What a resolution strategy is

The resolution strategy is the blueprint at the heart of a bank's resolution plan. It sets out how the authority would deal with the firm if it were assessed as failing or likely to fail and resolution were in the public interest: which legal entity or entities would be placed into resolution (the resolution entities), which resolution tools would be applied, in what sequence, and how the firm's critical functions would be kept running throughout.

The strategy is chosen through resolution planning and tested by the resolvability assessment. Its feasibility depends on the group structure, the location and amount of loss-absorbing and recapitalisation capacity (MREL), operational continuity, and the legal enforceability of the tools across jurisdictions. Where the preferred strategy is not feasible or credible, the resulting shortcomings are treated as impediments to resolvability to be removed.

Single point of entry and multiple point of entry

For a banking group, the strategy is usually framed around where resolution powers are applied. Under a single-point-of-entry (SPE) strategy, resolution tools are applied at a single top-level resolution entity, typically the parent or holding company, which absorbs group losses and downstreams recapitalisation to its subsidiaries through internal MREL. Under a multiple-point-of-entry (MPE) strategy, resolution is applied at more than one resolution entity, so that separate parts of the group can be resolved independently. The choice shapes the group's resolution-group structure, the placement of external and internal MREL, and the design of operational continuity.

The resolution strategy is developed as part of the resolution plan under BRRD Articles 10 to 14 (group plans under Articles 12 to 13), and, within the banking union, under SRMR Articles 8 and 9. The tools that a strategy deploys are those set out in BRRD Article 37 and following: sale of business (Article 38), the bridge institution tool (Articles 40-41), asset separation (Article 42), and bail-in (Articles 43-44). The concepts of resolution entity and resolution group, which the strategy relies on to allocate powers and MREL, are defined in the BRRD as amended by Directive (EU) 2019/879 and applied through MREL calibration under BRRD Articles 45 and following.

Practical relevance for banks and investors

For banks, the chosen strategy drives structural and financial decisions: how the group is organised into resolution groups, where MREL-eligible instruments are issued (externally by resolution entities, internally by other entities), and how services are arranged to survive resolution. A change in strategy can require significant reorganisation.

For investors, the strategy determines where losses would fall. Under SPE, external MREL and capital instruments issued by the top resolution entity are the primary loss absorbers, while operating subsidiaries are shielded; under MPE, loss absorption is more localised to each resolution entity. Knowing an issuer's strategy, and whether a given bond is issued by a resolution entity or an internal entity, is central to judging its position in the creditor hierarchy at failure.