Resolution reserve

Under the Resolution Act, dealing with banks in crisis is to be financed in the first place by losses and costs for recapitalisation being borne by shareholders and creditors. But in extraordinary circumstances external funding may be required. A resolution reserve is being established for this purpose and it will be built up by fees from the institutions.

One reason why external funding may be required in a resolution procedure is that certain liabilities may need to be exempted from a bail-in for stability reasons. The reserve may also be used to guarantee new debt that an institution in resolution may need to issue. The use of the reserve is limited by special regulations.

Transfer of money from the stability fund

Part of the existing stability fund will be transferred to the new resolution reserve. Along with the deposit insurance fund, this means that there will be three different financing arrangements in Sweden for the purpose of guaranteeing financial stability.

The institutions pay fees

The resolution reserve will be financed by fees paid by the institutions covered by the Resolution Act. Small institutions will have their fees set in accordance with a standard model, while large institutions will have to pay a charge proportional to the risk they pose to the system as a whole.

Fees for the stability fund will end when fees start to be levied for the resolution reserve.