LIECHTENSTEIN Law and Practice Contributed by: Bernhard Rankl, Moritz Blasy and Nicolai Binkert, Schurti Partners Attorneys at Law Ltd
ards while incorporating the specific needs and characteristics of its own financial market. Resolution Regime The Recovery and Resolution Act ( Sanierungs- und Abwicklungsgesetz SAG) and the Recovery and Resolution Ordinance ( Sanierungs- und Abwicklungsverordnung SAV) transpose Direc - tive 2014/59/EU (BRRD) into Liechtenstein law and require banks and investment firms to pre - pare restructuring plans laying out the actions to be taken to restore the financial stability of the institution in the event of a significant dete - rioration in its financial position. The SAG also foresees that the FMA has to draw up a reso - lution plan for each bank and investment firm and respective early intervention mechanism and resolution tools (ie, sale of business, bridge institution, asset separation and bail-in). While Liechtenstein is not part of the Eurozone and thus not a member of the Single Resolution Mechanism (SRM), it mirrors its principles in its national framework. The SRM ensures that if a major bank fails, it can be wound down efficient - ly with minimal impact on the broader financial system and economy. The SAG provides for the following resolution mechanisms: Early intervention measures The FMA can take early intervention meas - ures if a bank shows signs of financial distress. These include requiring the bank to implement its recovery plan, to take measures to restore its financial situation, or to restructure its busi - ness. The goal of early intervention is to address problems before they escalate into full-blown insolvency. Resolution tools In the event of a bank’s failure, the FMA can deploy a variety of resolution tools to ensure
an orderly wind-down while preserving critical banking functions. These tools include: • bail-in: allowing the bank’s creditors to absorb losses, reducing the need for public funds; • bridge institution: the creation of a temporary institution to take over the critical functions of the failed bank; • asset separation: the transfer of non-per - forming loans or high-risk assets to a sepa - rate entity to isolate them from the banking system; and • sale of business: selling parts of the bank or its entire business to a solvent institution. Insolvency Procedures The Liechtenstein insolvency law provides for two different types of proceedings, namely a bankruptcy proceeding ( Konkursverfahren ) focusing on the liquidation of a company, and a restructuring proceeding ( Sanierungsverfahren ) aiming at restoring the debtor’s financial viability and allowing it to continue operating, while pro - viding creditors with better recovery prospects than they would receive in a liquidation scenario. Given the importance of banks and the con - sequences of their failure, the procedures described above are only subsidiary, so that banks are not subject to restructuring proceed - ings at all, and bankruptcy proceedings only with the prior consent of the FMA. Bankruptcy proceedings can be initiated if a bank is either over-indebted ( überschuldet ) or unable to pay its debts ( zahlungsunfähig ).
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