The Resolution Fund was established with the passage of the Act on Resolution of Credit Institutions and Investment Firms, no. 70/2020. The Fund will cover the cost of financial undertakings’ resolution proceedings. It is a separate department of the Depositors' and Investors' Guarantee Fund (TIF). The Central Bank of Iceland’s resolution authority takes decisions on payments from the Resolution Fund.

In accordance with EU Directive 2014/59/EU, called the Bank Recovery and Resolution Directive (BRRD), each member state of the European Economic Area (EEA) is required to ensure that member states’ resolution funds have a balance of 1% of insured deposits by year-end 2027. Iceland’s Resolution Fund is already fully funded and therefore satisfies the requirements laid down in the Directive. The permanent arrangement for funding the Resolution Fund was laid down with the passage of Act no. 48/2022. The Resolution Fund will be fully funded with the transfer of capital from the deposit division of the TIF. The balance in the Fund will be just under 29 b.kr. at the end of 2022.

A fully funded Resolution Fund ensures that resolution can proceed efficiently if the need arises.