A bridge bank is a tool that is available when an institution fails and there is no buyer or private-sector solution on the horizon. It is meant to “bridge” the gap between when an institution fails and when a buyer or private-sector solution can be found. CDIC can use this tool to transfer all or part of the failing bank’s business to a bridge bank, which is temporarily owned by CDIC.
As in the case with a forced sale, the transfer would ensure that insured deposits are protected. As owner, CDIC would likely appoint to the bridge bank a new board of directors and chief executive officer to handle the restructuring and to stabilize the bank. Once stable, the bridge bank would be sold to the private sector.
For more info, consult our bridge bank backgrounder.