Resolution is the use of appropriate tools in the case of troubled banks facing financial distress.

Banking resolution is the process of restructuring a bank by a resolution authority, using the tools and the resolution powers to ensure the continuity of the critical function of the bank (eg. deposits, payment transactions), to restore its viability, wholly or partially, and to liquidate the residual part of the credit institution under normal insolvency proceedings.

Resolution action aim to :

  • Ensure continuity of the bank’s critical functions
  • Safeguard public interests and financial stability 
  • Minimize costs to taxpayers

The recent global financial crisis showed that the existing instruments available to supervisory authorities were not adequate to effectively deal with the new difficulties that banks were facing. Thus, authorities often used the public funds to avoid banks winding up, which would then have significant adverse effects impacts on the country's financial stability. 
In order to set out clear rules and mechanisms for resolution, the European Union drafted Directive 2014/59/BE for the recovery and resolution in financial institutions, which entered into force on 1 January 2015 in all EU Member States.

Law 133/2016 "On recovery and resolution of banks in the Republic of Albania".(published in the Official Gazette, Nr.163of  11/01/2017) harmonises the legal framework of resolution in Albania with Directive 2014/59/EU, designates the Bank of Albania as the Resolution Authority for banking sector.
As a resolution authority, the Bank of Albania has responsabilities regarding planning and carrying out of resolution actions:

  1. Prepares  Resolution plans.
  2. Assess the bank’s resolvability and identifies impediments to resolution and takes measures to remove them.
  3. Lays down the minimum level requirements for own funds and eligible liabilities - MREL for each bank.
  4. Drafts and implements resolution strategies (implements resolution instruments and if necessary, uses the Resolution Fund).
  5. Collects contributions for the Resolution Fund and approves the policies for its investment.