Bank Recovery and Resolution Directive (BRRD)
The Bank Recovery and Resolution Directive established a common framework for the recovery and resolution of banks and investment firms, which entered into force in January 2015. The rules allow resolution authorities to maintain the critical functions of a large failed bank by forcing creditors and shareholders to bail in the bank’s debt, rather than resorting to a taxpayer bailout. They also require banks to draft a recovery plan that would enable the bank’s turnaround in a stress situation, and a resolution plan to address potential impediments to resolution if the bank fails.
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