Resolution Financing Mechanism

Article 121 of the Bank Recovery and Resolution Act (RRA) requires the establishment of a specific resolution financing mechanism. The mechanism, fully funded by banks and investment firms seated in Liechtenstein, should support the effective application of resolution instruments and powers. The financial means of the mechanism will be administrated by the «Anstalt» (“Anstalt zur Finanzierung finanzmarktstabilisierender Massnahmen”), which was installed by law.

The financial means available under this mechanism are intended to support the effective application of the resolution regime if necessary (e.g. if a bank or investment firm fails and shall be resolved). The funds of the resolution financing mechanism may only be used to the extent necessary for effective application and for the purposes set out in Art. 122 RRA. Specifically, the funds may be used to collateralize assets or liabilities of the institution under resolution, to provide capital for a bridge institution or to compensate shareholders and creditors (after a “bail-in”).

The resolution financing mechanism shall be funded by the Liechtenstein banks and investment firms on a pro rata basis according to a contribution scale anchored by law. The target level is defined with at least 1% of the covered deposits of all institutions authorized in Liechtenstein. The target shall be reached by December 31, 2027. The calculation of contributions is carried out by the Financial Market Authority (FMA) Liechtenstein as the national resolution authority.

For the period 2023, the contributions amounted to a total of CHF 5.3 million. Currently the financial means of the resolution mechanism amounts to more than CHF 31 million.