In the Danish and North Atlantic resolution plans for credit institutions, bail-in is the preferred resolution tool. The Danish Financial Stability Company can use bail-in to absorb losses and recapitalise a financial institution. Bail-in involves the write-down of creditors and liabilities as well as the conversion of debt into equity. It can be applied either independently or in combination with other resolution tools.
For systemically important financial institutions (O-SIIs), bail-in is primarily used to restore the institution’s viability (restructuring). For non-O-SIIs, bail-in is employed to ensure a controlled winding down of activities. In Denmark, bail-in or variations thereof have been used since 2011 in the crisis management of several financial institutions.
The Danish Financial Supervisory Authority and the Danish Financial Stability Company have published a memorandum on the use of the bail-in tool:
The Process for Crisis Management of a Credit Institution (finanstilsynet.dk) (only in Danish).
Use of the bail-in tool (fs.dk).