Resolution tools

The following resolution tools are available to the Central Bank of Hungary acting in its capacity as the resolution authority:

  1. The sale of business tool: means the sale of all or part of an institution under resolution to another market participant who is not a bridge institution. This resolution tool is supposed to be the primary tool of resolution.
  2. The bridge institution tool: if the sale of assets is not a viable option, the assets and liabilities, as well as the critical functions of the institution under resolution can be taken over by a “bridge credit institution” or “bridge investment firm” established with a majority control of the state or the resolution fund. This is a temporary solution, also indicated by its name, until a buyer can be found for the institution under resolution.
  3. The asset separation tool: means the separation of the “good” and “bad” assets of the institution, which can be achieved by transferring the “good assets” to other institutions and eliminating the remaining part, or vice versa, by transferring the “bad assets” separated from the institution to a resolution asset management vehicle. In both cases, the main goal is to ensure the continuity of the essential functions of the institution.
  4. The bail-in tool: means that the unsecured creditors of the institution under resolution (e.g., bondholders) are involved in the absorbing of loss by writing off their claims or converting them into equity. It should be emphasized that deposits or parts of deposits not exceeding EUR 100,000 guaranteed by the National Deposit Insurance Fund (OBA) cannot be included in the bail-in.

The above resolution tools can be used individually or in combination, provided that the asset separation tool cannot be used alone, but only in conjunction with another resolution tool.