Volume II - PDF - International Association of Deposit Insurers

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•BACKGROUND DOCUMENTS• Part I: Research 18 Depending on the legal situation in different countries, open-bank transactions may have certain other disadvantages compared with a closed-bank transaction. In the open-bank case, certain contingent liabilities may be retained by the assisted institution and become potentially payable in cash; in a closed-bank transaction such liabilities would pass to the receiver and be payable as a non-deposit creditor claim. Furthermore, in some countries, certain burdensome leases and contracts may be abrogated without penalty in a closed-bank transaction. 117 Guidance for Developing Effective Deposit Insurance Systems: Volume II
•BACKGROUND DOCUMENTS• Part I: Research Discussion Papers Claims and Recoveries Abstract: The capacity to manage the assets and liabilities of a failed bank is an essential part of all effective safety-net systems. In the broadest sense, it involves disposing of the bank’s assets and resolving the bank’s liabilities for the benefit of creditors with bona fide claims against the bank. This paper considers the major objectives, organisational and resource requirements, and strategies of the claims-and-recoveries function that arise after a failure-resolution strategy has been adopted. The optimal strategy for effectively and efficiently managing the claims-and-recoveries function is situational, and reflects different economies, safety-net structures, insolvency regimes, and financial, legal and political systems. However, the claims-and-recoveries function is subject to common management processes. These include a feedback loop of analysis, planning, and execution. In addition, effectiveness and efficiency likely are best achieved through decisive control and commercial practice rather than reliance upon legal rights or bureaucratic procedures. The capacity to manage the assets and liabilities of a failed bank is an essential part of all effective safetynet systems. 1 In the broadest sense, it involves disposing of the bank’s assets and resolving the bank’s liabilities for the benefit of creditors with bona fide claims against the bank. This paper, which was prepared by the Subgroup on Claims and Recoveries, considers the major objectives, organisational and resource requirements, and strategies of the claims-and-recoveries function that arise after a failure-resolution strategy has been adopted. 2 In bank failures, claims take several forms. 3 In the context of insolvency proceedings, for example, creditors file claims. Claims also may encompass matters such as legal actions by or against the insolvent bank, or costs and outlays from financial assistance provided to the bank by the deposit insurer or another safety-net participant. Recoveries on these claims are typically derived from the disposition of the bank’s assets, payments by borrowers, and proceeds from legal actions, including claims against directors, officers, auditors and other third parties. The organisation (s) that actually performs the claims-and-recoveries function varies across jurisdictions, and reflects country-specific developments beyond the scope of this paper. In most cases, the deposit insurer will have, at a minimum, a mandate to advance its claims to recover on deposit insurance payments and possibly other costs. Thus, irrespective of whether a deposit insurer is responsible for resolving claims or disposing of the failed bank’s assets, it is likely to have an interest in 118 Guidance for Developing Effective Deposit Insurance Systems: Volume II
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III Feedback
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FINANCIAL STABILITY FORUM Guidance
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