What the assessment does
A resolvability assessment is the resolution authority's structured judgement on whether a bank can actually be resolved in a way that meets the resolution objectives. It asks two linked questions: is it feasible and credible to liquidate the firm under normal insolvency proceedings, and, if not, is it feasible and credible to place it into resolution using the resolution tools, while maintaining its critical functions, avoiding significant adverse effects on financial stability, and protecting public funds and covered depositors.
The assessment is carried out as an integral part of drawing up and updating the resolution plan, and it is not a one-off exercise: it is repeated as the firm, the group structure, the markets and the framework evolve. It covers the full range of factors that determine whether the preferred resolution strategy would work in practice, including loss-absorbing and recapitalisation capacity (MREL), the structure of the group and its liabilities, operational continuity, access to financial market infrastructures, management information systems, and cross-border and legal arrangements.
How it works in practice
Authorities typically assess resolvability against a set of dimensions or conditions and identify where the firm falls short. Where they conclude that resolution or liquidation is not currently feasible or credible, they identify impediments to resolvability and require the bank to address them. The assessment therefore feeds directly into the process for removing substantive impediments and into MREL calibration, and it shapes the choice between a single-point-of-entry and a multiple-point-of-entry strategy.
Legal basis
Under the BRRD, the resolvability assessment is governed by Articles 15 and 16: Article 15 addresses the assessment of resolvability for individual institutions and Article 16 addresses group resolvability, each framed around whether the firm can be liquidated under normal insolvency proceedings or resolved without significant adverse consequences and while preserving critical functions. Within the banking union, the Single Resolution Board conducts the assessment under Article 10 of the SRMR, and expresses its detailed expectations through its "Expectations for Banks" framework. Technical criteria for assessing resolvability have been specified in Commission delegated and implementing standards.
Practical relevance for banks and investors
For banks, the resolvability assessment is the lens through which the authority judges the whole planning effort. A negative assessment triggers binding obligations to change structure, contracts, systems or loss-absorbing capacity, and can constrain distributions or business decisions until impediments are removed. Firms increasingly publish resolvability self-assessments and disclosures.
For investors, the assessment is a key indicator of tail risk. A bank judged readily resolvable is one whose failure could be handled through bail-in and stabilisation rather than disorderly insolvency or ad hoc state support, which affects the expected treatment of different layers of the capital and liability stack. Trends in an issuer's resolvability, its MREL position and any publicly flagged impediments are all relevant inputs to credit analysis.