Bridge Bank

A bridge bank is a temporary institution created by a financial regulator or government to take over and manage the operations of a failed or failing bank until a more permanent solution, such as a sale or merger, can be arranged. The purpose of a bridge bank is to maintain critical banking services, protect depositors, and preserve the value of the failed bank's assets while ensuring stability in the financial system.

Example

If a regional bank fails due to insolvency, the government might establish a bridge bank to assume the failed bank's assets and liabilities temporarily, ensuring that customers continue to have access to their accounts while a long-term solution is found.