Banking Law and Insolvency Law Interaction in Spain

1. Introduction

The interaction between banking law and insolvency law in Spain becomes particularly important in two different situations:

when a bank is a creditor of an insolvent individual or company; and

when a bank or credit institution itself encounters serious financial difficulties.

Spanish law treats these situations differently.

For ordinary companies and individuals, the principal insolvency legislation is the Texto Refundido de la Ley Concursal (TRLC), approved by Royal Legislative Decree 1/2020 of 5 May and substantially reformed by Law 16/2022.

Banks, however, occupy a special position. Credit institutions are systemically important because their collapse may affect depositors, payment systems, other financial institutions and the wider economy. Consequently, ordinary insolvency rules interact with a special banking-resolution framework, including Law 11/2015 on the recovery and resolution of credit institutions and investment firms, together with European Union banking-resolution legislation.

The basic structure is therefore:

Ordinary debtor insolvency → Spanish insolvency law

Bank as creditor → insolvency law determines treatment and priority of its claim

Failing credit institution → special bank-resolution rules may intervene before ordinary liquidation

This interaction attempts to reconcile creditor protection, financial stability, depositor protection and the rescue of economically viable businesses.

2. Spanish Insolvency Law Framework

The TRLC establishes the central legal framework for insolvency proceedings in Spain.

A debtor can become subject to insolvency proceedings when the statutory conditions of insolvency are satisfied. Spanish law distinguishes, among other concepts, between current insolvency and imminent insolvency.

Current insolvency generally exists when a debtor cannot regularly comply with obligations that have become due.

Imminent insolvency concerns circumstances where the debtor expects that it will be unable regularly and punctually to meet its obligations within the statutory forward-looking period.

The insolvency system therefore attempts to intervene before financial deterioration becomes irreversible.

3. Banks as Creditors in Insolvency Proceedings

Banks frequently become major creditors in Spanish insolvencies because businesses commonly obtain financing through:

term loans;

revolving facilities;

mortgage loans;

syndicated loans;

credit facilities;

guarantees;

leasing;

factoring;

project finance; and

other secured financing arrangements.

When the borrower becomes insolvent, banking law and contractual rights cannot be examined independently from insolvency law.

The insolvency proceeding determines matters including:

recognition of the bank's claim;

classification of the claim;

treatment of security;

enforcement rights;

restructuring effects;

distributions;

voting rights; and

treatment under liquidation.

Consequently, a valid loan agreement does not necessarily allow a bank to continue enforcing its contractual rights exactly as it could outside insolvency.

4. Classification of Bank Claims

One of the most important functions of Spanish insolvency law is classification of creditors' claims.

Depending on the circumstances, claims may fall into categories including:

Claims against the insolvency estate

Certain obligations arising under legally specified circumstances receive treatment as claims against the estate.

Claims with special privilege

These are particularly important for banks because secured lending frequently involves mortgages, pledges or other security interests.

Claims with general privilege

Certain claims receive statutory priority over ordinary unsecured claims.

Ordinary claims

These generally participate without the special priority attached to privileged claims.

Subordinated claims

These receive lower priority because of their characteristics or the circumstances specified by insolvency legislation.

Classification therefore directly affects how much a financial institution may recover.

5. Mortgage Security and Special Privilege

Banks frequently secure loans through mortgages over real estate.

A mortgage can give the creditor a special privilege in insolvency, subject to the requirements established by insolvency and property law.

The practical consequence is important.

Suppose:

Company owes bank €2 million

and

Bank holds a valid mortgage over company property.

The bank does not simply become identical to every unsecured creditor when the company enters insolvency proceedings.

Its properly constituted security may give it privileged treatment in relation to the encumbered asset.

However, insolvency law determines the extent and exercise of that privilege.

6. Valuation of Security

Secured lending does not automatically mean that the entire outstanding loan enjoys unlimited privileged status.

Insolvency law contains rules concerning the valuation of security and determination of the amount benefiting from special privilege.

This prevents a situation where a relatively low-value asset supposedly secures an extremely large debt and the entire debt receives preferential insolvency treatment regardless of the economic value of the collateral.

Consequently, the interaction can be expressed as:

Banking contract creates debt

Security law creates collateral

Insolvency law determines treatment of the secured claim during insolvency.

7. Restrictions on Individual Enforcement

Outside insolvency, a secured creditor may ordinarily have contractual and statutory mechanisms for enforcing security after default.

In insolvency, collective-proceeding principles become important.

Spanish insolvency legislation can restrict or temporarily prevent individual enforcement actions, particularly where assets are necessary for maintaining the debtor's business activity or where restructuring negotiations receive statutory protection.

The reason is straightforward.

If every secured bank immediately seized important company assets, a potentially viable business could be dismantled before creditors collectively determine whether restructuring would produce a better result.

Therefore:

individual enforcement rights

may temporarily yield to

collective insolvency and restructuring objectives.

8. Restructuring Plans

The modern Spanish insolvency framework places substantial importance on restructuring before liquidation.

A financially distressed business may attempt to reorganise its debts through a restructuring plan.

Banks frequently play a central role because they may represent a substantial percentage of financial debt.

A restructuring may involve:

maturity extensions;

interest modifications;

debt reductions;

conversion of debt;

new financing;

disposal of assets;

operational restructuring;

modification of security arrangements; and

changes in the debtor's capital structure.

This demonstrates that modern insolvency law is not concerned solely with distributing the assets of failed companies.

It also attempts to preserve economically viable businesses.

9. Classes of Creditors

Restructuring plans generally require creditors to be organised into legally appropriate classes according to relevant common interests.

Banks cannot necessarily be placed indiscriminately into the same class as every other creditor.

Important distinctions may arise between:

secured financial creditors;

unsecured banks;

trade creditors;

public creditors;

subordinated creditors; and

other categories.

Correct class formation is especially important when a restructuring plan is intended to bind dissenting creditors.

10. Effect on Dissenting Banks

One of the most significant interactions between banking and insolvency law concerns cram-down mechanisms.

A bank may disagree with a proposed restructuring.

However, satisfaction of the statutory requirements can potentially permit a restructuring plan to affect creditors that did not voluntarily approve it.

This represents an important limitation upon ordinary contractual autonomy.

Outside insolvency:

Bank + borrower determine contractual amendments.

Within a statutory restructuring:

Insolvency legislation may permit collective restructuring mechanisms to affect dissenting creditors.

The justification is that a single creditor should not necessarily be capable of destroying a viable restructuring that satisfies statutory safeguards protecting affected creditors.

11. New Financing

Banks can also provide financing during restructuring.

New money is often essential because a company facing insolvency may require immediate liquidity to:

pay employees;

purchase materials;

continue production;

maintain essential suppliers;

finance restructuring; and

preserve enterprise value.

Modern Spanish restructuring law therefore contains protections concerning qualifying interim and new financing.

Without such protection, lenders might refuse to provide funds to financially distressed businesses because of the risk that subsequent insolvency would undermine the transaction.

12. Avoidance and Rescission of Transactions

Insolvency law also examines transactions completed before formal insolvency.

Certain transactions detrimental to the insolvency estate can potentially be challenged under insolvency rules.

This matters greatly for banks.

For example, scrutiny may arise where:

new security was granted shortly before insolvency;

an existing unsecured debt was suddenly secured;

preferential payments were made;

assets were transferred;

refinancing transactions were concluded; or

unusual collateral arrangements were created.

However, Spanish law also provides specific protection for qualifying restructuring transactions.

The objective is to balance two competing concerns:

prevent transactions that improperly prejudice creditors

while

protecting legitimate rescue financing and restructuring.

13. Set-Off and Banking Relationships

Banks often have several simultaneous relationships with customers.

A company may:

owe money to the bank under a loan; and

simultaneously maintain deposits or other monetary claims against the bank.

This raises the issue of set-off (compensación).

Insolvency legislation places conditions on when set-off can operate after insolvency proceedings begin.

This prevents creditors from using bilateral arrangements to circumvent the collective distribution system where the legal requirements for set-off were not already satisfied.

Therefore, contractual banking rights remain subject to insolvency-law limitations.

14. Guarantees Provided by Third Parties

Bank loans are frequently supported by:

personal guarantees;

corporate guarantees;

mortgages supplied by third parties;

pledges; and

joint obligations.

A restructuring or insolvency arrangement affecting the principal debtor does not automatically produce identical consequences for every guarantor.

Spanish Supreme Court jurisprudence has been particularly important in explaining the position of creditors against third-party guarantors.

This distinction is crucial for banking practice because the economic value of a loan may depend significantly upon third-party security.

15. Insolvency of Banks Is Different

A major distinction must now be made.

A normal company experiencing insolvency generally falls within ordinary insolvency mechanisms.

A credit institution, however, is subject to additional special legislation.

Article 578 of the TRLC expressly recognises special insolvency rules applicable to credit institutions and certain other regulated financial entities.

The provision identifies special legislation that interacts with the general insolvency regime, including Law 11/2015 on the recovery and resolution of credit institutions and investment firms.

Thus:

ordinary insolvency law is the general framework

but

special financial-sector legislation can modify that framework for banks.

16. Why Banks Receive Special Treatment

Banks are economically different from many ordinary businesses.

A manufacturing company may have hundreds of creditors.

A large bank can have:

millions of depositors;

payment obligations;

interbank exposures;

derivatives;

secured financing;

central-bank relationships; and

connections with financial markets.

Sudden ordinary liquidation can therefore create wider systemic consequences.

This is the rationale behind specialised bank-resolution law.

17. Recovery and Resolution Framework

Spanish bank-resolution law operates within the broader European Banking Union framework.

Resolution is conceptually different from ordinary corporate insolvency.

Its objectives include:

maintaining critical banking functions;

reducing systemic disruption;

protecting covered depositors;

preserving financial stability; and

allocating losses according to the resolution framework.

A failing bank therefore does not necessarily move immediately into conventional insolvency liquidation.

Authorities first determine whether statutory conditions for resolution are satisfied.

18. Banco Popular as the Major Example

The resolution of Banco Popular Español in 2017 provides the most important practical illustration.

Banco Popular experienced severe financial difficulties and liquidity deterioration.

The European Central Bank determined that Banco Popular was failing or likely to fail.

The Single Resolution Board adopted a resolution scheme on 7 June 2017.

Certain capital instruments were written down or converted, and the shares of the resolved institution were ultimately transferred to Banco Santander.

The Banco Popular litigation subsequently produced several major judgments from the General Court and Court of Justice of the European Union.

These decisions are particularly important for understanding the distinction between:

ordinary insolvency

and

special bank resolution.

19. Case Law

Case 1 — Tribunal Supremo, Judgment 549/2021, 20 July 2021

This Spanish Supreme Court case concerned the effects of an approved insolvency arrangement on a mortgage supplied by a third-party mortgagor who was not personally the debtor.

The bank held an ordinary claim against the insolvent borrower, while a third party had provided mortgage security.

The restructuring arrangement included a substantial reduction of claims and a payment extension.

The important question was whether those modifications also reduced the bank's rights against the third-party security provider.

Decision

The Supreme Court interpreted the former Article 135.1 of the Insolvency Law as protecting creditors that had not voted in favour of the arrangement.

Although the statutory wording expressly referred principally to personal guarantees, the Court considered that the protective logic extended to real security supplied by a third party.

Importance

The judgment demonstrates that:

modification of the debtor's insolvency obligation does not necessarily eliminate independent rights against third-party security providers.

This is extremely important for banks because guarantees and third-party mortgages are fundamental credit-risk mitigation instruments.

20. Case 2 — Tribunal Supremo, Judgment 965/2023, 15 June 2023

This case concerned a pledge over future receivables and its treatment in insolvency.

The Supreme Court examined the requirements under the former Article 90.1.6 of the Insolvency Law for recognising special privilege in relation to claims secured through pledges of future receivables.

Principle

Spanish insolvency law recognises security interests, but privileged treatment depends upon satisfaction of statutory requirements.

The existence of a financing contract alone is insufficient.

The relevant security must have been properly constituted and must satisfy the applicable rules for insolvency recognition.

Importance for Banks

Banks regularly use receivables as collateral.

The judgment therefore illustrates the interaction between:

secured banking finance

and

insolvency classification rules.

The bank's commercial expectation of security must be translated into a legally effective security interest capable of surviving insolvency scrutiny.

21. Case 3 — Tribunal Supremo, Judgment 1603/2025, 12 November 2025

This recent Supreme Court judgment concerned a mortgage creditor whose security was formally cancelled to facilitate the court-authorised sale of property during insolvency proceedings.

The documentation expressly stated that cancellation of the mortgage was intended to facilitate the sale and did not represent abandonment of the creditor's special privilege.

Decision

The Supreme Court held that the special privilege had not been extinguished merely because the mortgage had been cancelled in those circumstances.

The intention and legal context of the cancellation were important.

Importance

This decision demonstrates that courts distinguish between:

formal cancellation of collateral

and

substantive waiver of insolvency priority.

A secured bank therefore does not necessarily lose its insolvency privilege merely because a mortgage must technically be cancelled to permit an authorised sale, provided the legal arrangement preserves the privilege.

22. Case 4 — Banco Santander (Resolution of Banco Popular), C-410/20, Court of Justice, 5 May 2022

This case arose directly from the resolution of Banco Popular.

Investors sought remedies associated with securities acquired before the bank's resolution.

The dispute required the Court of Justice to consider the relationship between investor-protection remedies and the effects of the EU bank-resolution framework.

Decision

The Court emphasised the effectiveness of the resolution framework and the legal consequences flowing from the write-down and cancellation of capital instruments.

Rights that would undermine the legally mandated effects of resolution could not simply be reconstructed through ordinary investor-remedy mechanisms.

Importance

This case clearly demonstrates that:

special bank-resolution law can override remedies that might otherwise operate under ordinary company or securities law.

The purpose is to ensure that the resolution mechanism can actually stabilise a failing institution without being subsequently undone through incompatible private-law claims.

23. Case 5 — Fundación Tatiana Pérez de Guzmán el Bueno and SFL v Single Resolution Board, T-481/17, General Court, 1 June 2022

This was one of several major challenges to the Banco Popular resolution.

Applicants challenged the lawfulness of the resolution scheme adopted by the Single Resolution Board.

The General Court examined questions concerning:

the conditions for resolution;

valuation;

procedural rights;

property rights;

proportionality; and

the institutional powers exercised in the resolution process.

Decision

The General Court dismissed the action.

Importance

The case demonstrates the distinctive legal architecture governing failing banks.

Rather than applying ordinary corporate insolvency procedures alone, the authorities can employ specialised resolution tools where statutory conditions are satisfied.

This reflects the special public-interest dimension of bank insolvency.

24. Case 6 — Del Valle Ruiz and Others v Commission and SRB, T-510/17, General Court, 1 June 2022

This was another major Banco Popular challenge.

Shareholders and investors challenged aspects of the resolution process and raised issues including:

property rights;

procedural safeguards;

valuation;

right to be heard;

reasoning; and

the legality of the resolution mechanism.

Decision

The General Court dismissed the action.

Importance

The judgment reinforces the distinction between ordinary insolvency proceedings and bank resolution.

When a bank satisfies the statutory resolution conditions, public authorities may implement resolution measures rapidly because delay itself can threaten financial stability.

Consequently, the procedural architecture is designed differently from a conventional corporate insolvency case.

25. Case 7 — Eleveté Invest Group and Others v Commission and SRB, T-523/17, General Court, 1 June 2022

This case formed part of the same group of Banco Popular resolution challenges.

Investors contested the resolution measures and their consequences.

The General Court rejected the challenge.

Importance

The decision illustrates an important principle of modern banking insolvency law:

shareholder and investor interests operate within the statutory loss-allocation structure established by resolution legislation.

Resolution law is therefore not simply an alternative procedural route to ordinary insolvency.

It contains substantive rules determining how losses may be absorbed when a financial institution fails.

26. Case 8 — Algebris (UK) and Anchorage Capital Group v Commission, T-570/17, General Court, 1 June 2022

This was another significant challenge connected with Banco Popular.

The applicants contested the legality of the resolution and aspects of its valuation and implementation.

The General Court dismissed the action.

Importance

The case demonstrates that valuation is central to bank resolution.

Valuation assists authorities in determining:

the bank's financial position;

appropriate resolution action;

treatment of capital instruments; and

allocation of losses.

Valuation therefore performs a role in bank resolution similar in some respects to asset and enterprise valuation in ordinary restructuring, but within a specialised regulatory framework.

27. Case 9 — Aeris Invest v Commission and SRB, T-628/17, General Court, 1 June 2022

Aeris Invest, a former shareholder of Banco Popular, also challenged the resolution.

The case involved important questions concerning the lawfulness of resolution and protection of shareholders.

The General Court dismissed the annulment action.

Importance

The judgment confirms the significance of the public-interest objectives behind bank resolution.

Ordinary shareholder rights must be considered within a framework specifically designed to manage failing credit institutions without destabilising the wider financial system.

28. Principles Emerging From the Case Law

The cases collectively establish several important themes.

Principle 1 — Security remains important in insolvency

Properly constituted mortgages and pledges can provide banks with special privilege.

Principle 2 — Formalities matter

A lender cannot assume that commercial expectations automatically produce insolvency priority.

Security must satisfy statutory requirements.

Principle 3 — Third-party guarantees may survive restructuring

Modification of the principal debtor's obligations does not automatically eliminate every independent third-party guarantee.

Principle 4 — Insolvency is collective

Banks cannot always enforce individual contractual rights without regard to the collective proceeding.

Principle 5 — Bank failure receives specialised treatment

A failing credit institution may enter the resolution framework rather than immediately undergoing ordinary insolvency liquidation.

Principle 6 — Financial stability matters

Bank resolution introduces public-interest considerations that are less prominent in an ordinary commercial insolvency.

Principle 7 — Shareholders bear commercial risk

Resolution legislation contains mechanisms through which shareholders and capital investors may absorb losses.

29. Ordinary Company Insolvency Versus Bank Resolution

The distinction can be summarised as follows:

30. Bank as Secured Creditor

Where the bank is merely the creditor rather than the insolvent entity, ordinary insolvency rules become particularly important.

Consider the following example:

A Spanish company borrows €10 million from a bank.

The loan is secured by:

a factory mortgage;

pledged receivables; and

a shareholder guarantee.

The company later becomes insolvent.

The bank cannot simply rely on the loan agreement.

Each element must be analysed separately:

Loan claim → recognition and classification

Mortgage → special privilege and enforcement rules

Receivables pledge → validity and insolvency effectiveness

Shareholder guarantee → effect of restructuring upon third-party liability

The 2021 and 2023 Supreme Court decisions discussed above illustrate precisely why these distinctions matter.

31. Bank as Insolvent Entity

Now consider the reverse situation.

Suppose the bank itself experiences severe financial deterioration.

Ordinary liquidation could potentially trigger:

mass deposit withdrawals;

payment disruption;

losses for businesses;

interbank contagion;

financial-market instability; and

pressure on public authorities.

Consequently, specialised resolution legislation becomes relevant.

The Banco Popular litigation provides the clearest Spanish example of this distinction.

32. Resolution Versus Liquidation

Resolution should not be confused with ordinary liquidation.

Liquidation

The debtor's assets are generally realised and distributed according to insolvency priorities.

Resolution

Authorities employ specialised statutory powers to manage the failure of a financial institution while seeking to maintain critical functions and financial stability.

Resolution mechanisms may involve measures such as:

transfer of business;

sale of the institution;

write-down of capital instruments;

conversion mechanisms;

bridge structures where legally appropriate; and

other statutory resolution tools.

Banco Popular demonstrated how quickly such mechanisms can operate.

33. Depositor Protection

Depositors occupy a particularly important position in bank insolvency.

Bank insolvency cannot be approached exclusively as a dispute between shareholders and ordinary commercial creditors.

Authorities must also consider depositors and the deposit-guarantee framework.

This creates another fundamental distinction between banking insolvency and ordinary corporate insolvency.

The legal framework seeks to prevent the collapse of a bank from automatically producing equivalent losses for protected depositors.

34. Insolvency Hierarchy and Resolution

Creditor hierarchy remains important in bank resolution.

Resolution legislation is designed around an established hierarchy of claims and loss allocation.

The principle is broadly that losses should first be absorbed according to the statutory ranking rather than being shifted arbitrarily between stakeholders.

This is why the classification of:

equity;

subordinated instruments;

senior debt;

eligible liabilities;

deposits; and

protected claims

can become extremely important when a bank fails.

35. The “No Creditor Worse Off” Principle

An important safeguard in European bank resolution is the no creditor worse off principle.

Its basic purpose is to compare the treatment creditors received under resolution with the treatment they would have received in the relevant hypothetical ordinary insolvency scenario.

This demonstrates how closely resolution law and insolvency law interact.

Ordinary insolvency remains relevant even when it does not actually occur because it can provide the counterfactual benchmark against which aspects of resolution treatment are assessed.

Conceptually:

Actual result under resolution

is compared with

Hypothetical result under normal insolvency proceedings.

This helps protect creditors against certain disproportionate losses caused specifically by resolution.

36. Interaction With EU Law

Spanish banking insolvency cannot be understood exclusively through domestic legislation.

Spain participates in the European Banking Union.

Accordingly, the framework involves interaction among:

Spanish insolvency legislation;

Spanish bank-recovery and resolution legislation;

EU resolution legislation;

the Single Resolution Mechanism;

the Single Resolution Board;

European Central Bank supervision; and

Court of Justice jurisprudence.

Banco Popular illustrates this multi-level structure particularly clearly.

A Spanish bank was resolved through the European resolution architecture, while resulting litigation reached EU courts and interacted with Spanish private-law proceedings.

37. Importance for Lending Practice

The interaction between banking and insolvency law affects banks long before insolvency actually occurs.

When making a loan, banks need to consider:

whether security is legally valid;

whether it will be recognised in insolvency;

its likely insolvency ranking;

whether enforcement may be stayed;

whether guarantees will remain enforceable;

whether restructuring can bind the bank;

whether new financing receives protection; and

likely recovery in liquidation.

Insolvency law therefore directly influences the pricing and structure of banking transactions.

38. Importance for Borrowers

The framework also protects financially distressed borrowers.

Without collective insolvency rules, the first creditor to enforce could seize critical assets and destroy an otherwise viable business.

Restructuring law instead permits coordinated negotiations.

A viable business may therefore be able to:

restructure debt → obtain liquidity → preserve operations → continue trading → repay creditors over time.

Liquidation remains available when rescue is not economically realistic.

39. Overall Legal Position

The relationship between banking law and insolvency law in Spain operates at several levels.

Level 1 — Bank lending

Banking law governs the financial relationship and regulatory obligations surrounding lending.

Level 2 — Borrower insolvency

The TRLC determines how the bank's claim, collateral and enforcement rights are treated.

Level 3 — Restructuring

Insolvency legislation can modify the ordinary contractual relationship between debtor and bank through collective restructuring mechanisms.

Level 4 — Bank distress

When the bank itself is failing, specialised recovery and resolution legislation becomes relevant.

Level 5 — EU Banking Union

European institutions and EU legislation can become directly involved in managing significant bank failures.

This makes Spanish banking insolvency a combination of private law, insolvency law, banking regulation and European financial law.

40. Conclusion

The interaction between banking law and insolvency law in Spain is based on a fundamental distinction between a bank participating as a creditor in another debtor's insolvency and a bank itself becoming financially distressed.

Where the bank is a creditor, the Spanish insolvency framework determines the recognition, classification and enforcement of its claims. Mortgages, pledges and third-party guarantees can provide substantial protection, but their effectiveness depends upon compliance with insolvency and security-law requirements.

Spanish Supreme Court decisions such as Judgment 549/2021, concerning third-party mortgage security, and Judgment 965/2023, concerning pledges over future receivables, demonstrate the importance of correctly structuring banking security. Judgment 1603/2025 further illustrates how a mortgage creditor's special privilege can be preserved where formal cancellation of the mortgage facilitates an insolvency sale without constituting a substantive waiver of priority.

The position changes significantly when the credit institution itself fails. Spanish insolvency legislation expressly recognises the existence of special rules applicable to credit institutions, while Law 11/2015 and the European resolution framework provide specialised mechanisms for dealing with failing banks.

The Banco Popular resolution and the resulting cases—including Banco Santander (C-410/20), Fundación Tatiana (T-481/17), Del Valle Ruiz (T-510/17), Eleveté Invest (T-523/17), Algebris (T-570/17) and Aeris Invest (T-628/17)—demonstrate that bank failure is not treated merely as conventional corporate insolvency.

The Spanish framework can therefore be summarised as:

Bank as creditor → insolvency law controls claim and security

Distressed borrower → restructuring may modify ordinary contractual enforcement

Bank itself fails → specialised banking-resolution law becomes central

Resolution → financial stability and continuity of critical banking functions

Ordinary insolvency → remains important as both a legal regime and a benchmark for creditor protection

Ultimately, Spain's system attempts to combine two objectives: effective creditor rights in ordinary insolvency and protection of financial stability when the insolvent or failing entity is itself a bank.