Volume II - PDF - International Association of Deposit Insurers

•BACKGROUND DOCUMENTS•
Part I: Research
The interrelationships among the safety-net participants
can vary significantly. These interrelationships
are the outgrowth of the institutional, economic and
financial situation of a country, and of its history.
Irrespective of the specific structure of a country’s
financial safety net, however, smooth cooperation
and goodwill among the various components are
key to an effective deposit insurance system. A
well-designed safety net is integral to a smoothfunctioning
financial system and contributes to
economic stability.
A need for coordination exists in any institutional
set-up, as three different instruments—deposit
insurance, lender of last resort and supervision—
are used, each with its own criteria, to achieve the
common objective of banking-system stability.
However, the nature and the extent of the problem
vary with the specific institutional set-up a country
has adopted.
When a single agent—generally the central bank—
acts simultaneously as lender of last resort, banking
supervisor and deposit insurer, the interrelationships
issue is an internal matter and thus should be
capable of being dealt with and resolved relatively
simply. The smooth resolution of potential conflicts
is dependent on an adequate accountability
regime among the departments that are responsible
for each mandate.
When, however, the functions of lender of last
resort, banking supervisor and deposit insurer are
allocated to separate agencies, the interrelationships
issue may be more complex, as each agency is
held accountable for discharging its own mandate. 2
As a consequence, various issues related to information
sharing, allocation of powers and responsibilities,
and coordination among the different functions
need to be clearly and explicitly addressed in order
to promote and maintain the credibility of the
safety net.
There are no specific rules or guidelines to address
and, possibly, resolve the interrelationships issue
described above. Possible solutions by their very
nature must be country-specific. Moreover, even
within the same country, the safety-net institutional
set-up and, therefore, the characteristics of
the relationships among the various agencies evolve
in response to changes in the country’s financial
system.
When a country decides to implement an independent
deposit insurance system, or to reform an
existing deposit insurance system, it is important
that any “interrelationships issues” that may arise
should be addressed. 3 This task is made easier if
policymakers consider and are guided by what
would be in the best interest of the general public.
Information Sharing:
Interrelationships and
the Deposit Insurer’s
Information Needs
Information sharing among safety-net participants
is essential to an effective deposit insurance system.
Indeed, in order to discharge their mandates effectively,
deposit insurers and other safety-net participants
should have access to an adequate flow of
information.
The need for information on the part of the deposit
insurer varies significantly according to its institutional
mandate and its powers. In a simple paybox
system, for example, the deposit insurer should have
the necessary information to be able to reimburse
depositors whenever necessary, including information
on the amount of insured deposits held by
individual depositors.
For its part, a risk-minimising deposit insurer
has greater needs for information because of its
broader mandate. It must be able to assess the
financial condition both of the industry and of
individual insured institutions, as well as to anticipate
the financial troubles of individual institutions
and to deal with them effectively when they arise.
Thus, depending on its mandate, a risk-minimising
deposit insurer may need macro-level—industry
information—and micro-level information—
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Guidance for Developing Effective Deposit Insurance Systems: Volume II