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Business and Economics > Finance: General

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Cover Technical Notes and Manuals
Sibling Rivalry in the Financial Safety Net: Governance Arrangements for Bank Resolution and Deposit Insurance
Atilla Arda
and
Jan Nolte
The technical note and manual "Sibling Rivalry in the Financial Safety Net," authored by Atilla Arda and Jan Nolte, examines the governance structures essential critical for effective bank resolution and deposit insurance functions. Considering the vulnerabilities exposed during the 2008-09 global financial crisis, the note emphasizes the interconnectedness of these two critical functions, both of which aim to safeguard depositors and maintain financial stability. The authors discuss various institutional arrangements, highlighting the choice between integrating both functions within existing agencies or establishing new entities. The note then identifies potential conflicts of interest among resolution authorities, deposit insurance systems, other safety net participants such as central banks and supervisory agencies, and the financial sector. These potential conflicts underscore the necessity of robust governance frameworks to address these challenges and ensure autonomy, operational independence, and accountability of the two functions. The note emphasizes the need for strong legal protections for individuals in charge of resolution and deposit insurance, ensuring they can take decisive actions during crises. By exploring best practices and case studies, including Denmark's integrated framework, the authors provide valuable insights into optimizing institutional and governance arrangements by integrating the deposit insurance function within the resolution authority. This could support effective cooperation among authorities which is vital for creating resilient financial safety nets.
Keywords:
deposit insurance; bank resolution; crisis preparedness; crisis management; financial crisis; financial stability; governance; independence; autonomy; deposit insurance agency; deposit insurance system; views ofthe IMF; governance arrangement; deposit insurance fund; deposit insurer; Bank resolution framework; Financial safety nets; Financial sector stability; Global
Cover IMF Working Papers
A Confidence-Financial Inclusion Nexus in the Caucasus and Central Asia?
Kalin I Tintchev
and
Kady Keita
We document novel evidence that confidence in macrofinancial stability has a positive impact on financial inclusion in CCA countries and more broadly. This channel is particularly important for CCA countries, with confidence gains of 1 unit leading to 0.7 unit improvement in financial inclusion. Institutional factors such as level of governance and reliance on transparent policy rules and robust financial safety nets explain a large fraction of the variability in confidence in the region. We find that governance reforms are critical for deepening financial inclusion while the impact of inflation targeting, fiscal rules and deposit insurance schemes is positive and material only when governance levels exceed certain thresholds.
Keywords:
Financial inclusion; confidence; governance; inflation targeting; fiscal rules; deposit insurance; inclusion Nexus; governance reform; CCA country; governance level; governance gap; Fiscal rules; Financial sector development; Global; Central Asia and the Caucasus
Cover Finance & Development
Finance & Development, December 2024: Finance & Development, December 2024
International Monetary Fund. Communications Department
Finance & Development, December 2024
Keywords:
housing sector; IMF photo; affordability crisis; cotton textile industry; housing supply; Housing prices; Housing; Mortgages; Global financial crisis of 2008-2009; Global; Africa; Caribbean; Europe; Middle East
Cover Policy Papers
2024 Review Of The Fund's Transparency Policy And Open Archives Policy—Background Paper 1 On Key Trends
International Monetary Fund. Strategy, Policy, & Review Department
On November 15, 2024, the IMF’s Executive Board concluded the Review of the IMF’s Transparency Policy and Open Archives Policy and approved a number of reforms. As an international institution, making important documents available to the public on timely basis enhances the IMF’s credibility, accountability, and effectiveness and is critical to fulfill its mandate of promoting global economic and financial stability. While transparency at the IMF is achieved through a range of policies and practices, the Transparency Policy and the Open Archives Policy form the core elements of the IMF’s transparency framework. The Fund has come a long way since the inception of these policies in the early nineties. Most Board documents are now published, published more quickly, and under more consistent and evenhanded application of modification rules. The information available in the Fund’s archives has increased and is more easily accessible to the public. While experience suggests that these policies are effective in delivering on their objectives, the landscape in which the Fund operates has evolved since these policies were last reviewed in 2013. In a more interconnected and shock-prone world the pace with which policymakers need to make decisions has accelerated and the expectations of stakeholders on the availability and timeliness of the Fund’s analysis and policy advice has grown. Against this backdrop, the 2024 Review of the IMF’s Transparency Policy and Open Archives Policy focuses on targeted reforms to (i) support faster publication of board documents and communications of Board’s decisions; (ii) strengthen the rules and processes to modify Board documents prior to publication; and (iii) allow faster release of some documents in the Fund’s archives accessible to the public. The reforms further clarify the scope and objectives of these policies, their implementation processes, and how to strengthen knowledge sharing. The review was supported by data analysis as well as surveys and consultations with key stakeholders, including Executive Directors, country authorities, IMF missions chiefs, and civil society organizations as detailed in the three background papers accompanying this 2024 review.
Keywords:
Accountability; Archives; Communication; Independence; Lending; Modification Rules; Publication; Surveillance Transparency; country paper; publication rate; transparency Policy review; IMF's transparency Policy; lags of country document; Financial Sector Assessment Program; Global financial crisis of 2008-2009; Income; Financial sector; Anti-money laundering and combating the financing of terrorism (AML/CFT); Central and Eastern Europe; Global; Caribbean
Cover IMF Working Papers
Global Contagion of Financial Reforms
Nan Li
,
Chris Papageorgiou
,
Tong Xu
, and
Tao Zha
We construct an extensive database of domestic financial reforms spanning 90 countries from 1973 to 2014. Utilizing this dataset, we estimate a structural model that incorporates various factors identified in the existing literature to explain the global contagion of financial reforms. Our findings reveal that (1) geopolitical influence and cross-country learning were the primary drivers behind the marked increase in financial reforms globally during the 1990s, and (2) the observed reversals of financial reforms in developing countries after the global financial crisis were driven by shifts in beliefs about the impact of these reforms on growth.
Keywords:
Financial reforms; global contagion; geopolitical influence; cross- country learning; belief updating; reform reversal; reform intensity; political costs; economic growth; financial crisis; IMF working paper 24/243; reform contagion; financial liberalization; liberalization level; Financial contagion; Global financial crisis of 2008-2009; Financial sector; Global
Cover Technical Assistance Reports
Sri Lanka: Technical Assistance Report-Liquidity Monitoring and Monetary Operations
International Monetary Fund. Asia and Pacific Dept
The IMF South Asia Regional Training and Technical Assistance Center (SARTTAC) provided technical assistance (TA) to the Central Bank of Sri Lanka (CBSL) focusing on modernizing monetary operations framework and improving liquidity monitoring. Macroeconomic crisis, compounded by the pandemic, has created significant challenges for conducting monetary policy in Sri Lanka. Considering this, the mission proposed a phased approach for modernizing monetary policy instruments and operations, contingent on progress in ongoing debt restructuring, reducing financial stability risks, achieving macroeconomic stabilization, and improving CBSL’s balance sheet. A transitory model for monetary operations was recommended, centered on one week liquidity operations, while still envisaging a certain level of market segmentation. Key recommendations included introducing a single policy rate to strengthen monetary policy signaling, modifying Statutory Reserve Ratio, and operationalizing Standing Facilities to form an Interest Rate Corridor (IRC). In the later stages, when the CBSL can target aggregate liquidity, liquidity management should return to a mid-corridor system with Open Market Operations (OMO)s calibrated based on liquidity forecasts. These recommendations are designed to enhance monetary policy transmission, support the achievement of CBSL’s primary mandate of price stability, a prerequisite for macroeconomic stability and sustainable economic growth.
Keywords:
Sri Lanka; Monetary policy; international organization.; IMF South Asia Regional Training and Technical Assistance Center; liquidity monitoring; IMF's Monetary; liquidity Assistance facility; weakening monetary policy transmission; Liquidity; Special resolution regime; Open market operations; Liquidity forecasting; Central bank policy rate; Global
Cover IMF Staff Country Reports
Spain: Financial Sector Assessment Program-Technical Note on Financial Safety Net and Crisis Management
International Monetary Fund. Monetary and Capital Markets Department
This paper examines a technical note on financial safety net and crisis management as part of Financial Sector Assessment Program in Spain. Spanish authorities have made good progress in establishing an effective crisis management and resolution regime. The Spanish authorities should integrate bank resolution authority for planning and execution in one institution. Integration would ensure that the national resolution authority responsible for implementing orderly resolution actions has control over the primary levers necessary to achieve its objectives. The Spanish authorities need to establish a framework for addressing liquidity needs in resolution. Spanish authorities should continue to enhance cross-authority crisis coordination arrangements. This should include formalizing its existing crisis management practices and prioritizing by agreeing a cross-authority crisis simulation exercise strategy. Spain’s Executive Resolution Authority should also have the flexibility, where possible, under national procurement legislation to depart from procurement rules in a crisis scenario to appoint external advisory support including independent valuers at short notice.
Keywords:
bank Resolution planning; Banco de España; IMF STX staff; resolution execution; directorate General insurance; authority crisis coordination; Bank resolution; Crisis management; Bank resolution framework; Crisis resolution; Financial sector stability; Global
Cover IMF Staff Country Reports
Panama: Financial Sector Assessment Program - Technical Note on Financial Safety Net, Resolution, and Crisis Management
International Monetary Fund. Monetary and Capital Markets Department
This paper presents a technical note on financial safety net, resolution, and crisis management in Panama. Key institutional pillars of a financial safety net have not been established in Panama. An explicit industry-funded deposit insurance system should be established as a key element of an effective financial sector safety net in Panama. Superintendency of Banks of Panama (SBP) is the resolution authority for banks in Panama; the SBP relies on strong prudential supervision to avoid bank failures and remove weak institutions. The current approach to bank resolution has not changed since the 2012 Financial Sector Assessment Program and recent technical assistance missions. The legal framework underpinning SBP corrective actions, its overall powers and approach to handling bank insolvency has not changed since passage of the Banking Law in 2008. Panamanian authorities have undertaken a review of the current resolution framework and have determined there is need for improvement. The authorities should build upon current domestic and regional efforts, and develop their internal, interagency, and cross-border coordination and communication mechanisms for bank resolution and crisis management.
Keywords:
IMF-World Bank Financial Sector Assessment Program; Banco Nacional de Panamá; FSAP assessment's finding; staff team of the International Monetary Fund; deposit insurance system; Bank resolution framework; Bank resolution; Crisis resolution; Crisis management; Financial sector stability; Global; Central America
Cover Technical Assistance Reports
Republic of Moldova: Technical Assistance Report-Design Considerations for a New Bank Liquidation Framework
International Monetary Fund. Legal Dept.
and
International Monetary Fund. Monetary and Capital Markets Department
At the request of the National Bank of Moldova (NBM), a technical assistance (TA) mission of the Monetary and Capital Markets Department and the Legal Department visited Chisinau during November 28 to December 5, 2022, to assist with the design of a revised bank liquidation framework. The mission reviewed three stylized models for bank liquidation – i.e., a purely administrative model in which a public authority (e.g., the resolution authority) directs the liquidation procedure, a judicial model that relies on court-supervised liquidation procedures, and a hybrid model in which a dedicated liquidator carries out the liquidation process under supervision of the court. It identified important considerations in support of a continued (albeit reduced) role for the NBM in bank liquidation and concluded that a hybrid model could be a viable option for Moldova: by shifting more responsibilities to the judiciary, the NBM’s Resolution Division could free up some resources, while maintaining synergies between the NBM’s responsibilities for adopting early intervention measures and (the planning of) bank liquidation. The mission recommended that, in such a model, the NBM retains the power to (i) initiate liquidation; (ii) appoint or propose liquidators; and (iii) undertake a ‘Purchase and Assumption’ type of transaction, whereby the deposits of the failing bank are transferred to a willing buyer. It also provided detailed guidance on, among others, (i) the triggers for determining when liquidation should be initiated; (ii) the process for commencing the liquidation process; (iii) the legislative design of transfer powers and associated safeguards; (iv) the role and appointment of liquidators; and (v) legal protection of the NBM.
Keywords:
Republic of Moldova; Bank Liquidation; Bank Failures; Purchase and Assumption; Depositors; Financial Stability.; bank liquidation model; Moldovan bank liquidation regime; NBM staff; NBM Law; liquidation framework; Financial sector stability; Bank resolution framework; Bank resolution; Banking crises
Cover Technical Assistance Reports
Seychelles: Technical Assistance Report-Bank Resolution Framework
International Monetary Fund. Legal Dept.
and
International Monetary Fund. Monetary and Capital Markets Department
The IMF conducted a technical assistance to Central Bank of Seychelles (CBS) and provided policy and legal guidance to the CBS on the drafting of legal amendments that will provide an adequate institutional framework and effective powers for bank resolution, and thus contribute to financial stability, while limiting the use of public funds and addressing moral hazard concerns. The mission provided recommendations on corrective actions, emergency liquidity assistance (ELA) and bank resolution frameworks to enhance their alignment with international best practices, FSB’s Key Attributes of Effective Resolution Regimes for Financial Institutions (KAs) and good practice.
Keywords:
Seychelles; key attributes; banking; corrective actions; emergency liquidity assistance; bank resolution; moral hazard; public funds; resolution funding mechanism; resolution options; entry into resolution; deposit insurance scheme; financial stability; recovery plans; resolution plans; resolvability assessments; domestic coordination; cross border coordination.; bank resolution law; IMF legal department; IMF's Monetary; request of the Central Bank of Seychelles; MCM STX; IMF Monetary; Bank resolution framework; Financial sector stability; Bridge bank; Options; South Asia; Global