Panel 1: Setting out the Issues. 3 May 2007. Presentation by: J. P. Sabourin, Chair of Executive Council & President of the International Association of Deposit Insurers, and Chief Executive Officer of the Malaysia Deposit Insurance Corporation. Bank failures. - PowerPoint PPT Presentation
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Presentation by: J. P. Sabourin, Chair of Executive Council & President of the International Association of Deposit Insurers, and Chief Executive Officer of the Malaysia Deposit Insurance Corporation
BCCI’s operations were divided between 2 auditors neither of whom audited all of BCCI’s operations therefore, no full & clear picture of its operations
Assurance by the Bank of England that the auditors should continue to certify BCCI’s books, reinforced by an agreement that the Abu Dhabi government, supervisor and BCCI would work with the auditors to restructure the bank & avoid its collapse
The Luxembourg Monetary Commission did not want to take the role of lead regulator as the operational headquarters was in London. But Bank of England did not want to accept the responsibility of supervising the global operations of a bank that it did not charter.
What were the regulators’ & supervisors’ responses?
Realisation that there was no consolidated oversight of the global activities of BCCI.
Response – Formation of the “Regulatory College” comprising supervisory authorities from 8 countries to provide a cooperative oversight structure & share information.
Realisation that there was a lack of power to deal with international banking groups.
Response – Strengthening of the Concordat by the Basel Committee whereby a bank is required to obtain the consent of both its home country regulator & host country regulator to establish a branch in a jurisdiction outside its home country.
Different insolvency regimes in different countries.
Liquidators in different jurisdictions have different objectives.
Different right of set-off across bankruptcy regimes.
Uncertainty in some jurisdictions where assets are paid out to creditors may be traced & reclaimed by liquidator. This can upset the finality of transactions.
Should there be a super regulator that maintains a global repository of information on internationally active banks?
Availability & sharing of information regarding emerging problems that may have implications on stability of global financial system would assist in the monitoring & implementation of appropriate pre-emptive or corrective actions promptly & in a coordinated manner.
Do regulators & deposit insurers have a duty of care?
During 1990/91, Abu Dhabi, the auditors, BCCI & Bank of England reorganised BCCI.
However, the public knew nothing of the fraud & criminal activities that had perpetuated within BCCI, & continued to do business with BCCI. And this certainly caused substantial damage to innocent depositors & customers of BCCI who would have discontinued their dealings with BCCI.