The myriad reports issued on this past year’s economic crisis—what went wrong and how to prevent it in the future—make it clear that improvement in international cooperation and coordination is essential. As I mentioned in my last column,1 on Sept. 6, 2009, the Basel Committee, which develops international banking standards, issued a set of guiding principles to strengthen the regulation, supervision and risk management of the banking sector.2 One of those guiding principles was to issue recommendations to reduce the systemic risk associated with the resolution (that is, liquidation or receivership) of cross-border banks. On Sept. 17, 2009, its Cross-Border Bank Resolution Group issued a report and recommendations (CBRG report) regarding resolutions of financial institutions that have cross-border activities.3 Comments on the CBRG report are to be submitted by Dec. 31 of this year.
Banks operating internationally would do well to review the report. The report serves as a good summary of legal, logistical and other issues that can occur in the resolution of a financial company that conducts cross-border activities in several countries. This month’s column will discuss the CBRG report and its recommendations, and compare them to the laws in the United States for liquidating U.S. banking offices and subsidiaries of non-U.S. banks.
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