Front Matter
  • 1 0000000404811396 Monetary Fund


This book analyzes and compares the laws of selected industrial countries that are representative of the different approaches to the treatment of banks in distress. It addresses only those banking and economic policy issues that are required for a proper understanding of the banking law or the legal strategies, procedures, and practices that have evolved in the treatment of banking problems. The book does not cover international aspects of bank insolvency, but rather has a domestic focus, given that bank regulation and supervision are still largely a national endeavor.

© 2001 International Monetary Fund

Cover design: Lai Oy Louie

Composition: Jack Federici

Cataloging-in-Publication Data

Asser, T. M. C. (Tobias Michael Carel), 1935-

Legal aspects of regulatory treatment of banks in distress / Tobias M.C. Asser. _ Washington, D.C. : International Monetary Fund, 2001.

p. cm.

Includes bibliographical references.

ISBN 1-55775-972-3

1. Bank failures – Law and legislation. 2. Bankruptcy – Law and legislation. 3. Banking law. 4. Banks and banking – State supervision. I. International Monetary Fund.

HG1521.A77 2001

Price: $26.00

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  • Preface

  • Overview

  • Scope of the Report

  • Forced Liquidation and Restructuring of Banks: Differences Between Bank Insolvency Law and General Insolvency Law

  • I. General Policy Considerations

  • 1. Special Treatment of Banks

  • 2. Institutional Framework

  • 3. Incidental Versus Banking System Problems

  • 4. The Corrective Effects of Market Forces

  • 5. Liquidity Support Provided by the Central Bank as Lender of Last Resort

  • 6. Prevention

  • II. General Legal Considerations

  • 1. The Law Governing Banking Activities

  • 2. International Aspects

  • 3. General Protection for Banks: Principles of Administrative Law

  • 4. Special Protection for Banks: Provisions of Banking Law

  • 5. Review of Regulatory Acts

  • Principal Objectives To Be Pursued by Law

  • III. Regulatory Intervention: Common Issues

  • 1. Categories and Objectives of Regulatory Intervention

  • 2. Discretion of Regulators Under the Law

  • 3. Gradation of Regulatory Intervention

  • 4. Timeliness of Regulatory Measures

  • 5. Reporting and Disclosure Requirements

  • 6. Financial Costs of Regulatory Intervention

  • Principal Objectives To Be Pursued by Law

  • IV. Corrective Action: Common Features

  • 1. Authority to Take Corrective Action

  • 2. Grounds for Taking Corrective Action

  • 3. Corrective Action Plans

  • V. Corrective Action: Categories

  • 1. Choice of Corrective Action

  • 2. Corrective Agreements, Warnings, and Orders

  • 3. Appointment of Observers and Inspectors

  • VI. Exceptional Financial Support to Insolvent Banks

  • VII. Special Moratorium on Debt Service by Banks Under the Banking Law

  • 1. General Observations

  • 2. Judicial Moratoria

  • 3. Extrajudicial Moratoria

  • 4. Entry into Force and Termination of Moratoria

  • Principal Objectives To Be Pursued by Law

  • VIII. Taking Control of a Bank Under the Banking Law: Common Issues

  • 1. Survey of Procedures

  • 2. Bank Administration Procedures

  • 3. Issues Common to Bank Administration Procedures

  • 4. Regulatory Administration Versus Judicial Administration

  • IX. Provisional Administration Under the Banking Law

  • 1. General Issues

  • 2. Appointment of a Provisional Administrator

  • 3. Legal Effects of the Appointment of a Provisional Administrator

  • X. Receivership Under the Banking Law

  • 1. General Issues

  • 2. Appointment of a Receiver

  • 3. Legal Effects of the Appointment of a Receiver

  • XI. Bank Resolution Procedures Used in a Banking Law Receivership

  • 1. Principal Procedures

  • 2. Bank Merger

  • 3. Purchase and Assumption Transactions

  • 4. Forced Bank Liquidation

  • XII. Revocation of the Banking License

  • 1. Grounds to Revoke the Banking License

  • 2. Authority to Revoke the Banking License

  • 3. Legal Effects of Revocation of the Banking License

  • Principal Objectives To Be Pursued by Law

  • XIII. Taking Control of a Bank Under General or Special Insolvency Law

  • 1. General Issues

  • 2. Special Bank-Related Features of the General Insolvency Law

  • Principal Objectives To Be Pursued by Law

  • XIV. Banking System Restructuring

  • 1. Overview

  • 2. Institutional and Functional Features

  • 3. Legal Aspects

  • Principal Objectives To Be Pursued by Law


This book is based on a comparative study of the law of selected countries with banking legislation that may serve as standard for the treatment of banks in distress. This report is consistent with and builds on the G-22 Working Group Reports on the International Financial Architecture, issued in October 1998, and the report on Orderly and Effective Insolvency Procedures: Key Issues, prepared by the Legal Department of the IMF and published in August 1999.

The author of this book is a former Assistant General Counsel of the IMF, who prepared it in close consultation with several bank insolvency experts, both inside and outside the IMF. Special thanks for their valuable assistance are extended to:

  • Stephen Adamson (United Kingdom), a National Partner in charge of Restructuring Services of Ernst & Young and an advisor to the Government of the United Kingdom as a nonexecutive member of the Insolvency Services Executive Agency Steering Board;

  • Ross Delston (United States), Attorney-at-Law and a former Assistant General Counsel of the Federal Deposit Insurance Corporation;

  • Jordan Luke (United States), a partner in the law firm of Davis Polk & Wardwell and a former general counsel to the Federal Home Loan Bank Board.

Within the IMF’s Legal Department, the support of François P. Gianviti and William E. Holder, the comments of Hermann W. Krull and Bernhard Steinki, and the assistance of Rachel Ray are gratefully acknowledged. The report has benefited greatly from the patient explanations of banking policy by Stefan N.M. Ingves, Warren Coats, and Marc G. Quintyn of the IMF’s Monetary and Exchange Affairs Department, and the extensive comments and suggestions provided by Gudrun Mauerhofer of the Austrian National Bank, Glenn Hoggarth of the Bank of England, and Urs Zulauf and Eva Hüpkes of the Swiss Federal Banking Commission. David Driscoll edited the paper, and Gail Berre of the IMF External Relations Department coordinated production of the publication.

The opinions expressed in this report are those of the author and are not necessarily shared by the Executive Board or the staff of the IMF.