Mechanics
A partial property transfer arises when a resolution authority uses its powers to move only a selected portion of a failing bank's assets, rights or liabilities to a recipient, leaving the remainder in the residual entity. It is the counterpart to a transfer of the whole institution. Partial transfers occur most often under the sale of business tool, where part of the bank is sold to a private purchaser, and the bridge institution tool, where a viable part is moved to a temporary, publicly controlled bridge bank while the rest is wound up. The asset separation tool, which transfers impaired assets to an asset-management vehicle, likewise involves a partial transfer.
Creditor safeguards
Because a partial transfer splits a single legal entity, it creates the risk that some creditors are advantaged and others disadvantaged depending on which side of the line their claims fall. The BRRD therefore attaches a set of safeguards to any partial transfer. Protected arrangements, namely netting and set-off agreements, title-transfer financial collateral arrangements, secured liabilities, and structured-finance and covered-bond arrangements, must be respected: the authority may not separate linked rights and liabilities in a way that undermines them. Security interests must move with the assets they secure, and the components of a structured-finance arrangement must be kept together.
No creditor worse off
Overlaying these specific protections is the general no creditor worse off safeguard. A creditor left behind in the residual entity, or one whose claim is transferred, must not receive less than it would have obtained had the whole bank instead been wound up under normal insolvency proceedings. If an independent valuation later shows that it did, the creditor is entitled to compensation from the resolution financing arrangements. The valuation supporting the resolution decision must specifically consider the impact of any partial transfer.
Relevance
For investors and counterparties, the partial-transfer safeguards determine how much protection a particular instrument or contract enjoys if the issuer fails: secured and netted positions are shielded, while ordinary senior claims may be left in a residual entity heading for liquidation. The choice of what to transfer is therefore never purely commercial; it is bounded by the protected classes. For resolution planners, the need to respect protected arrangements is a central constraint on separability and on the design of a credible resolution strategy, and it is one reason banks are expected to be able to identify and separate their critical functions in advance.