a bank that gets into difficulty. The bank must remove any obstacles to such intervention. This process is known as resolution planning. Resolution planning ensures that both DNB and the banks are better prepared for a possible crisis, thereby reducing the impact of a bank's failure.

Due care – the resolution plan

We draw up a resolution plan for each bank. It describes how we may intervene if a bank is in difficulty. It includes:

  • a resolution strategy
  • a description of how operational and financial continuity is guaranteed
  • the amount of loss-absorbing capacity a bank must hold
  • any obstacles to implementation of the resolution strategy.

Resolution strategy

A resolution strategy includes the following points:

  1. Will a bank be allowed to go bankrupt or will DNB take it into resolution? We determine this by means of a “public interest test,” in which we assess the impact of a bankruptcy on the financial system, the economy as a whole and society. For example, a bank may have so many payment or savings accounts that we consider this function to be critical. The impact on other banks, and hence financial stability in the Netherlands, may also be too great. In that case the bank qualifies for resolution. We update the public interest test each year and also perform it when a bank is failing or likely to fail.
  2. If a bank qualifies for resolution, we describe the preferred resolution tool. Generally, the bail-in tool is appropriate for the largest banks, while a sale is the most likely option for smaller banks.

Continuity

A bank’s operational and financial continuity is crucial for us to be able to implement the resolution strategy. The resolution plan states, for example, which ICT systems must continue to operate. Sufficient liquidity must also be guaranteed during and after resolution.

Safeguarding loss absorbing capacity

If a bank fails and goes into resolution, it must have sufficient “loss absorbing capacity”. This is necessary to absorb losses and recapitalise the bank with the aid of the bail-in tool. Since 2017, European resolution authorities have been able to impose on banks minimum required own funds and eligible liabilities (MREL). This safeguards a bank's loss-absorbing capacity. As of 1 January 2019, globally systemically important banks (G-SIBs) must comply with the total loss absorbing capacity (TLAC) standard of the Financial Stability Board (FSB), an international consultative body for the worldwide financial system.

Obstacles to resolution

Finally, we will assess whether the resolution plan is feasible in practice and whether there are obstacles to its implementation at the bank, such as an overly complex structure, non-marketable assets or an inability to supply certain information s promptly. If we identify an obstacle, the bank must eliminate it to ensure the feasibility of the resolution strategy.

The process

DNB contacts a bank before we draw up its resolution plan to request the information we need. Once we have finished the plan, we share the overall conclusions with the bank.