Resolution

The Czech National Bank (CNB) is pursuant to Act No. 374/2015 Coll., the Act on Recovery and Resolution in the Financial Market (Act), the resolution authority for banks, credit unions and certain investment firms (hereinafter "institutions”) in the Czech Republic.

Resolution means the restructuring of an institution by a resolution authority, through the use of resolution tools, to ensure the continuity of its critical functions, preservation of financial stability and restoration of the viability of all or part of that institution, while the remaining parts are put into normal insolvency proceedings. Hence, resolution is a process by which the authorities can intervene to manage the failure of an institution in an orderly fashion.

The Act provides the CNB with more comprehensive and effective arrangements to deal with failing institutions at national level, as well as cooperation arrangements to deal with cross-border banking failures as of 1 January 2016.

The issue of effective resolution gained in importance during the recent financial crisis of 2008–2009 when many countries and central banks were forced to minimize adverse impacts of bank failures using, among other measures, also taxpayers' money. The main objective of the new credible recovery and resolution framework is to avoid the need for taxpayers' money to the greatest extent possible and to transfer the costs of a potential failure of an institution to its owners and, if necessary, its creditors.

The main roles and powers of the CNB as the resolution authority include:

• Resolution planning
• Resolution execution
• Prescribing contributions to the resolution financing arrangement

The CNB as the resolution authority performs its tasks in accordance with the legislation in force and its activities are internally governed by its Organisational Statute (pdf, 190 kB).