A Single [SM]all Bank Resolution Framework - Proposal for a Single Framework

Jul 19, 2026

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A proposal outlining a single small bank resolution framework for FinSAC client countries, focusing on how to assess public interest, apply legal safeguards, and structure resolution tools. It evaluates preferred resolution strategies, including a two-step sale of business approach, and examines resolution funding, liquidity, and public support. The paper also addresses banks’ resolvability and resolution planning for small banks, highlighting gaps in loss-absorbing capacity and conversion capacity and considering the role of resolution financing mechanisms.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages58

Reading Time2 h 26 min

AccessFree to download

Contents

Abbreviations

Acknowledgements and Disclaimer

Executive Summary

1. Bank Resolution Practices in FinSAC Client Countries

1.1. State of play of resolution regimes in FinSAC client countries

1.2. The bank liquidation procedure in FinSAC client countries

2. A Single [SM]all Bank Resolution Framework

2.1. The public interest assessment

2.2. Resolution powers and tools – the case for a 2-step sale of business

2.3. Resolution funding, liquidity, and public support

2.4. Resolvability and resolution planning for sm[all] banks

3. Conclusion

Annex 1. Definition of key terminology used throughout the paper

Annex 2. Overview of Resolution Frameworks in FinSAC client and selected benchmark countries

Annex 3. Resolution regimes in the EU and US – Comparative overview of selected aspects

Annex 4. Legal consideration on the Public Interest Assessment

Annex 5. Overview of standard liquidation and resolution tools

Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized May 2025 © 2025 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 [Internet: www.worldbank.org](Internet: www.worldbank.org) This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be construed or considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: [pubrights@worldbank.org](pubrights@worldbank.org). Cover design: Kora Reichardt Contents 1 CONTENTS Abbreviations 3 Acknowledgements and Disclaimer 4 Abstract 5 Executive Summary 6 1. BANK RESOLUTION PRACTICES IN FINSAC CLIENT COUNTRIES 12 1.1. State of play of resolution regimes in FinSAC client countries 12 1.2. The bank liquidation procedure in FinSAC client countries 14 2. A SINGLE [SM]ALL BANK RESOLUTION FRAMEWORK 16 2.1. The public interest assessment 16 2.1.1. The public interest assessment as a condition for BRRD resolution 16 2.1.2. The public interest assessment as legal safeguard under a single [sm]all bank regime 19 2.2. Resolution powers and tools – the case for a 2-step sale of business 22 2.2.1. Preferred resolution strategies for banks in FinSAC client countries 22 2.2.2. Proposal for a two-step SoB under a staggered resolution approach 24 2.3. Resolution funding, liquidity, and public support 26 2.3.1. Lack of loss absorbing and conversion capacity in FinSAC client countries 27 2.3.2. Use of DIFfor resolution and/or need for a separate resolution fund 28 2.3.3. Liquidity under resolution –forward looking ELA 34 2.3.4. Public support 35 2.4. Resolvability and resolution planning for sm[all] banks 35 3. CONCLUSION 37 2 Contents Annex 1. Definition of key terminology used throughout the paper 38 Annex 2. Overview of Resolution Frameworks in FinSAC client and selected benchmark countries 40 Annex 3. Resolution regimes in the EU and US – Comparative overview of selected aspects 43 Annex 4. Legal consideration on the Public Interest Assessment 48 Annex 5. Overview of standard liquidation and resolution tools 51 1. Liquidation payout as a default 51 2. Insured deposit transfer 52 3. Assets and liabilities or share transfer to a private acquirer 52 Increase market concentration / competitive effect / welfare effecting amount-financial stability 53 4. Bridge Bank 54 5. Open Bank Bail-In Resolution Strategies 54 Abbreviations 3 ABBREVIATIONS BRRD CMDI DGSD DIF EBA ECB ECHR ECJ ELA

FAQs

What is the core purpose of the proposed single small bank resolution framework?

It presents a single framework for handling the resolution of small banks in FinSAC client countries, centering on public interest assessment, legal safeguards, and appropriate resolution powers and tools.

How does the framework address liquidation and resolution tools for small banks?

It discusses standard liquidation defaults and multiple resolution tools, and it argues for preferred strategies such as a two-step sale of business under a staggered resolution approach.

What issues does the framework raise about resolution funding and liquidity?

It highlights limitations in loss-absorbing and conversion capacity in FinSAC client countries and examines how resolution financing, including potential use of DIF and liquidity support such as ELA, can be managed.

Jul 19, 2026

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