Bridge Bank

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Bridge Bank
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Bridge Bank - is an institution that was created by a national regulatory authority or central bank to operate a bankrupt bank until a buyer is found for its business. Bridge bank manages an insolvent bank as a caretaker.

Goal of Bridge Bank

The Bridge bank is created to receive and store deposits and good assets of another system bank. The bridge bank is responsible for continuing the operation of the insolvent bank, may obtain permission to conduct some or all of the bank's regular operations, such as granting new loans and renewing existing loans[1]. The bridge bank is a temporary measure, hence the 'bridge'. The bridge bank provides the time needed for an insolvent bank to find a buyer so that it can become a business again. But if the insolvent bank is unable to find a buyer, the bridge bank manages its liquidation with the help of a competent bankruptcy court[2].


A national bank may be chartered by a currency controller as a bridge bank only if the management board finds that[3]:

  • the amount that is reasonably necessary for the operation of such a bridging bank will not exceed the amount that is reasonably necessary to save the costs of liquidation, including payment of the accounts of the insured 1 or more insured banks affected by default or which threaten to default on which is chartered over a bridge
  • the continuation of the business of such insured bank or banks that are subject to default or which are at risk of default, is essential to provide appropriate banking services in the community in which each bank in default is located
  • the continued operation of such insured bank or banks in which the bank or bankruptcy is at risk, for which a bridging bank is chartered, is in the best interest of the depositors of such bank or banks in bankruptcy or in bankruptcy or in society

Rule of Bridge bank

After chartering the bridge bank, the bridge bank may[4]:

  • accepting deposits from such insured bank or banks that are unable to perform or are at risk of default
  • accepts such other obligations (including obligations related to any fiduciary activity)
  • purchase of such assets (including assets related to any fiduciary activity)
  • perform any other temporary functions that the corporation may order in its sole discretion

The articles of association of the bridge bank organization are approved by the corporation and drawn up by 3 representatives appointed by the corporation. The bridge bank has a temporary board of directors, which consists of not less than 5 and not more than 10 members appointed by the corporation. The bridge bank management adopts regulations that may be approved by the corporation[5]. The bridge bank is an insured bank since the charter as a national bank. The bridge bank will be treated as an insured bank which is affected by the default at such times and for such purposes as the corporation may determine at its sole discretion. A bridge bank may be treated as a bantruckto for some purposes[6].

Duration of the bridge bank

The bridge bank status expires at the end of 2 years from the date of the card being issued. The management board may, at its own discretion, extend the status of a bridging bank as such by three additional 1-year periods[7].

Completing the bridge bank

The status of each bridge bank expires at the earliest[8]:

  • merger or consolidation of a bridge bank with a depository institution which is not a bridge bank
  • when choosing a corporation, the sale of the majority of the bridge bank's share capital to an entity other then the corporation and other than another bridge bank.
  • sale of at least 80 percent of the core capital of the bridge bank to an entity other than a corporation and other than another bridge bank
  • when choosing a corporation or taking overall, essentially, the bridging bank's deposits and other liabilities by the institution's holding company, depositary or depository institution that is not a bridge bank, or the acquisition of all or substantially all of the assets of the bridge bank by the holding company of a depository institution, a depository institution other than a bridge bank or other entity authorized under applicable law
  • expiry date of the bridging bank

Bridge bank solution

The Board of Directors may, at its sole discretion, dissolve a bridge bank in accordance with this paragraph at any time. The management board shall immediately commence proceedings for the termination in accordance with this paragraph after 2 years from the date of chartering the bridge bank or its extension[9].

Charter conversion

After selling the majority of the bridge bank's core capital, the corporation may amend the bridge bank statute to reflect the termination of the status of bridge bank as such, after which the bank remains a national bank, with all its rights, privileges and privileges, subject to all applicable laws and regulations[10].



  1. International Monetary Fund, (2012), point 67
  2. International Monetary Fund, (2012), point 67
  3. United States, (1992), §1821(n)(2)(A)
  4. United States, (1992), §1821(n)(1)(B)(i-iv)
  5. United States, (1992), §18219(n)(2)(D)
  6. United States, (1992), §1821(n)(2)(B-C)
  7. United States, (1992), §1821(9)
  8. United States, (1992), §1821(10)(A-E)
  9. United States, (1992), §1821(n)(2)(12)(ii)
  10. United States, (1992), §1821(11)(B)

Author: Klaudia Kazienko