Systemic banking crises have been commonplace in FinSAC client countries and, more broadly, in the ECA region during the last 30 years. A first wave of crises was triggered by the transition to a market economy of former communist and socialist countries at the beginning of the 1990s. More crises arose around the Russian bond moratorium crisis in 1998. Many countries saw further distress and failures during the Global Financial Crisis (GFC). This paper outlines the key elements of effective frameworks to handle weak banks and takes stock of FinSAC client countries' progress towards establishing these. It focuses particularly on preparedness for systemic scenarios. It provides an overview of the key features of FinSAC countries' financial systems, identifies recent relevant reforms, and outlines important areas for further attention, including recommendations to guide areas for focus.
Authors
- Disclosure Date
- 2024/06/25
- Disclosure Status
- Disclosed
- Doc Name
- Dealing with Weak Banks in FinSAC Countries : Progress and Challenges Ahead
- Product Line
- Advisory Services & Analytics
- Published in
- United States of America
- Rel Proj ID
- 7E-Financial Sector Advisory Services (Finsac) Center -- P143745
- Sector
- Other Non-bank Financial Institutions,Banking Institutions
- TF No/Name
- TF014150-Croatia Crisis Simulation,TF014151-Trust Fund Administration and Monitoring,TF014152-Non Performing Loan Resolution,TF014153-Moldova Liquidity Stress testing,TF014154-Bosnia Herzegovina Macroprudential Capacity Building TA,TF014155-Kosovo Consumer Protection and Financial Literacy Implementation,TF014156-Croatia Bank Resolution Framework,TF014603-Bank Resolution,TF015183-Asset classification and provisioning,TF015943-Montenegro Crisis Simulation Exercise,TF016039-NPL BUSINESS DEVELOPMENT AND REGIONAL OUTREACH,TF016061-IFRS implementation - Prudential Interactions Georgia,TF016062-CRD IV assessment - Ukraine,TF016086-Kosovo Consumer Protection and Financial Literacy (CPFL) Complaints Han,TF016087-Kosovo Financial Education,TF016088-Bank Recovery and Resolution Regional Seminar,TF016300-Albania NPL Resolution,TF016457-Albania Recovery and Resolution Plans,TF016903-Moldova Crisis Simulation Exercise,TF017251-Bulgaria: Regional Conference on Consumer Protection and Financial Lite,TF017354-Poland: Deposit Insurance Systems Workshop,TF017559-Moldova Bank Resolution,TF017964-Macedonia Crisis Simulation Exercise,TF018005-IFRS Seminar,TF018036-Serbia: On-site examination procedures and structuring of Pillar 2 dial,TF018242-Armenia Crisis Simulation Exercise,TF018565-Croatia: NPL Resolution Diagnosis,TF019277-Recovery and Resolution Plans Seminar,TF019276-Kosovo Crisis Simulation Exercise,TF019400-Bosnia & Herzegovina: Deposit Insurance Strengthening Project,TF019398-Cyber security preparedeness workshop,TF0A0177-Workshop on NPL resolution,TF0A0178-High-level Conference on Integrated Financial Sector Supervisory Models,TF0A0302-Albania Crisis Simulation Exercise,TF0A0399-High-level Advisor to the top management of the Bank of Albania,TF0A0406-TECHNICAL ASSISTANCE ON INTRODUCTION AND IMPLEMENTATION OF DEPOSIT INSU,TF0A0443-Cross border banking supervision and resolution: the small host perspec,TF0A0445-BRRD pocket guide,TF0A0644-Albania: Legal reform â Banking Resolution Framework,TF0A1115-Single Supervisory Mechanism Seminar,TF0A1116-Bank of Albania â Assessment of Recovery Plans for systemic banks,TF0A1126-Western Balkans: High-Level Scenario & Implications Seminar,TF0A1204-Developing Cyber- and Cross-Border Crisis Simulation Exercises,TF0A1525-Central Bank of Kosovo â Assessment Analysis of Non-Performing Loa,TF0A1536-Kosovo Contingency Plan,TF0A1537-Ukraine Liquidity Stress Testing,TF0A1577-Macedonia â Assessment of Microprudential Supervision,TF0A1578-Ukraine: Supervisory Needs Assessment and Prioritizationof Reforms for,TF0A1810-Design of the ToR for Asset Quality Review & support in conducting Forw,TF0A1948-Ukraine Financial Stress Index,TF0A2117-Working paper: Governance of Financial Sector Policy Functions in ECA,TF0A2118-Montenegro Deposit Insurance Strengthening Project,TF0A2335-Workshop on âMacroprudential Policy-making in Emerging Europeâ,TF0A2367-Ukraine Early Warning System,TF0A2539-Cooperation with the ECs Joint Research Center - Resolution Financing A,TF0A2581-Serbia: Operational aspects of micro stress testing,TF0A2931-Ukraine Strengthening Resolution Framework TA,TF0A2932-BiH: Quantitative Impact Study for the introduction of Basel III,TF0A2933-Macedonia: Assessment of the processes of Licensing and Banking Regulat,TF0A2938-EU â Institutional and Regulatory Developments,TF0A3299-BiH Bank Resolution Framework TA,TF0A3315-Moldova Bank Resolution & Restructuring,TF0A3346-Bank Resolution Conference and Bail-in workshop,TF0A3347-Armenia: Cyber Crisis Simulation Exercise,TF0A3468-Microprudential Supervision: Business Development,TF0A3678-Bank Recovery & Resolution: Business Development,TF0A3679-Ukraine Financial Conditions Index,TF0A3680-Macroprudential Frameworks: Business Development,TF0A3864-Cyber-Crisis Management for Financial Sector Authorities,TF0A3947-Ukraine: Improving the quality of banking regulation in line with the E,TF0A3981-SPE MPE paper,TF0A4015-BiH: Support in development and implementation of European supervisory,TF0A4016-BiH: Support in development and implementation of European supervisory,TF0A4176-Belarus: Strengthening Deposit Insurance Framework,TF0A4286-Albania: Guidelines for the implementation of multi-lender NPL restruct,TF0A4287-Albania Bank Resolution Framework TA,TF0A4304-Albania: Assessment of Recovery Plans for systemic banks,TF0A4372-SPE MPE paper,TF0A4427-Belarus: Improvement of the bank resolution framework,TF0A4446-Georgia CSE,TF0A4547-FinSAC-CBCM/FSB Workshop Resolution Regimes in Europe,TF0A5168-National Bank of the Republic of Macedonia â Risk management regul,TF0A5169-National Bank of the Republic of Macedonia â Bank Recovery and Res,TF0A5183-Ukraine: NPL restructuring and workout guidelines,TF0A5767-Deposit Insurance seminar,TF0A5786-Ukraine: Strengthening Resolution Framework TA,TF0A5785-Ukraine: Conference on the Role of the judiciary in Bank resolution,TF0A6175-The role of the judiciary in Bank resolution - Collection of Bank resol,TF0A6207-NPL resolution conference,TF0A6980-Regional Innovation Forum,TF0A7539-FinSAC knowledge product resolution: bail-in simulator,TF0A7540-FinSAC knowledge/ training product - bank resolution case study,TF0A7601-Ukraine: Analytical tools for assessing the systemic risk in consumer l,TF0A7602-Trust Fund Administration and Monitoring,TF0A7772-Montenegro: Strengthening Bank Recovery and Resolution Framework TA,TF0A8093-Serbia: Strengthening the foundations and analytical basis for the Depo,TF0A8127-BiH: Programatic FinSAC TA on bank supervision and resolution,TF0A8607-Kosovo: TA on Crisis Management and Strengthening Deposit Insurance Fun,TF0A8715-Uzbekistan: New Banking Law and Guided BCP Self-Assessment,TF0A9251-Financial Stability Committees in Eastern Europe and Central Asia â,TF0A9252-Georgia: Assessment of New Cybersecurity Regulations,TF0A9254-NPL: Business Development,TF0A9255-Microprudential Supervision: Business Development,TF0A9256-Fintech Conference (Part 2),TF0A9257-Bank recovery & resolution (R&R): Business Development,TF0A9258-Fintech Conference (Part 1),TF0A9733-Belarus: Assessment of Cybersecurity Regulations,TF0A9813-Macedonia: Programmatic TA on Macroprudential, Crisis Preparedness, & B,TF0A9888-TF Administration & Monitoring,TF0B0082-Georgia Strengthening the Deposit Insurance Agency,TF0B0122-Moldova: FinSAC TA on Bank Resolution,TF0B0123-Moldova: FinSAC TA on Bank Recovery and Supervision,TF0B0147-Albania: Programmatic TA on bank supervision, resolution, DGS and NPLs,TF0B0286-Serbia: TA on the prevention of formation and accumulation of new NPLs,TF0B0318-Ukraine: TA on Bank Recovery & Resolution & Deposit insurance & new leg,TF0B0344-FinSAC knowledge/ training product: Paper on Related Parties Transactio,TF0B0487-Ukraine: Programmatic FinSAC TA on Bank Recovery and Resolution, Micro-,TF0B1009-Kosovo: Stocktaking Paper on the Evolution of the Corporate Governance,TF0B1110-Georgia Cyber Crisis Simulation Exercise,TF0B1138-Albania Deposit Insurance Strengthening TA,TF0B1769-Uzbekistan licensing, prudential regulation and supervision,TF0B2173-Basics of bank supervision conference,TF0B2224-Kosovo: Technical Assistance on Deposit Insurance Fund of Capacity Dev,TF0B2712-Policy Note on Borrower Relief Measures in Europe and Central Asia (ECA,TF0B2789-Moldova TA on Bank Resolution,TF0B2874-Kosovo: TA on Macroprudential Analysis and Financial Stability Policy C,TF0B2986-Policy Note on NPL Resolution,TF0B2987-Policy Note on Bank Crisis Management in Europe and Central Asia (ECA),TF0B3566-Cyber-Crisis Management for Financial Sector Authorities,TF0B3809-Armenia: Diagnostic on crisis management and supervisory framework,TF0B5031-Moldova Bank Resolution,TF0B5073-Uzbekistan: TA on Banking supervision and regulation,TF0B5245-Armenia: Risk-based supervision and financial sector safety net,TF0B5247-Kosovo DIFK strengthening,TF0B5403-Albania Deposit Insurance Legal and Regulatory Review,TF0B5542-Policy Brief on Big and Small Bank Resolution,TF0B5773-Albania FINREP reporting,TF0B7508-Cyber-Crisis Management for Financial Sector Authorities,TF0B7825-BiH: TA on Green Finance and NPL operational plans,TF0B7889-Uzbekistan:Â TA on Banking supervision and regulation,TF0B7901-Armenia: Risk-based supervision and crisis preparedness,TF0B7915-Belarus: Strengthening Banking Sector Supervision and Financial Stabili,TF0B7927-Kosovo: Capacity Development on Resolution Regime Implementation and Ri,TF0B7952-Moldova: TA on Strengthening Bank Resolution Framework,TF0B8281-North Macedonia: Green Finance, Bank Resolution, and Supervisory challe,TF0B8293-Armenia: Bank Resolution,TF0B8606-North Macedonia: Deposit Insurance TA,TF0B8708-Albania: TA on Green Finance, Bank Resolution, FINREP reporting, and Cr,TF0B8780-Albania: Enhancing Deposit Insurance Preparedness and Interagency Coope,TF0B8885-BiH: Deposit Insurance TA,TF0B8886-Georgia: Bank Resolution Simulation Exercise,TF0B8887-Ukraine: Bank Recovery and Resolution, and Deposit Insurance,TF0B9229-Kosovo: TA on Green Finance, Bank Resolution, & Bank Supervision,TF0B9528-Moldova: Bank Resolution Simulation Exercise,TF0C0520-Policy note on DGF asset sale practices,TF0C0521-Seminar on the DGS Funds and Backstop Funding Arrangements,TF0C0618-Ukraine: DGF Asset Sale Practices,TF0C0723-Albania: Bank Resolution & Assessment Methodology,TF0C0724-Moldova: Strengthening Bank Resolution Framework,TF0C0725-Armenia: Bank Resolution & Assessment Methodology,TF0C0726-BiH: Banking Regulation, Supervision and NPLs,TF0C0823-NM Amending Deposit Insurance Law and Reporting Framework,TF0C0924-Uzbekistan Banking supervision and regulation,TF0C1137-Armenia: Banking Regulation, Supervision and NPLs,TF0C1138-Georgia: Bank Recovery and Resolution Simulation Exercise âExecuti,TF0C1175-North Macedonia: Climate related risks,TF0C1304-Conference challenges in bank supervision and resolution,TF0C1336-Webinars on Climate Stress Testing,TF0C1519-Kosovo: Enhancing funding and investment policies,TF0C1615-Strengthening capacity of Moldovaâs Deposit Guarantee Fund for the,TF0C1616-Albania: FinSAC TA on Climate related risks,TF0C1925-Montenegro: Strengthening Bank Supervision and Deposit Guarantee Framew,TF0C2004-BiH: Support to Legal Amendment,TF0C2005-NM: Support to Legal Amendment,TF0C2006-Albania: Fiscal Backstop for Deposit Insurance,TF0C2007-BiH: Gap Analysis on Deposit Insurance Legal Framework,TF0C2834-Ukraine: Programmatic FinSAC TA on Micro-Prudential Frameworks, NPL Res,TF0C2835-Ukraine: Programmatic FinSAC TA on Micro-Prudential Frameworks, NPL Re-,TF0C4174-Getting the financial sector reform priorities right
- Theme
- Financial Infrastructure and Access,Financial Stability,Financial inclusion,Finance,Private Sector Development,Regulation and Competition Policy,Business Enabling Environment,Financial Sector Integrity,Financial Sector oversight and policy/banking regulation & restructuring
- Unit Owning
- EFI-ECA-FCI-Finance-2 (EECF2)
- Version Type
- Final
- Volume No
- 1
Table of Contents
- Annex 1: Summary of asset management companies in ECA 2
- Executive Summary 5
- 1. Introduction 11
- 2. Scope of the paper 13
- 4. Measures undertaken by banks and supervisory authorities to mitigate and overcome distress 29
- 4.1. Recovery planning and execution 29
- 4.2. Early detection and dealing with weak, but viable banks 33
- 4.3. Managing financial stress 35
- 5. Managing banking crises in systemic scenarios 42
- 5.1. Context and explanation 42
- 5.2. What is the true extent of the losses? 42
- 5.3. An independent valuation 47
- 5.4. Loss coverage: who foots the bill? 48
- 5.5. Availability of resolution tools in crisis scenarios -1
- 5.5.2. Bridge bank transactions 59
- 5.5.3. Open bank resolution using bail-in powers 60
- 5.6. The need for public backstops 64
- 5.7. Dealing with asset quality 65
- 5.8. Funding in resolution 70
- 5.9. The need for domestic and cross-border coordination 73
- 6. Recommendations 75
- 7. References 77
- Annex 1: Summary of asset management companies in ECA 80
- Annex 1: Summary of asset management companies in ECA 81
- Annex 2: Key banking failures in ECA 2013-2023 83
- Annex 3: Bank ownership structures per country 99
