Financial Sector Assessment

Key Institutional Aspects of the Bank Insolvency Regime

A set of key features of the broader legal and institutional environment for bank regula­tion and contract enforcement will affect the effectiveness of any bank insolvency regime. Many of those features are included as part of BCPs, and others may be viewed as part of the preconditions for effective supervision and robust bank exit policies. The features include the following:

• A clear legal framework for banking supervision, including operational autonomy of banking authorities, and specific decision making powers and procedures (part of BCP 1)

• Well-defined property and contractual rights (part of preconditions of BCP)

• Effective enforcement procedures (for expeditions and effective collection of claims and enforcement of security interests)

• Integrity and transparency of official decision making process