According to the Law, there are several cases when the DGF establishes a bridge bank:
in accordance with the bid of the winner of an open tender;
on its own initiative for resolution of a system important bank with the subsequent search for an investor during the year;
by a decision of the Cabinet of Ministers of Ukraine.
However, in any case, this way of resolution stipulates that the DGF will:
- create a new legal entity - a bank, and ensure that the new bank obtains a banking license;
- appoint temporary management to this bank and set up its main operational processes;
- transfer all or part of the insolvent bank's property (assets) to the bridge bank;
- transfer to the bridge bank the liabilities (deposits) of the insolvent bank for the same amount in accordance with the priority of creditors established by law;
- sell 100% of the shares of the bridge bank to an investor.
Creation of a bridge bank in accordance with the winning investor's bid:
- The bridge bank will be established for a period of 3 months.
- The winner of the open tender will have approximately 1 month after the purchase to bring the bridge bank into compliance with prudential requirements.
- During this time, the bridge bank will have to service the maturing guaranteed deposits in accordance with the legal requirements.
This resolution option has advantages when the investor needs a banking license but does not want to bear the costs of restoring the financial condition of the insolvent bank or considers the risks of the insolvent bank too high. However, this method is operationally more complicated, given the extremely limited time to set up a bridge bank and the need to establish all operational processes.
Only a pre-qualified person or bank may acquire such a bridge bank.
Establishment of a bridge bank with the subsequent search for an investor
The DGF may use this option only in exceptional cases, for example, if it is necessary to resolve a systemically important bank that cannot be simply liquidated, but there are no other willing buyers for its assets and liabilities.
In such a case, the DGF may establish a bridge bank even without a tender winner, transfer the assets and liabilities of the insolvent bank to the bridge bank, and continue the search for an investor (buyer) for up to 1 year with the possibility of extending this period for a maximum of 1 year.
From the first day, the financial condition of the bridge bank must meet the minimum requirements of banking law. In this case, the bank's capital is fully formed by the DGF. During the time required to find a buyer, the bridge bank operates in the market as a regular bank and fulfills all obligations to depositors and creditors.