Recovery and resolution scenarios are still of importance for
European institutions. Banks perform functions which are critical
for economic activity to take place. They collect funds (deposits
and other forms of debt) from private persons and businesses,
provide loans for households and businesses, allow savings to be
allocated for investment and manage payment systems that are
crucial for various sectors of the economy and society as a
whole.
Banks operate on the basis of public trust. If confidence in
them is lost, depositors and other creditors may quickly withdraw
their funds, which may lead to their failure. As well as depriving
their customers of access to the socially valuable banking
functions mentioned above, the failure of a large bank may
undermine confidence in other banks, affect their finances and
create instability across the financial system as a whole. Thus,
through this contagion effect, the value and viability of other
banks could be rapidly
