Volume II - PDF - International Association of Deposit Insurers

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•BACKGROUND DOCUMENTS• Part I: Research likely to achieve by individual or collective action, given the comparatively small stake that each would have compared to the aggregate position of the insurance organisation. 7 The degree of clarity in a nation’s statutory or decisional law may influence significantly the bargaining power and behaviour of creditors and debtors. Precisely because there are “not enough assets to go around” in an insolvency, the decision to give particular creditors or types of claims priority, or to permit (or not) collateralisation, may produce an opposite (but not necessarily equal) reaction. In some countries, the law provides for specific time limits associated with the pursuit of claims by creditors, which can affect eligibility for deposit insurance coverage. 8 Nevertheless, many countries impose limitations on the extent to which a bank can provide collateral for liabilities. Public-entity depositors often require highly marketable securities for collateral, even though these typically make up only a small portion of the assets of many large banks. 9 It should be noted that in the case of many small banks, groups such as trade creditors could make up a sizeable portion of non-deposit creditors. These types of creditors may not be in a position to collateralise their claims. 10 See James A Marino and Rosalind L. Bennett, “The Consequences of National Depositor Preference,” FDIC Banking Review 12, no. 2: 19–38, 1999. 11 Although set-off can be regarded as a tool to help reduce credit risk, it carries with it some legal risk in that netting contracts may not be legally enforceable in all the countries in which an institution operates and each type of netting has differing degrees of enforceability in the case of default. See, International Monetary Fund, Orderly and Effective Insolvency Procedures, (1999). 75 Guidance for Developing Effective Deposit Insurance Systems: Volume II
•BACKGROUND DOCUMENTS• Part I: Research Discussion Papers Structure and Organisation Abstract: Whether a deposit insurance system will be effective in meeting its public-policy objectives will be determined, in part, by how the system is structured and organised. Structure and organisation encompasses a deposit insurance system’s mandate, roles and responsibilities; its governance arrangements; and its human resources and other operational considerations. Mandates, roles and responsibilities vary widely among deposit insurance s ystems. It is critical that they be well defined and consistent with the stated public-policy objectives of the scheme. In order to discharge its mandate effectively, a deposit insurer should have access to requisite information on its member institutions. The choice of the governing structure for the deposit insurance system usually is influenced by the mandate and the degree to which the deposit insurer is legally separate from the other safety-net participants or those having an interest in deposit protection and financial-sector stability. Governance systems can be enhanced through the use of sound strategic- and riskmanagement processes and good internal-control and audit systems. Arrangements should be made to ensure that the governing structure is accountable and transparent. Human resources and other operational issues are critical elements of the structure and organisation of a successful deposit insurance system. Key issues are: attracting and retaining qualified employees, determining the appropriate mix between dedicated staffing and outsourcing, ensuring the confidentiality of information supplied to employees, and guaranteeing that employees receive legal protection against lawsuits for their action in the normal course of their activities. 76 Guidance for Developing Effective Deposit Insurance Systems: Volume II
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Volume II FINANCIAL STABILITY FORUM
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Acknowledgements The preparation Fi
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II Outreach Process . . . . . . . .
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Activities •BACKGROUND DOCUMENTS
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III Feedback
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•BACKGROUND DOCUMENTS• Part III
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FINANCIAL STABILITY FORUM Guidance
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