The purpose of the framework is to prepare banks for self-propelled recovery and, if circumstances necessitate, allow authorities to resolve them in an orderly way with least disruption and minimal cost to the national exchequer while preserving financial stability.
The new framework will be applicable to all banks designated as domestic systemically important banks by the CBO, and at its discretion, the central bank may apply all or parts of the framework to any other bank licensed by it.
The release of the Bank Resolution Framework is in line with the developments in the international regulatory arena, whereby, a number of other jurisdictions have established resolution frameworks to operationalise the key international standards proposed by the Financial Stability Board.
The Bank Resolution Framework puts in place effective procedures to ensure that in the extreme event of any problems occurring at banks, the damage to the entire financial system of the country is kept at the minimum. The framework also incentivises the banks to adopt strategies that enable the authorities to manage banking crisis with minimal use of public funds while preserving financial stability.