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Bail-in: part of SRM’s toolkit

About bail-in

Bail-in is a key resolution tool, which allows the write-down of debt owed by a bank to creditors or its conversion into equity. In the Banking Union (BU), preparation and execution of the bail-in is a joint effort by all relevant authorities in the Single Resolution Mechanism (SRM). The SRB and the national resolution authorities (NRAs) closely cooperate to ensure that at the time of resolution all necessary actions are taken to restore the bank to viability (in case of an open bank bail-in) and to meet the resolution objectives.

Following a FOLTF declaration and the fulfilment of the other criteria of Article 18(1), the SRB drafts and adopts a resolution scheme. In turn, the relevant NRA adopts an implementing act of the resolution scheme. This document, addressed to the bank, guides the operations within the bank (internal execution) and with external stakeholders (external execution) for executing the SRB’s bail-in decision. 

These operations are subject to the national bail-in mechanic applied to the bank under resolution. This mechanic is defined by each BU jurisdiction in accordance with their respective national legal framework. Against this background, coordination within the SRM is of the utmost importance to ensure an effective bail-in, in particular in the context of a cross-border resolution case.

This document is structured around the different stylised phases of a resolution process, describing the roles of the SRB, the NRAs, the bank, as well as other stakeholders, throughout these phases in relation to bail-in, as illustrated in the figure below. 

Guidelines published by the EBA

When publishing their approaches to bail-in, resolution authorities follow the recommendations of the EBA’s Guidelines to resolution authorities on the publication of the write down and conversion and bail-in exchange mechanic.

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