Contributions to resolution financing arrangement

The resolution financing arrangement for the Czech Republic is the Resolution Fund, whose funds amounted to approximately CZK 38.8 billion at the end of 2024. The CNB regularly monitors the development of covered deposits,[1] and if it concludes that the volume of funds in the Resolution Fund is, or could be, lower than 1% of covered deposits in the near future, it will set contributions for institutions in an appropriate amount.[2] The amount of an institution’s individual contribution to the Resolution Fund depends on its size and risk profile and is specified in the Commission Delegated Regulation EU 2015/63.

The funds in the Resolution Fund are managed by the Financial Market Guarantee System. In exceptional cases, the Resolution Fund can also be tapped in the resolution of an institution to:

  • finance resolution (e.g. to purchase the assets of a failing institution, to provide a loan or a guarantee in the sale of the failing institution’s business or assets to a selected acquirer, or to top up capital of that acquirer),
  • pay compensation according to the “no-creditor-worse-off” principle if the results of the application of resolution tools lead to the institution’s owner (or creditor) being entitled to lower payment compared to liquidation or insolvency.

As the funds are public, their use is subject to prior approval by the European Commission under the public support rules.

[1] The deposits of individuals (natural persons) and companies (legal entities) except financial institutions up to a maximum amount equivalent to EUR 100,000.

[2] Pursuant to Article 209(2) of the Recovery and Resolution Act, institutions and branches of institutions from non-EU Member States are obliged to contribute to the Resolution Fund. If an institution ceases to exist as a result of a national merger, the obligation to pay the contribution to the Resolution Fund that would have fallen to the defunct institution passes to its legal successor.