The European mechanism that makes a bank pay for itself, the exact order in which losses are absorbed, and what is genuinely protected for you.
What exactly is a bail-in?
The term comes from to bail in: to rescue from within. A bail-in is one of the bank resolution tools created by European Directive 2014/59/EU, known as the BRRD, adopted in 2014 after the financial crisis. Its principle: when a bank fails, it is no longer the state, and therefore the taxpayer, that pays first, but the bank itself, meaning those who lent it money or invested in its capital. The directive has been transposed into the law of every Member State, Belgium included, and applies to all banks in the banking union.
In practice, the resolution authority can write down certain debts of the bank, or convert them into shares, to absorb losses and recapitalise it. This machinery operates within a supervised procedure, with precise objectives: preserving the continuity of critical functions (payments, access to accounts), protecting guaranteed depositors and preventing a failure from spreading to the whole system. The framework is completed by the Single Resolution Mechanism, which centralises decisions for the larger banks of the euro area.
Sources : Directive 2014/59/EU, known as BRRD (EUR-Lex) ; Council of the European Union, Single Resolution Mechanism.Who absorbs the losses, and in which order?
The hierarchy is set by the directive. In a resolution, losses fall first on shareholders: the value of their shares can be written down to zero. Next come the bank's creditors, in a precise order: first the riskiest debts (subordinated bonds), then ordinary unsecured creditors (senior bondholders), and only as a very last resort uncovered depositors, meaning the portion of deposits above €100,000.
Two safeguards structure the mechanism. On the one hand, covered deposits, up to €100,000 per person and per institution, are expressly excluded from bail-in by Article 44 of the directive: they can neither be converted nor written down. On the other hand, before the common resolution fund may top up the process, losses of at least 8% of total liabilities must already have been borne by the bank's own shareholders and creditors. Individual depositors and small businesses also enjoy, in the ranking of claims, a preference over other unsecured creditors.
Source : Directive 2014/59/EU, known as BRRD (EUR-Lex).Can my deposits actually be used?
Only the portion above the ceiling held at a single institution can, in theory and as a last resort, be called upon.
History offers two useful landmarks, to be read in context. In Cyprus, in March 2013, the first bailout plan provided for a one-off levy of 6.75% on deposits below €100,000 and 9.9% above: the proposal, widely criticised, was rejected by the Cypriot parliament on 19 March 2013. In the United States, Silicon Valley Bank failed in March 2023 after customers requested withdrawals of 42 billion dollars in a single day: the lesson lies in the speed of modern bank runs. The bank was placed into FDIC receivership the very next day, on 10 March 2023.
A measured reading of these episodes comes down to one habit: do not depend on a single channel, or a single bank.
Sources : BBC News, 16 March 2013 ; BBC News, 19 March 2013 ; Federal Reserve OIG, Material Loss Review of Silicon Valley Bank.Who decides on a bail-in in Belgium?
The significant banks of the euro area fall under the Single Resolution Mechanism: the European Central Bank, as the supervisory authority, establishes that a bank is failing or likely to fail, and the Single Resolution Board, an independent EU agency, decides whether a resolution is in the public interest and adopts the scheme. It takes effect twenty-four hours after approval, the time allowed for the European Commission to raise possible objections.
For less significant institutions, planning and decision remain national: in Belgium, the National Bank of Belgium acts as the resolution authority, under the indirect responsibility of the Single Resolution Board. In both cases, a bail-in is never an improvisation: every bank maintains with its authority a resolution plan, prepared and updated in advance, that spells out which functions must be preserved and how losses would be allocated.
Sources : Council of the European Union, Single Resolution Mechanism ; official EU portal, Single Resolution Board page.How to limit your exposure, without alarmism
Part of your wealth can live outside the banking system, without this being any strategy of fear: physical gold held in your own right, a reasonable quantity of cash, or a private safe deposit box outside the banking system for precious metals and important documents. A concrete example of a private vault operator in Belgium is presented at the bottom of this page.
Frequently asked questions
What is the difference between a bail-in and a bail-out?
A bail-out is an external rescue: the state, and therefore the taxpayer, injects money to save the bank. A bail-in is an internal rescue: the bank's shareholders and then its creditors absorb the losses, in an order fixed by law. Since the 2014 BRRD directive, the bail-in is the European rule, and recourse to public money comes only as a very last resort, under strict conditions. For the ordinary depositor, the difference is concrete: guaranteed deposits, up to €100,000 per person and per bank, are excluded from the mechanism.
Source : Directive 2014/59/EU, known as BRRD (EUR-Lex).Can a bail-in affect my ordinary savings account?
No, as long as your balance at the bank stays below €100,000. Covered deposits are expressly excluded from the scope of bail-in by the directive: current accounts, savings accounts, term accounts and registered certificates of deposit can neither be converted nor written down. Only the portion above the ceiling at a single institution is treated as a claim on the bank, and even then only after shareholders and other creditors. The ceiling, the repayment delay and the special cases of the guarantee are detailed on the dedicated page of this site.
Sources : Directive 2014/49/EU (EUR-Lex) ; Directive 2014/59/EU, known as BRRD (EUR-Lex).What happens to a depositor above €100,000?
The portion of your deposits above €100,000 at a single bank becomes, in a resolution, a claim eligible for bail-in: it can be written down or converted into shares to recapitalise the institution. It is used only after shareholders and other creditors have been exhausted, and individuals and small businesses rank above large professional creditors.
Source : Directive 2014/59/EU, known as BRRD (EUR-Lex).Are my loans cancelled if my bank is resolved?
No. An outstanding loan, whether a mortgage or an instalment loan, is an asset of the bank: in a resolution or an insolvency, it is taken over by the bridge institution, the purchaser or the liquidator, and you keep repaying it under the same contractual terms. Deposit protection applies to your savings, never to your debts. This continuity is in fact a stated objective of resolution: essential functions, including loan and payment management, must continue without interruption for customers.
Source : Council of the European Union, Single Resolution Mechanism.Does the bail-in regime apply to Belgian banks?
Yes. Every bank established in Belgium is subject to the BRRD directive, transposed into Belgian law, and to the banking union's Single Resolution Mechanism. Significant banks and cross-border groups fall directly under the Single Resolution Board; less significant institutions answer to the National Bank of Belgium as the resolution authority, under the Board's indirect responsibility. Each bank maintains a resolution plan with its authority, prepared in advance, that sets out the order of loss absorption and the continuity of customer services.
Sources : Council of the European Union, Single Resolution Mechanism ; official EU portal, Single Resolution Board page.Can a bail-in be decided overnight?
The procedure is short but framed. The European Central Bank first establishes that the bank is failing or likely to fail. The Single Resolution Board then assesses whether a private solution is possible and whether resolution is in the public interest, and adopts a scheme that takes effect twenty-four hours after approval, leaving time for possible objections from the Commission. Guaranteed depositors have nothing to do: their funds up to €100,000 are never within the scope of the mechanism.
Source : Council of the European Union, Single Resolution Mechanism.Gold & Silver Company, in Dottignies (Mouscron)
To illustrate the option of holding valuables outside banks, mentioned above: this private operator in Dottignies (Mouscron) rents safe deposit boxes by the year, with no bank account required and a valid identity document presented at subscription. Prices and conditions on the official site.