Effective financial crisis management requires prior preparation and planning. It requires not only appropriate mandates and tools but also proper financial crisis planning, management and recovery. Both the institutions and the authorities carry out extensive preparation and planning work. Each institution draws up a recovery plan. This details the actions the institution plans to take to preserve or restore its financial position and viability following a deterioration in its financial situation. The recovery plan is a preventive measure intended to help prevent an institution from failing.
Financial crisis management is an important part of the work of SEACEN stakeholders in safeguarding financial stability and protecting their economies from the costly effects that a financial crisis can have. Financial stability means that the financial system can maintain its fundamental functions and is resilient to disruptions that threaten these functions. These fundamental functions are to facilitate payments, turn savings into financing, and manage financial risks. These functions are important for the economy to function effectively. Serious disruption to any of these fundamental functions can have considerable costs for society, so there is a need to maintain financial stability. This can take the form of preventive measures to reduce the risk of a crisis occurring, and crisis management measures to limit the costs when one.
There are two reasons why special systems are needed to deal with banks and other institutions in crisis. One is that they provide functions that are crucial for a properly functioning economy. The other is that their operations feature an inherent degree of instability. This means that banks cannot routinely be allowed to fail in the same way as other types of companies.
The FSB’s Key Attributes of Effective Resolution Regimes for Financial Institutions (the ‘Key Attributes’ KA) set out the core elements that the FSB considers to be necessary for an effective resolution regime. Their implementation should allow authorities to resolve financial institutions in an orderly manner without taxpayer exposure to loss from solvency support, while maintaining continuity of their vital economic functions.
The course will take the participants through a crisis management simulation, so that they will experience a fast-developing situation where authorities have to be alert and resourceful in communicating with each other and using their crisis management tools judiciously.
This course will help participants understand how to develop a financial crisis plan. Through the use of case studies and crisis simulation, participants will be work through from crisis planning through to crisis management, and recovery. This is a process required to be laid down in law based on international standards, and involving SEACEN stakeholders, governments and other institutions concerned such as deposit insurance corporations (DICs).
Participants should have at least three years of experience in the regulation and supervision and those responsibility for implementing or designing resolution activities. It is recognized that central banks and monetary authorities are often not the supervisory or resolution agencies in some economies; accordingly, SEACEN members are encouraged to invite participants from these agencies in their jurisdictions as well.