Insolvency – why a special regime for banks? by Eva Hupkes ... - IMF

submit his or her own proposals. 70 The Canada Bank Act establishes a system whereby the
Superintendent may take control of the bank’s own assets as well as those under its
administration. 71 Where the Superintendent has control of such assets, he or she may do all
that is necessary or expedient to protect the rights and interests of the depositors and creditors
of the banks. Dutch banking law authorizes the supervisor, De Nederlandsche Bank, to
appoint a trustee to a bank, by whom all decisions taken by the management, board of
directors and shareholders must be approved. 72 In Spain, the bank supervisor, which is the
Bank of Spain, has the ability to place the management of a distressed bank under the control
of appointed officials (interventores). 73 Any action taken without the prior approval of this
official is considered null and void. 74 In Switzerland, the current proposal for an amendment
to the Banking Act introduces the instrument of an “investigator” who can be appointed for
investigatory or monitoring purposes and, under certain conditions according to the mandate
defined by the Swiss Federal Banking Commission (SFBC), can act in lieu of the bank’s
managers or directors. 75 U.S. law establishes a particular regime to control management
action, and defines in detail the types of transactions that become subject to authorization,
should the bank become what is termed “undercapitalized” 76 or “significantly
undercapitalized”. 77 Where a bank is qualified “critically undercapitalized” 78 it will no longer
70 Id; see also Austria: Sec. 70 (2) 2 of the Banking Act. The appointed supervisor can prohibit
“all bank operations that may increase the risks for the bank’s creditors.”
71 Canada: Sec. 648 (1) (a) and (b) (i), (ii) of the Bank Act 1991, c. 46 (available via the
Internet at http://laws.justice.gc.ca/en/B-1.01/text.html). Bank management is placed under
the control of the Superintendent, and “no director, officer or employee of the bank has access
to any cash or securities held by the bank unless a representative of the Superintendent
accompanies the director, officer or employee, or the access has been previously authorized
by the Superintendent or the Superintendent’s representative.” The Bank Act explicitly
stipulates that ”the bank shall not make, acquire or transfer any loan or make any purchase,
sale or exchange of securities or any disbursement or transfer of cash of any kind without the
prior approval of the Superintendent or a representative designated by the Superintendent.”
72 Netherlands: Act on the Supervision of the Credit System Sec. 28 (available in the Global
Banking Law Database at http://www.gbld.org/downloads/The%20Netherlands/ASCS.pdf ).
73 Spain: Law 26/1988 on the Regulation and Supervision of Credit Institutions Art. 31
(available in the Global Banking Law Database at
http://www.gbld.org/downloads/Spain/DICI.pdf).
74 Id., Art. 35.
75 See supra note 35.
76 For the definition of “undercapitalised”, see 12 USC § 1831o (b) (C).
77 For the definition of “significantly undercapitalised”, see 12 USC § 1831o (b) (D). As such,
a prior written approval from the Federal banking agency is necessary ”to pay any bonus to
any senior executive officer or to provide compensation to any senior executive officer at a
rate exceeding that officer's average rate of compensation (excluding bonuses, stock options,
and profit-sharing) during the 12 calendar months preceding the calendar month in which the
institution became undercapitalized.” 12 U.S.C. § 1831o (f) (4) (A).
78 For the definition of “critically undercapitalised”, see 12 U.S.C. § 1831o (b) (E).
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