Question

Describe some of the mechanisms to support the recovery of financial institutions, or their resolution (winding down) if recovery is not possible as stated in the Bank Recovery and Resolution Directive.

Answer 1

A financial institution is very important for every economy. A healthy economy must have a sound financial institutions. It is one of the market participants which helps to the ecominy to grow. There could be several mechanisms to support them. The banks must prepare recovery plans so that it helps in growing. The national authorities can also take decision in this regard. The financial institutions must contribute to a national fund which is established by the authorities so that falling banks can be saved. The contribution depends upon the size of the institutions. Some special shareholders like shareholders of bank and creditors can also pay thier share. So, these are some of the mechanisms so that a falling financial institutions can be saved.