Australia: Financial Sector Assessment Program-Technical Note-Bank Resolution and Crisis Management

International Monetary Fund

No 2019/048, IMF Staff Country Reports from International Monetary Fund

Abstract: This technical note analyzes the existing legal and institutional frameworks in Australia, including coordination arrangements and focuses on crisis preparedness, including recovery and resolution planning as well as the Reserve Bank of Australia’s (RBA) lender-of-last resort functions. The analysis highlights that Australia has a well-established framework for financial stability, surveillance and policy formulation and the resolution regime for financial institutions has been significantly enhanced since the financial crisis. Australian Prudential Regulation Authority (APRA) has made progress in developing recovery planning requirements for the banking industry, extending these from large to medium sized and smaller banks. However, there is a need to better integrate the recovery planning within the risk management framework and operational testing exercises and to significantly enhance APRA’s work on resolution planning, particularly for the largest banks. The paper recommends that the Australian authorities should introduce an ex-ante funded deposit insurance scheme, based on best international practice.

Keywords: ISCR; CR; banking sector; APRA power; APRA's risk assessment model; bridge bank; financial system; risk management framework; problem bank; particular focus; enforcement function; R&E team; bank distress; introduced bank levy; APRA direction power; resolution framework; transfer power; resolution modality; holding company; Crisis management; Bank resolution framework; Crisis resolution; Bank resolution; Australia and New Zealand; Global (search for similar items in EconPapers)
Pages: 33
Date: 2019-02-21
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