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Wouter Bossu, Dawn Chew, and Mr. Sean Hagan

this is intimately related to a country’s sovereignty. Further, it could also be clarified whether it will be a joint inspection or if the host supervisor may send a representative and whether the examination report would be shared in full with the host supervisor. Information should be shared when there are supervisory concerns and shared on a timely basis. 73 Resolution . BCP 11, EC 7 states that the supervisor should cooperate and collaborate with relevant authorities in deciding when and how to effect the orderly resolution of a problem bank situation. The

S. Raihan Zamil

banking system. In practice, regulation and supervision serve two distinct but related functions: Laws and regulations are the collective set of rules that provide the banking authority with powers to license banks, set minimum operating and risk management standards for banks, and take necessary corrective measures—including revocation of banking licenses—in problem bank situations. The main intent is to require bank management to behave prudently because banks are the guardians of depositor funds. Supervision is the authorities’ means of implementing these rules

International Monetary Fund
In recent years, the IMF has released a growing number of reports and other documents covering economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with government officials, is published at the option of the member country.
Wouter Bossu and Dawn Chew
Well-designed banking laws are critical for regulating the market access and operations of banks, as well as their removal from the market in case of failure. While at a financial policy level there is a broad consensus as to the content of banking laws, from a legal perspective their drafting often leaves something to be desired. In spite of what is often argued, the types of weaknesses of banking laws are hardly country-specific; many weaknesses are shared by many banking laws. This working paper discusses those weaknesses and ways to remedy them, by focusing on a selected set of legal policy principles.
International Monetary Fund. Monetary and Capital Markets Department

-minimizing organization”) . This provides a degree of flexibility and would likely facilitate the handling of problem bank situations. The procedure, in which the ACP recommends but does not compel the FGD to intervene, is appropriate because the ACP—through its supervisory work—has good knowledge about the concerned bank, as well as of the state of the financial sector in general, and is therefore well placed to assess the chances of a successful intervention. It is also appropriate that the FGD has the discretion to accept or to decline the recommendation from the ACP, thus taking

International Monetary Fund. Monetary and Capital Markets Department
This technical note discusses key findings of the assessment of Crisis Management and Bank Resolution Framework for France. The findings reveal that the crisis preparation, crisis identification, and crisis management processes in the supervisory authority (ACP) are comprehensive and well structured. Without having a formal U.S.-type “PCA-regulation,” the ACP identifies weak banks and requests appropriate remedial measures to be taken. The ACP also actively uses the Basel II Pillar 2 instrument to require add-ons on an individual-bank basis to the minimum regulatory capital requirements, reflecting the assessed riskiness of a bank.
International Monetary Fund. Monetary and Capital Markets Department

authority of the CBK to resolve problem bank situations is clearly defined from the preventive stage through resolution and liquidation. A number of cases were reviewed during the assessment to determine the extent of the CBK use of its enforcement authority. Some of the cases reviewed involved requiring a bank to restructure board and senior management and the recapitalization of the bank, the closing of the branch of a foreign bank operating unlicensed in Kosovo and the successful—and still on-going—resolution of a failed bank. However, the special circumstances that

International Monetary Fund. Monetary and Capital Markets Department

, while resolution represents the decisive action to resolve a problem bank situation. 18. Although intervention and resolution are two separate activities, preparing for both involves same or similar information to help ensure the success of both . As a bank resolution is basically a bankruptcy procedure, these procedures represent an exercise of a fiduciary capacity: in intervention, to control, secure, and inventory a bank’s assets and prepare final financial statements for the failed bank; in resolution, because of the special nature of banks and to fulfill

International Monetary Fund. Monetary and Capital Markets Department

risks. Early warning indicators are used to identify and address adverse developments swiftly. For instance, violations of the “trigger capital ratio” must be immediately reported by a bank to the HKMA, which will require the bank to take appropriate action. 24. The framework for identifying problem bank situations is generally sound . Potential risk factors are identified and presented swiftly in appropriate HKMA internal (and, when relevant, also external) committees for consideration. The deliberations have often led to further actions, such as communications