Background
World Bank-IMF staff members have carried out a broad consultative process to prepare a draft report on the bank insolvency framework. A number of global and regional seminars, with participation of more than 90 countries, have been held as part of the GBII in
the past three years to ensure a wide consultation process, including countries from all regions of the world, as well as representatives for the regulatory and legal professions. A joint World Bank-IMF drafting team prepared successive versions of a report on bank insolvency in consultation with a Core Consultative Group (CCG).1 Since mid-2004, a number of pilot country reviews of the institutional, legal, and regulatory framework to address bank insolvency have been carried out for a number of systemically and regionally important countries. After those pilot reviews, a revised version of the main report is expected to be circulated for the information of World Bank and IMF Boards.
The initiative aims to identify internationally accepted principles regarding the legal and institutional framework necessary to address cases of bank failures, starting at the point at which the authorities need to assume control of the bank for the purpose of rehabilitating or, where appropriate, liquidating it in a structured and orderly fashion. In particular, the report covers the following areas:
• The institutional arrangements necessary for dealing with bank insolvency
• General legal issues arising in bank insolvency proceedings
• The legal framework empowering the banking authorities to assume control of a distressed bank (either in the context of official administration or by way of other arrangements), which allows them to conduct the restructuring of an insolvent bank
• The principles applicable to the restructuring of insolvent banks, the special problems associated with different restructuring techniques, and the legal approaches that may be followed to deal with them
• The legal underpinnings and modalities of bank liquidation proceedings
• Modifications to the legal and institutional framework in the event of a systemic crisis
