What the concept describes

The resolution perimeter is a planning concept used by resolution authorities to delineate which parts of a banking group would be captured by a resolution action, and which would not. It is not defined as a standalone term in the legislation; it is the practical shorthand authorities and banks use when mapping a group into the entities that would be stabilised in resolution and the entities that would instead be wound down or liquidated under normal national insolvency procedures.

Drawing the perimeter starts from the group's legal and operational structure. Authorities identify the resolution entity or entities at which resolution powers would be applied, the wider resolution group that hangs beneath each resolution entity, and any liquidation entities that are not intended to be resolved. Under a single point of entry strategy the perimeter typically centres on one parent resolution entity; under a multiple point of entry strategy several resolution entities, each with its own perimeter, coexist within the group.

Why the boundary matters

The perimeter determines where loss-absorbing and recapitalisation capacity must sit. Resolution entities must hold external MREL against the consolidated balance sheet they support, while operating subsidiaries inside the perimeter are usually equipped with internal MREL that upstreams losses to the resolution entity. Entities placed outside the perimeter as liquidation entities are generally not required to hold MREL, because they are expected to fail through insolvency rather than be recapitalised.

The perimeter also shapes how critical functions and shared services are protected. Functions judged critical, and the operational arrangements that support them, need to remain available across the entities that are kept open. Where key services are hosted in an entity that would fall outside the perimeter, that misalignment can constitute an impediment to resolvability that authorities require the bank to remedy.

There is no single article that defines the resolution perimeter. It follows from the resolution planning provisions of the BRRD, Articles 10 to 14, which require the resolution plan to identify how resolution tools and powers would be applied to the group, and from the definitions in Article 2, which underpin the concepts of resolution entity, resolution group and group entity. Within the banking union the Single Resolution Board sets the perimeter for the banks under its remit through the same planning framework, reflected in the SRMR, Articles 8 and 9.

Practical relevance for banks and investors

For banks, the perimeter is a structural output of resolution planning that drives concrete requirements: the placement of issuing entities, the distribution of internal and external MREL, and the design of intragroup guarantees and service arrangements. Changing the perimeter, for instance by designating an additional resolution entity, changes where debt must be issued.

For investors, knowing whether an issuer sits inside the resolution perimeter, and at what level, is central to judging how its bonds would be treated at the point of failure. Debt issued by a resolution entity is exposed to external bail-in; debt issued by an entity outside the perimeter may instead face ordinary insolvency, with different recovery expectations. The perimeter therefore links a group's legal structure directly to the loss allocation an investor should anticipate.