Abstract Resolution preserves a failing bank’s critical functions to support financial stability. Resolution costs are funded from the bail-in of creditors’ claims that the bank is required to hold or funds to which the industry contributes, such as deposit insurance funds or dedicated resolution funds. Public resources may sometimes be needed to enhance a bank’s internal resources and those of industry-sourced funds, and jurisdictions have adopted a variety of policies to deploy and recoup such public support. Resolution frameworks should integrate well-defined public support arrangements to enhance financial stability and contain adverse social costs. Elements to consider include the last resort principle, codified policies and procedures to recoup the public support, adequate governance arrangements and, subject to appropriate safeguards, some flexibility to deal with systemic risks.
Rastko Vrbaski (2026) studied this question.