Receivership and Resolution Establishing an Effective AMC Thomas A Rose The World Bank

1. Enhancing the Effectiveness of Deposit Insurance International Association of Deposit Insurers 5th Asian Regional CommitteeHanoi, Vietnam (March 28-29 2007) Receivership and Resolution Establishing an Effective AMC Thomas A Rose The World Bank

2. Establishing an Effective AMCIntroduction • The Varying Mandates for Deposit Insurers • Impact of Bank Failure Resolutions • Importance of Asset Resolution • Conditions for an Effective AMC

3. The Varying Mandates for Deposit Insurers • No One Universal Design • Pay-Box Systems • Premium Collection • Fund Management • Depositor Reimbursement • Expanded Systems for Risk Management • Role in Bank Failures

4. Impact of Financial Institution Failure Resolution • Depositors • Borrowers • Creditors • Community • Economy

5. Importance of Asset Resolution • Generally: • Helps in resolving the financial institution • Returns assets to the market • Can contribute to economic recovery, but can also depress prices • Can help to maintain credit culture • Risk Minimization: • Recovery for the Insurance fund

6. An Effective AMC • The Success of an AMC depends upon many factors: • Clear Goals • Operational Issues • Conducive Operational Environment

7. An Effective AMCClear Goals • What Are The Desired Results? • Keep the desired goals simple • Avoid conflicting goals • What Will Be The Implementation Strategy? • Rapid asset disposition • Asset management • Warehouse

8. An Effective AMCOperational Issues • Asset Transfer Prices • Should be market based • Setting Realistic Expectations & Timeframes • Followed by accountability in meeting them • Political Support • Find out in advance what might be of concern

9. An Effective AMCOperational Issues • Adequate Operating Capital • If not, little will be accomplished • Allocation of expenses to assets or institutions • Enabling Environment • Legal, Judicial • Possible Special Powers

10. An Effective AMCOperational Issues • Independence • Enhances credibility • Accountability & Transparency • Governance • Internal Controls

11. An Effective AMCOrganizational Issues • The Board of Directors • Selection, qualifications • Committees and Advisory Bodies • Can help to enhance governance • The Importance of Skilled Staff • Responsibilities and Accountability

12. An Effective AMCInformation Systems • Data Management Information System • Reliable, accurate and comprehensive • Secure and Confidential • Files • Debtor Information • Debt Workouts

13. An Effective AMCAsset Management • Guidelines for Handling Assets • Consistent with set goals • Decision making process and speed • Flexibility in asset resolution strategy • A Number of Policy Issues Associated With Asset Resolution Will Need To Be Considered

14. An Effective AMCQuestions to Consider • How should the portfolio be divided ? • Can you prevent debtors from stripping assets? • Will partial debt forgiveness be permitted? • How many times do you try a debt workout with the same debtor? • Will you consider asset sales? • What happens to assets after a workout?

15. An Effective AMCBuilding Support • Public and Political Support • A Positive Image Is Very Important • Demonstrate the benefit to society • Tout Success • Be honest, transparent and fair to all • Be aware of sensitive issues • Disclose information regularly

16. An Effective AMCConclusion • The AMC can have a positive impact • Its Organizational structure is important • It must have very clear goals • A supportive operational environment is needed • Accountability, transparency and fairness are essential elements IT IS HARD WORK !

17. THANK YOU Thomas A. Rose Adviser The World Bank (202) 458-0397 trose@worldbank.org