Does Bank Resolution Rule out the Use of Public Funds? The Case of the Podkarpacki Bank Spółdzielczy

On 15 January 2020 Polish resolution authority made a decision to launch the resolution of a regional cooperative bank. The aim of the resolution was to maintain the service of local government units, considered as the critical function of the bank. The tool used was a bridge bank combined with bail-in to subordinated bonds and unguaranteed deposits, including deposits from local government units. The author is of the opinion that the write-off deposits from public entities was a substitute of the insufficient amount of liabilities contractually eligible for bail-in, served as the instrument enhancing credibility of resolution as well as protecting other creditors from excessive losses (i.e. mitigating contagion risk). The presented case of bank resolution, has been assessed as an example of intentionally bending of the stiff BRRD rules to an unusual case to find the practical, socially acceptable solution. By comparing this case with resolution of other small banks in the EU, the author argues that national authorities seek to limit the scope for bail-in and try to use the financial arrangements within the resolution of small local banks as more secure for the banking sector and socially acceptable manner.