34
INTERNATIONAL MONETARY FUND
CRISIS MANAGEMENT AND RESOLUTION
31. The crisis management framework has many of the features needed to manage bank
distress and failure. The legal powers for dealing with emerging stress in banks are robust and the
BoT has policies and systems in place to identify and respond to bank stress. However, the law has
room for improvement—for instance regarding the clarity of resolution objectives, triggers, powers,
and safeguards. The authorities are encouraged to undertake a comprehensive review of the BoTA
and FIBA with a view to better aligning the resolution framework with international standards,
particularly the Key Attributes.
32. EWIs should be developed further, building on the existing framework. The BoT should
develop additional EWIs for individual banks linked to more comprehensive triggers for PPA, PCA,
and banks’ recovery plans. The existing triggers for PPA and PCA are based on the BoT’s supervisory
ratings and occur at relatively advanced stages of deterioration. The PPA and PCA frameworks
should be revised to set the triggers at earlier stages of bank stress.
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Contingency plans should be
developed and tested regularly by the BoT. D-SIBs have developed recovery plans and other locally
incorporated banks are required to develop those plans by June 2020. The BoT could usefully issue
further guidance following the review of the plans.
33. The bank resolution framework should be improved. The responsibility for resolution
decision-making should be moved from the FIPC to a body within the BoT (without external
members) to help ensure the BoT’s operational independence, facilitate prompt decision-making,
and avoid dilution of institutional accountability. Resolution functions should be vested in the BoT,
with the Financial Institution Development Fund (FIDF) only responsible for resolution funding. If the
BoT provides funding to the FIDF, it should do so only under a formal indemnity from the
government.
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