Last update: 25 March 2026 - Consolidation of content on banking resolution and the role of the ACPR in the recovery and resolution mechanism.
When a bank falters, the ordinary rules of bankruptcy do not apply. The risk of contagion to the entire financial system calls for a special regime, overseen by the public authorities. The bank resolution is the process by which the public authorities take control of a credit institution in difficulty in order to maintain its critical functions, protect depositors and preserve financial stability, without using taxpayers’ money. In Europe, this mechanism is part of the’banking union, This is the institutional architecture built after the 2008 crisis around three pillars.
Banking union: three pillars against systemic risk
Launched in 2012, banking union is designed to break the vicious circle between the banking crisis and the sovereign debt crisis that almost engulfed the eurozone. Its architecture is based on three complementary mechanisms.
The first pillar is the Single Oversight Mechanism (MSU), created by Regulation (EU) No 1024/2013. It entrusts the European Central Bank (ECB) with the direct prudential supervision of large credit institutions in the eurozone. The national authorities, including the ACPR in France, continue to supervise less significant institutions under the indirect control of the ECB. This pillar is the subject of a dedicated article on our website.
The second pillar is the Single Resolution Mechanism (MRU), established by Regulation (EU) No 806/2014. It creates two institutions: the Single Resolution Board (SRB), which decides on the resolution of significant banks, and the Single Resolution Fund (SRF), funded by contributions from the banking sector, which finances resolution operations.
The third pillar, the european deposit guarantee scheme (EDIS), is still under negotiation. It aims to pool depositor protection at European level.
The role of the ACPR in crisis prevention and resolution
In France, the Autorité de contrôle prudentiel et de résolution (ACPR) has two distinct functions, housed in two separate bodies. Its supervisory college is responsible for the ongoing supervision of credit institutions and insurance companies: it grants authorisations, monitors the financial soundness of the supervised entities and ensures that their customers are protected.
Sound resolution college intervenes when the situation deteriorates beyond what can be rectified. It has considerable powers: it can trigger a resolution procedure, choose the instruments to be used and appoint a special administrator. For significant institutions directly supervised by the ECB, the power to decide on resolution lies with the CRU; the ACPR then implements European decisions in its capacity as national resolution authority.
Even before a crisis erupts, the ACPR can take measures to early intervention measures These include requiring the implementation of a recovery plan, imposing changes in strategy or governance, suspending management or even appointing a provisional administrator with extensive powers (art. L. 612-34 CMF). The aim of this range of preventive measures is to correct an institution's course before resolution becomes necessary.
Recovery and resolution plans: anticipating the crisis before it happens
The BRRD Directive (2014/59/EU) and its French transposition impose a dual preventive planning system.
The recovery plan: the establishment's survival guide
Each credit institution must draw up and keep up to date a preventive recovery plan (recovery plan). This document, validated by the supervisory authority, identifies the measures that the institution could activate by its own means to overcome a serious crisis: disposal of assets, raising of capital, restructuring of activities, changes in governance. It is based on crisis scenarios and precise trigger indicators.
The issue is responsiveness. A business that has prepared its recovery options can act quickly and in a structured way, without waiting for the situation to become irremediable.
The resolution plan: organising an orderly default
At the same time, the resolution authorities (ACPR or CRU) draw up a plan for each institution. preventive resolution plan (resolution plan). Unlike the recovery plan, this document does not seek to save the institution. It prepares the ground for its orderly «death» if the recovery measures fail.
As part of this planning process, the authority assesses the resolvability the entity: does its legal structure allow for effective resolution? Are critical functions identified and separable? Do the financial contracts contain the necessary clauses? If obstacles are identified, such as an overly complex structure or excessive overlap of critical activities, the authority may require structural changes to remove them.
When is the resolution triggered?
Resolution is subject to strict conditions. Article L. 613-49 of the Monetary and Financial Code, transposing Article 32 of the BRRD, requires three cumulative conditions to be met:
- The company is proven or foreseeable failure (failing or likely to fail), within the meaning of Article L. 613-48 CMF ;
- No alternative private measure does not make it possible to remedy the situation within a reasonable time ;
- The resolution is necessary in the public interest continuity of critical functions, financial stability and depositor protection. A judicial liquidation under ordinary law would not achieve these objectives to the same extent.
Default is actual or foreseeable when the institution no longer complies, or is likely to fail in the near future, with the conditions of its authorisation, in particular prudential capital requirements.
A independent valuation of assets and liabilities (art. 36 BRRD) is required before any resolution instruments can be implemented. This valuation, carried out by an independent expert, forms the basis for decisions on loss absorption and recapitalisation.
The four resolution tools
The BRRD provides resolution authorities with a modular toolbox that can be adapted to the circumstances of each crisis.
The bail-in: getting shareholders and creditors to contribute
Le internal refloating (bail-in) is the central instrument of the new regime. It breaks with the logic of the public bailouts of 2008 (lease-out) by requiring the institution's shareholders and creditors to absorb losses before any recourse to public funds.
The bail-in operates according to a strict hierarchy of loss absorption defined in article L. 613-55-5 of the CMF :
- The core capital (CET1) are cancelled first; ;
- The additional equity instruments (AT1) are written down or converted ;
- The Tier 2 capital instruments (T2) ;
- La senior unsecured debt, a category introduced by BRRD II ;
- The ordinary unsecured claims.
Guaranteed deposits (up to €100,000) are expressly excluded from the bail-in.
Disposal of activities
The resolution authority may transfer all or part of the assets, rights and liabilities of the failing institution to a solvent purchaser. This sale ensures the continuity of the transferred activities, preserves jobs and customer relations.
Bridge bank
Healthy« assets and critical functions can be transferred to a temporary entity, the»relay centre, fully controlled by the public authorities. This transitional structure maintains essential services while a definitive buyer is found or a permanent solution is put in place.
Separation of assets (bad bank)
This instrument isolates impaired assets of the failing institution into a hive-off vehicle. The aim is to clean up the balance sheet to facilitate recovery or the sale of viable activities. It can only be used in combination with another resolution instrument.
MREL and TLAC: guaranteeing the effectiveness of bail-in
The bail-in only works if the institution holds sufficient absorbable financial instruments. The BRRD requires each institution to comply with a MREL (Minimum Requirement for own funds and Eligible Liabilities), calibrated individually by the resolution authority according to the resolution strategy adopted.
For banks of global systemic importance (G-SIBs), the MREL converges with the TLAC (Total Loss-Absorbing Capacity), a standard set by the Financial Stability Board. These requirements impose on lending institutions permanently hold a «cushion» of financial instruments designed to absorb losses in the event of resolution.
The NCWO principle: creditor protection
The principle No Creditor Worse Off (art. L. 613-57 CMF) is the fundamental safeguard of bail-in. No creditor may suffer losses as a result of the resolution that are greater than those it would have suffered in a conventional judicial liquidation. This principle is verified by a valuation ex post carried out by an independent expert. If a creditor is injured, he or she is entitled to compensation from the Single Resolution Fund.
Financing the resolution
Even if the principle is not to use public money, a resolution procedure may require liquidity: to capitalise a bridge institution, guarantee certain liabilities or facilitate a sale. Financing is based on a dedicated system, fed by the banking sector itself.
At national level, the Deposit Guarantee and Resolution Fund (FGDR) collects contributions from the French sub-fund. At eurozone level, these contributions are paid into the Single Resolution Fund (FRU), with a capacity of several tens of billions of euros. The FRU is used to finance the resolution of significant banks supervised by the ECB, providing a credible financial strike force without depending on the finances of a single Member State.
Can the State take our money in the event of a banking crisis?
This issue has regularly come up in public debate, particularly since the Cyprus crisis in 2013.
Deposit guarantee: up to €100,000 protected
In France, the FGDR guarantees deposits up to a maximum of 100,000 per depositor and per institution, in accordance with Directive 2014/49/EU and Articles L. 312-4 et seq. of the CMF. This ceiling covers current accounts, term accounts, unregulated passbook savings accounts and PEL home savings schemes.
In the event of default, the ACPR has 5 working days to establish that the deposits are unavailable, after which the FGDR compensates depositors within a period of 7 working days (art. L. 312-5 CMF). Financial instruments (securities accounts, PEAs) benefit from a separate mechanism: the securities guarantee, up to a maximum of 70,000 per investor (art. L. 322-1 CMF).
Could the bail-in affect savers?
The BRRD Directive expressly protects guaranteed deposits bail-in. Only deposits in excess of the €100,000 ceiling, and only after all other eligible liabilities have been exhausted, can be subject to internal bail-in. In practice, the loss-absorption hierarchy places protected depositors at the very bottom of the scale of contributors.
Concrete cases of bank resolution
Cyprus (2013): bail-in before the BRRD directive
In March 2013 Laiki Bank (Popular Bank of Cyprus) lost all of their unsecured deposits. Those of the Bank of Cyprus saw 47.5 % of their deposits in excess of €100,000 converted into shares. This operation, carried out before the BRRD directive came into force, has been described as a bail-in. de facto. The CJEU ruled that the applicants' appeals were inadmissible (CJEU, Mallis v Commission, Case C-105/15 P), the measures having been taken by the Cypriot national authorities and not by the European institutions. This crisis directly motivated the adoption of the harmonised resolution framework.
Banco Popular (2017): the first resolution under the MRU regime
7 June 2017, Banco Popular Español became the first bank to be resolved by the CRU. Shareholders and holders of subordinated debt were bailed out in full, and the bank was sold to Santander for a symbolic one euro. Depositors suffered no loss. The EU General Court upheld the legality of the resolution (Case T-523/17, Student v. CRU).
The specificities of the insurance sector
The resolution framework also applies to insurance companies, with significant adaptations. Insurance crises are often slower to emerge and the risk of immediate contagion less acute.
The main difference: the absence of a generalised bail-in for the insurance sector. The complexity of policyholders' rights makes such a measure difficult to transpose. The authorities prefer to transfer portfolios of insurance policies to other bodies. Insurance guarantee funds intervene as a last resort to protect the rights of policyholders if no takeover solution is found.
Legal recourse for customers and depositors
There are a number of remedies available to customers of an establishment in difficulty:
- Compensation from the FGDR automatic for guaranteed deposits, within 7 working days (art. L. 312-4 CMF).
- Liability action against directors FGDR: the FGDR may take legal action against de jure or de facto directors for reimbursement of sums paid (art. L. 312-6 CMF).
- The right to compensation NCWO If the resolution has caused losses greater than those of a liquidation, the creditor is entitled to compensation from the FRU.
- Proceedings before the CJEU against the decisions of the CRU (European Court of First Instance), Student v. CRU, Case T-523/17).
- Withdrawal of approval Closure: this is the ultimate administrative measure, ending the institution's right to operate and automatically leading to its dissolution and entry into compulsory liquidation. Depositors are then exempt from declaring their claims (art. L. 613-30 CMF).
Bank resolution litigation is at the crossroads of administrative law and insolvency law. For a legal support in banking law, Our firm advises on these issues, as well as handling litigation.
Frequently asked questions
What is a bank resolution?
Bank resolution is a process whereby the public authorities take control of a bank in difficulty in order to preserve its critical functions and protect depositors, without resorting to a rescue using taxpayers' money. It differs from judicial liquidation in that it aims to ensure the continuity of the business.
What are the three pillars of banking union?
The banking union is based on the Single Supervisory Mechanism (SSM), entrusting banking supervision to the ECB; the Single Resolution Mechanism (SRM), entrusting resolution to the CRU; and the European Deposit Insurance Scheme (EDIS), currently under negotiation.
What is bail-in?
Bail-in requires the shareholders and creditors of a bank in difficulty to absorb losses before any recourse to public funds. Guaranteed deposits of up to €100,000 are protected and cannot be subject to bail-in.
What are the ACPR's tasks in terms of resolution?
The ACPR is France's national resolution authority. Its resolution college can initiate a resolution procedure, choose the instruments to be applied and appoint a special administrator. For significant banks, it executes the decisions of the European Single Resolution Board.
What is the BRRD?
Directive 2014/59/EU (BRRD) establishes the harmonised European framework for the recovery and resolution of credit institutions. It provides for preventive plans, resolution instruments including bail-in, and minimum capital requirements (MREL).
What is MREL?
The MREL (Minimum Requirement for Own Funds and Eligible Liabilities) is the minimum requirement for own funds and eligible liabilities that each bank must hold to guarantee the effectiveness of the bail-in. For systemically important banks, the MREL converges with the TLAC of the Financial Stability Board.
Can the State take our money in the event of a banking crisis?
No for guaranteed deposits: the FGDR protects your deposits up to €100,000 per depositor and per institution. Only deposits exceeding this ceiling could theoretically be affected by a bail-in, and only after all other eligible liabilities have been exhausted.
Sources
- Directive 2014/59/EU of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms (known as «BRRD»).
- Directive 2019/879/EU of 20 May 2019 amending the BRRD Directive (known as «BRRD II»).
- Regulation (EU) No 806/2014 of 15 July 2014 establishing uniform rules and procedure for the resolution of credit institutions (known as the «MRU Regulation»).
- Regulation (EU) No 1024/2013 of 15 October 2013 entrusting the ECB with tasks relating to the prudential supervision of credit institutions (known as the «MSU Regulation»).
- Monetary and Financial Code, articles L. 613-34 et seq. (prevention and resolution measures), L. 613-49 (conditions for initiating resolution), L. 613-55-5 (loss absorption hierarchy), L. 613-57 (NCWO principle), L. 312-4 et seq.
- CJEU, Mallis and Malli v Commission and ECB, Joined cases C-105/15 P to C-109/15 P, 20 September 2016.
- EU Court of First Instance, Student v. CRU, Case T-523/17 (Banco Popular resolution).
EN 
FR