The point at which an institution is put into resolution (the ‘point of resolution’ or POR) will be triggered if the institution is no longer able to meet its minimum prudential requirements or is judged to be no longer viable, if recovery options have become depleted or ineffective, and if no private-sector solution seems likely or feasible.
One practical example of this is the withdrawal of correspondent banking relations – a serious issue for the Lithuanian financial sector. If taken to an extreme, de-risking can result in increased financial exclusion. It may also bring higher risk transactions out of the regulated system into more opaque, informal channels, and become even harder to monitor.