Published: 17.11.2022 Updated: 05.07.2024

A resolution action is taken when the resolution authority (the Single Resolution Board or Latvijas Banka) determines that a failing bank or an investment firm cannot initiate the insolvency proceedings without harming the public interest or causing financial instability.

A resolution action constitutes the decision of the resolution authority to initiate the resolution proceedings of a bank or an investment firm, application of a resolution tool or the exercise of one or several resolution powers.

Resolution objectives

When applying resolution tools to the institution under resolution, the resolution authority chooses the tools that best achieve the following resolution objectives:

  • to guarantee the continuity of critical functions
  • to avoid significant adverse effects on the stability of financial markets and to maintain market discipline
  • to protect the government resources by reducing reliance on the state aid
  • to protect the interests of depositors and investors
  • to protect customers' financial resources and assets

Resolution plan

To ensure the operational response of the resolution authority in the situation of crisis, for each bank and investment firm under resolution a resolution plan has been drawn up (to be reviewed once a year) and an assessment of resolvability is carried out.

In the resolution planning process, the resolution authority ensures the feasibility and credibility to apply a resolution action to a bank or to an investment firm if the following conditions for resolution are met:

  • the competent authority or the resolution authority finds that the bank or the investment firm is failing or is likely to fail.
  • no alternative private sector measures are available, if implemented within a reasonable time-frame, would prevent the failure of the bank or the invetsment firm.
  • the resolution action is necessary in the public interest in order to achieve one or more resolution objectives and the resolution objectives would not be achieved to the same extent, if the insolvency proceedings were applied to the bank or to the investment firm.

Resolution tools

With regard to to a bank or to an investment firm that fulfils all the conditions for the application of resolution measures, the resolution authority is entitled to apply one or several of the following resolution tools:

  • sale of business tool
  • bridge institution tool
  • asset separation tool
  • bail-in tool