Single Resolution Fund

The SRF has been built up over a period of 8 years (2016-2023) and, as of July 2023, the SRF stands at approximately €77.6 billion. The target size of the SRF is set as at least 1% of the amount of covered deposits of credit institutions in all 21 Banking Union countries by the end of this year (2023). 

The individual amount each bank owes is calculated pro-rata to the amount of its liabilities (excluding own funds and covered deposits) in respect of the aggregate liabilities (excluding own funds and covered deposits) of all the credit institutions and certain investment firms in Banking Union countries. Amounts banks owe to the fund are in proportion to the risks taken by each institution.

Going forward, the new backstop to the SRF will also be introduced. This is an additional emergency fund, operated by the European Stability Mechanism, that can be called upon and doubles the size of the SRF. In the first instance, the backstop is provided through public money to provide immediate support and confidence to the market. However, this publicly funded backstop then has to be paid back in the years after its use by all of the banks in the Banking Union, meaning the taxpayer is fully reimbursed.

The Initial Period for the constitution of the Single Resolution Fund is expected to end on 31 December 2023. The SRB will verify in the first months of 2024 whether the available financial means in the SRF is equal to at least 1% of covered deposits held in the BU. Should the available financial means in the SRF decrease to below this target level, the Board will assess whether ex-ante contributions to the SRF are to be calculated and collected in the 2024 contribution period.

Within the resolution scheme, the SRF may be used only to the extent necessary to ensure the effective application of the resolution tools, as last resort, in particular:

• To guarantee the assets or the liabilities of the institution under resolution;
• To make loans to or to purchase assets of the institution under resolution;
• To make contributions to a bridge institution and an asset management vehicle;
• To make a contribution to the institution under resolution instead of the write-down or conversion of liabilities of certain creditors under specific conditions;
• To pay compensation to shareholders or creditors who incurred greater losses than under normal insolvency proceedings.

The SRF shall not be used to absorb the losses of an institution or to recapitalise an institution. In exceptional circumstances, where an eligible liability or class of liabilities is excluded or partially excluded from the write-down or conversion powers, a contribution from the SRF may be made to the institution under resolution under two key conditions, namely:

• Bail-in of at least 8%: losses totalling not less than 8% of the total liabilities including own funds of the institution under resolution have already been absorbed by shareholders after counting for incurred losses, the holders of relevant capital instruments and other eligible liabilities through write-down, conversion or otherwise;
• Contribution from the SRF of maximum 5%: the SRF contribution does not exceed 5% of the total liabilities including own funds of the institution under resolution.