After payment of contributions in 2024, the Resolution Fund was in compliance with the requirement of the European Commission that the Resolution Fund must have at its disposal funds corresponding to 1% of the covered deposits. This also means that, going forward, the institutions will only be required to make further contributions to the Resolution Fund if it is unable to keep up with developments in the covered deposits or otherwise fails to meet the target requirement. Finansiel Stabilitet will check once annually whether the Resolution Fund has at its disposal sufficient funds to meet the requirement and will inform the institutions if contributions are needed. It is expected that a small contribution will be needed to meet the target requirement in 2025.

With the Resolution Fund, Finansiel Stabilitet has at its disposal cash resources which may be used in case crisis management of a bank, mortgage credit institution or an investment company becomes necessary. The Resolution Fund may in such case be used to grant loans and guarantees, among other things. The Resolution Fund may also in special circumstances and within certain limits be used to cover losses directly when an institution needs crisis management, for instance to protect socially critical functions or to mitigate potential financial contagion in the situation at hand.

The Resolution Fund’s cash funds totalled DKK 8.8 billion at 31 December 2024. Finansiel Stabilitet is responsible for ensuring that the available financial means of the Resolution Fund are from time to time proportionate with the Resolution Fund’s potential liabilities. As is the case for the Deposit Guarantee Fund, an overall investment profile has been adopted that is based on investments being made in low-risk cash funds.

Finansiel Stabilitet may take resolution measures in accordance with the Act on Restructuring and Resolution of Certain Financial Enterprises if the following conditions are met: (1) the Danish FSA has informed Finansiel Stabilitet that the bank is failing or is likely to fail, (2) the Danish FSA has informed Finansiel Stabilitet that there is no prospect that other measures, including measures taken by the private sector or the Danish FSA, within an appropriate time frame would prevent a resolution of the enterprise, (3) Finansiel Stabilitet assesses that a resolution is necessary in the public interest.

When these conditions are met, Finansiel Stabilitet may e.g. assume control over the enterprise, effect a full or partial sale of the enterprise, transfer all or parts of the enterprise to a subsidiary of Finansiel Stabilitet (bridge institution or portfolio management company) or write down or convert the enterprise’s liabilities.

In connection with restructuring and resolution, losses are generally to be borne in accordance with the order of priority of creditors. Moreover, the principle applies that no creditor may be placed at a financial disadvantage relative to a bankruptcy process.

This is to be assessed in a subsequent independent valuation. If it is assessed that there are creditors who have been placed at a disadvantage, they will be entitled to compensation from the Resolution Fund.

Depositors may also be affected by restructuring and resolution measures, but the value of their deposits will never be less than the amount of coverage provided under the Deposit Guarantee Fund.

The Resolution Fund may be used to provide guarantees and loans etc. in connection with the use of restructuring or resolution measures. The Resolution Fund may also in special circumstances be used to cover a company’s losses when at least 8% of the company’s liabilities and own funds have been written down or converted. In such situation, the Resolution Fund may contribute assets equivalent to up to 5% of the enterprise’s liabilities and own funds. However, in the preparation of resolution plans, this option is not assumed to be used.

The legislative framework of the Resolution Fund and Finansiel Stabilitet’s restructuring and resolution activities is the Act on Restructuring and Resolution of Certain Financial Enterprises, see Consolidation Act no. 24 of 4 January 2019 and Executive Order no. 823 of 3 July 2015 on the Resolution Fund. In addition, executive orders have been issued on resolution planning and contingency resolution measures, see Executive Order no. 2018 of 26 October 2021, and on Finansiel Stabilitet’s use of resolution measures, see Executive Order no. 822 of 3 July 2015.

The Act on Restructuring and Resolution of Certain Financial Enterprises entered into force on 1 June 2015. The Act became effective for the Faroe Islands and Greenland on 1 January 2018 and 1 January 2020, respectively.

The rules implement Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 (BRRD) as amended by, among others, Directive 2019/879/EU of the European Parliament and of the Council of 20 May 2019 (BRRD II). With a view to achieving a uniform application of the rules, the European Commission issues delegated acts and implementing acts in this area.

On 11 August 2021, the Danish FSA decided that the Resolution Fund constitutes a public sector entity under Regulation (EU) no. 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms (CRR) and that exposures to the Resolution Fund are assigned a 0 risk weighting pursuant to Article 116(4) of the Regulation.