Principles and objectives of banking resolution

Resolution processes are based on the following principles:
Shareholders of the entities bear first losses, followed by creditors. Covered deposits are fully protected.
Creditors of the same rank will be treated equally.
No creditor shall incur greater losses than would have been incurred if an entity had been wound up under normal insolvency proceedings.
Management bodies of the entity will be replaced.

Current resolution regime pursues the following objectives:

To avoid significant adverse effects on financial stability, in particular by preventing contagion to the system.
To ensure the continuity of essencial services for the real economy or for financial stability.
To ensure an efficient use of public resources, by minimising reliance on extraordinary public financial support, being the shareholders and creditors, or the industry in its turn, who must assume the losses.
To this end, Law 11/2015 foresees both internal mechanisms for loss absorption by the shareholders and creditors of the entity under resolution (the internal recapitalization instrument), as well as the establishment of a National Resolution Fund, financed by contributions from investment firms that are not included under the scope of the Single Resolution Mechanism, as well as branches in Spain of credit institutions and investment firms established in third countries.
To protect depositors covered by the Deposit Guarantee Fund of Credit Institutions and investors covered by the Investment Guaranty Fund.
To protect client funds and client assets.

Objectives	Art. 14 Regulation (UE) nº 806/2014 -Art.3 Spanish Law 11/2015	Principles	Art. 15 Regulation (UE) nº 806/2014 -Art.4 Spanish Law 11/2015
TO PROTECT FINANCIAL STABILITY	To ensure the continuity of critical funtions, the interruption of which could disrupt the provision of essencial services for the real economy or for financial stability	PRIVATE LOSS ABSORPTION	The shareholders of the instituiton bear first losses. Creditors of the institution bear losses after the shareholders in accordance with the order of proiority of their claims. Creditors of the same class are treated in an equitable manner.
TO PROTECT FINANCIAL STABILITY	To avoid significand adverse effects on financial stability, in particular by preventinf contagion, including to market infrastructures, and by maintaining market discipline.	PRIVATE LOSS ABSORPTION	No creditor shall incur greater losses than would have been incurred if an entity had been wound up under normal insolvency proceedings
TO MONIMISE USE OF PUBLIC FUNDS	To ensure an efficient use of public resources, by minimising reliance on extraordinary public financial support.	REPLACEMENT OF MANAGEMENT BODIES	They will be replaced, except in those cases where the retention of the management body and senior management is considered to be necessary for the achievement of the resolution objectives. They shall provide all necessary assistance for the achievement of the resolution objectives. Natural and legar persons are made liable, subject to national law, for their responsibility for the failure of the institution.
TO PROTECT DEPOSITORS AND OTHER FUNDS	To protect depositors covered by the Deposit Guarantee Fund of Credit Institutions and investors covered by the investment Guaranty Fund.	PROTECTION OF COVERED DEPOSITS	Covered deposits are fully protected
TO PROTECT DEPOSITORS AND OTHER FUNDS	To protect client funds and client assets	SAFEGUARDS	Resolution actions are taken in accordance with the safeguards in this Regulation.
When pursuing this objectives, authorities shall seek to minimise the cost of resolution and avoid destruction of value unless necessary to achieve the resolution objectives.		SAFEGUARDS