1. Preparing for the Resolution of a Troubled Bank Have Your Toolkit Ready

2. “Plans are nothing; planning is everything.”

3. Bank Resolution Contingency Planning- Why Do It?  Countries must be prepared to allow a bank to fail  An actual bank closing will be different than the one you prepared for  Contingency planning for closings should be undertaken on a regular basis  Such contingency planning can require a significant resource commitment including the time of staff and senior management  The benefits of contingency planning outweigh the costs

4. Identifying Key Parties When a Bank Needs to be Resolved  Government entities that would be involved (Prime Minister, Central Bank, Deposit Insurer, Ministry of Finance)  Media (domestic and foreign)  Private sector participants that may be acquirers of banks or assets or specialized service providers  Foreign home/host supervisors of parents, subsidiaries and branches of local institutions  Maintain names and coordinates for key people

5. Develop a Communications Plan  Overriding objective: maintain public confidence  Problems should be acknowledged but accompanied by solutions  Consistent focused message coordinated between key agencies  Make use of a main spokesperson (with back- up) and involve senior people - stay on message

6. Possible Triggers For A Bank Closing Can Have Different Consequences Consider these various scenarios:  Capital adequacy below threshold level  Failure of a plan for capital raising  A rogue event such as fraud  Losses of confidence  Market events (collapse of one or more markets)  A natural disaster

7. What Documents Would Be Needed In Each of These Situations?  Make use of The Resolution Toolkit in planning for a bank resolution (http://siteresources.worldbank.org/EXTFINA NCIALSECTOR/Resources/Bank_Resolution_ Toolkit.pdf)http://siteresources.worldbank.org/EXTFINA NCIALSECTOR/Resources/Bank_Resolution_ Toolkit.pdf  Review the legal authority and market for acquisition of whole banks or bank assets and put together the outlines for all types of possible acquisitions

8. How A Closing Is Designed Dictates What Forms Will Be Needed  Example 1 - if there will be a paying agent bank you will need a Paying Agent Agreement (Form 11 in the Toolkit)  Determine how a Paying Agent will be chosen in advance of a bank closing – how will possible conflicts of interest be addressed?  Outline the issues that will need to be addressed in an agreement in advance of a bank closing such as the need to perform a “true-up” after closing once all accounts to be transferred are identified, the procedure for unclaimed deposits and the payment of interest on accounts

9. Example 2  If you are considering doing purchase and assumption agreements outline the possible deal points that might be offered and prepare standard form agreements for each possibility  Form 12 is a simple P&A agreement with a put option, setting forth the obligations of the parties at various points in time  The assuming party has 60 days to “put” assets to the Receiver, purchase additional defined assets from the Receiver or seek assignment of leases

10. Example 2 (continued)  Note that the contract provides for an Equity Adjustment which reflects either a positive or negative number depending on the mix of assets and liabilities assumed  The Equity Adjustment is part of a “true-up” process that will continue during the period of time the acquirer has rights to “put” assets back to the Receiver or purchase other loans or property from the Receiver  The Equity Adjustment may be in cash or bonds

11. Example 3  If a management team will be placed in the bank (for example in a bridge bank situation) there will need to be a detailed contract outlining the team’s responsibilities and remuneration (see Form 9)  The contract should set forth with specificity the description of the services to be rendered by the team and the compensation measures, including if applicable any performance based compensation  Appendix A of Form 9 provides a detailed description of services that can be modified to fit specific circumstances

12. Prepare Your Resolutions Handbook  Determine what will be needed if a bank is closed to include  Staffing at Branches  Communications  Interpretive Services  Legal Support  Accounting Support  Asset Management

13. Managing the Resolution  Communications may be biggest challenge  There may be need for liquidity support for certain types of resolutions – where will it come from?  Manage individual bank resolutions to prevent a systemic crisis  Prepare an after action report to capture “lessons learned”