BANK INTERVENTION and RESOLUTION: Part 3 United States Department of the Treasury Office of Technical Assistance Banking & Financial Services

Advance Preparation - Intervention Both bank intervention and resolution advance preparation should be conducted concurrently.

Legal – Advance Preparation Prepare notices and other legal documents regarding appointment of the Conservator or Receiver File at the appropriate court

Conservator or Receiver Failed bank employee retention strategy Appropriate Delegations of Authority and Powers of Attorney have been issued

Bank Intervention Manager Main function is managing and coordinating all intervention team members to assure that the intervention goes as smoothly as possible. He can delegate many of the functions to others; however, the BIM bears ultimate responsibility to assure completion of intervention activities as required.

Function Area Teams Review the Information Package for items in the functional area Determine staffing, supplies, equipment and security needs.

Accounting Review P&A for asset and liabilities splits with Assuming Bank. Review bank’s financial reports. Determine the staffing required. Determine the computer equipment/software, and the supplies required to perform the accounting function. Attend pre-intervention function managers meetings and other meetings as applicable.

Asset Team Review bank’s financial reports to determine types and amounts of assets Determine the staffing required for the intervention. Determine the computer equipment/software, and the supplies required to perform the Asset intervention function.

Branch Operations Identify the number of branches and the Institution contact person at each branch. For branches located abroad, contact Legal to secure the services of an experienced banking attorney in each country prior to the intervention. Determine the staffing requirements of each branch.

Branch Operations Instruct each branch manager to check in during the first hour of the intervention to report status and problems. Obtain the address, directions to, phone number, and fax number of the branch.

Deposit Operations Team Perform a preliminary insurance determination according to governing deposit insurance law. Identify any politically sensitive depositors such as churches, charitable or religious organization, public units unsecured, fully insured and/or fully secured.

Facilities Ensure necessary supplies, forms and documents are available. Arrange for an official seal, tape or other means to control drawers, and use labels for inventory, etc.

Facilities As needed, arrange for intervention meetings with the team managers and/or entire intervention team. Determine if the failed bank’s existing facilities has the capacity to accommodate the intervention team. Arrange for additional work space if necessary (e.g. hotel conference rooms).

Security Meet with contracted Security Guard firm or police Provide instructions Determine locations and assignments.

Information Technology If possible, the IT Manager should visit the failing institution to help prepare data files, equipment, and information needed for the intervention. He can use this opportunity to gather additional information and resolve unanswered questions where possible. Determine capability of stopping accruals, when to expect the download files, report generation capability, delivery logistics, and staffing.

Information Technology (cont) Coordinate with BIM regarding the important information itemized on the IT checklist, e.g.: When do accruals cut off? Can we place holds on accounts? Has the bank been servicing loans for any other banks? etc.

Legal Team Review the bank inspection report Prepare the proper legal order (i.e., Conservatorship or Receivership) as required by law Meet with the members of the receivership/liquidation team to review the strategy for the process Provide the Bank Intervention Manager with copies of applicable transaction documents (e.g., P&A) once a bid has been accepted

Legal Team (cont) Review major contracts and agreements as requested by the Conservator/Receiver or the Bank Intervention manager (including letters of credit, open credit lines, unfunded and partially funded commitments, etc.). Accompany the Conservator/Receiver, the Bank Intervention Manager, and the representative from the applicable Supervisory Authority when the proper legal notice (i.e., Conservatorship or Receivership) is served on the bank. Make sure that the notice is published in accordance with the Law

Personnel Prepare sign in/out sheets for both Intervention Team and failed bank employees. Prepare timesheets for failed bank employees to use (unless theirs are acceptable).

Public Awareness Well before any problem bank action, Communications Departments from both the Supervisory Authority and the DGF should diligently coordinate information and control information through one spokesperson.

Public Awareness When the bank is closed and the Supervisory Authority appoints a Receiver, the Supervisory Authority issues a press release to inform the public The press release should stress that the action is being taken to minimize the impact of a bank failure on the local economy, by finding an Agent Bank to handle deposits, and transferring assets into the private sector.

Public Awareness Possible follow-up questions should be anticipated and answers prepared Why has the Supervisory Authority decided to close the bank? What will happen to clients/depositors? Will any depositors lose their funds? What will happen to borrowers (loan clients)? Etc.

Public Awareness Prior to any bank failures, the authorities should coordinate in developing a media and depositor education plan that answers, at a minimum, the following questions: Where will insured deposits be paid? Is there an acquiring bank to act as paying agent? Will all branch facilities be open for payment? When will deposits be paid (or be made available)? What information must an insured depositor provide to obtain payment What happens to my loan? Must I continue making payments?

Primary Goals of Bank Intervention A bank intervention is a process driven function consisting of two primary areas: Secure, Inventory and Control Reconcile and Balance

Secure, Inventory and Control Loan and deposit files and records Collateral documents Accounting records IT systems Legal documents Board and committee minutes and records

Secure, Inventory and Control Cash and liquid assets Vaults Bank building and branches Furniture, fixtures and equipment Vehicles

Reconcile and Balance Balance and reconcile each general ledger line item account as of the time of closing Create a final Pro Forma balance sheet with adjustments for: Changes since month end Assets and liabilities not properly reflected on books Undisclosed liabilities

Reconcile and Balance Emphasis on deposit accounts in order to begin payment of insured deposits within (5) five days of bank closing Have all reconciling and balancing complete within (90) days of closing This process cannot begin until all things secured, inventoried and controlled

Immediate Actions at Intervention Intervention Steps Immediately prior to intervention, the Bank Intervention Manager will conduct an intervention team meeting to go over the plans. At this time, the Bank Intervention Manager will go over the initial responsibilities for each team member. Any extra or special responsibilities will be assigned to the appropriate Function Manager.

Immediate Actions at Intervention The initial Intervention team consists of: Bank Intervention Manager Senior officials of the Supervisory Authority Legal Adviser Conservator or Receiver Facilities/Security Function Manager, along with any other necessary security personnel

Immediate Actions at Intervention The initial intervention team enters the bank and meets with key bank officials The designated Supervisory Authority official explains what is taking place, and presents the intervention order to the general director

Immediate Actions at Intervention The designated official advises the general director of the appointment of and introduces the Conservator or Receiver, and relieves the general director and selected management of their authority and responsibilities.

Immediate Actions at Intervention The general director and problem management personnel should then be escorted from the premises Ensure that the bank intervention notification is posted on the door.

Immediate Actions at Intervention Security Team: The Security Function Manager should immediately take control of SWIFT and/or other wire transfer facilities The Security Function and IT Managers should ensure that ATMs are disabled and applicable networks notified All the night depositories should be locked and/or sealed, with official notices posted on them. Any night depositories must be emptied and the contents inventoried under dual control and work processed by the Accounting team.

Immediate Actions at Intervention Security Team (cont): The initial intervention team must keep the key bank officials under control. Do not allow anyone to leave the meeting, make a phone call or issue any instructions, as they may be detrimental to the bank. Depending on the nature of the bank’s problems (i.e. responsibility of key bank management for the bank’s problems), the former key bank management may be escorted out of the bank.

Immediate Actions at Intervention Security Team (cont): In this case, they are not allowed to remove any items, personal or otherwise. The intervention team will inventory their offices and take control of anything important to the bank’s business. The Bank Intervention Manager or Conservator or Receiver will arrange for any personal items to be delivered later.

Immediate Actions at Intervention The Bank Intervention Manager then notifies the remaining intervention team members to enter the bank and commence their assignments. Intervention team members with branch operations responsibilities can coordinate by phone. Initial intervention team meets with remaining management, notifies them of the revocation of all authority and their new reporting responsibilities.

Immediate Actions at Intervention Team members enter the bank. Each Function Manager immediately commences a meeting with bank staff in his/her assigned area. If the bank has a small number of staff, this meeting may be held with all bank employees at one time or the Bank Intervention Manager may have already held it.

Critical Actions at Intervention Ensure that everything concerning the on- going operation is under control, including: SWIFT or other wire transfer facilities Cash Loan notes, collateral and other documentation Deposit files and documentation Fixed assets and cars, etc. Other assets documentation Telephones, including Fax machines

Critical Actions at Intervention Cash must be counted Offices, desks and storage areas, such as drawers, file cabinets, etc. must be secured and inventoried. If inventory cannot be accomplished immediately the storage areas must be secured. Personal computes must be secured to prevent deletion of important files

Critical Actions at Intervention The Security Function Manager must collect the bank’s official stamps, seals, and any other evidence of authority for bank. These must be inventoried and secured, with notification given to the proper authorities. General ledger must be reconciled, balanced and posted to date, etc.

Critical Actions at Intervention The Supervisory Authority must prevent any loss, destruction or manipulation of records, assets or liabilities. The Function Managers must be alert to potential problems with employees such as abuses, vandalism of documentation or systems and similar problems.

Critical Actions at Intervention Immediately advise other affected parties (payment system, clearing system, correspondent banks, etc.) of the intervention, revocation of previous management’s authorities, and transfer of authority to Supervisory Authority.