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Guidance on Interrelationships from the FSF Report The Canadian Approach Extending the principles to the international domainTRANSCRIPT
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How Good Interrelationships Promote Effective Deposit Insurance Systems
Presentation to the IADI/EBRD Deposit Insurance SeminarDecember 8, 2003
J.R. LaBrosseSecretary General
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• Effective interrelationships among financial safety
net players are essential to an effective deposit insurance system.
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• Guidance on Interrelationships from the FSF Report
• The Canadian Approach
• Extending the principles to the international domain
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Key attributes of an effective system:
• Mandate should be aligned with objectives and powers
• Setting responsibilities and accountabilities clarifies roles of the safety net players
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• The more complex the safety net institutional framework; the more relevant the interrelationships issues become
• Different safety-net functions contribute to stability of financial systems but also introduce potential conflicts of interest
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• There is no one model to recommend
• The supervisory authority is usually the primary source of information
• A deposit insurer’s information needs vary according to its mandate
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• When is the interrelationship issue internalized
• When is it not?
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MANDATE POWERS INTERACTION DURING LIFE
CYCLE OF INSTITUTIONS
(Beginning, Midlife, End)
EFFECTIVENESS AND COST
MINIMIZATION
INTER –RELATIONSHIP
ISSUES
PURE PAYBOX
Reactive(e.g. clean-up,
liquidation)
FailureLow
MainlyInformation
SharingCOST-REDUCING OBJECTIVE
Mainly reactive, some proactive
features(e.g. clean-up but some
risk assessment & limited role in failure
resolution)
Approaching failure,
(but some interaction upon failure)
Low - MedRequires well-defined roles, responsibilities, information sharing
& co-ordination
FULL RISK MINIMIZER
Proactive(e.g. risk
identification risk assessment and management)
Beginning, Midlife,Troubled
High Requires well-defined roles, responsibilities,
co-ordination information sharing
& co-ordination
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“…Good Fences Make Good Neighbours…”
• The Canadian Case
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Interrelationships Among Financial Safety-Net Players
“…Good Fences Make Good Neighbours…”
•Coordination is essential
• A strong accountability regime
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CDIC’s Role Within Canada’s Prudential Regulatory System
D e pa rtm e nto f F in an ce
O S FI F C A C C D IC
C P A
B a nk o fC a na da
M in is te r o f F in a n ce
P a rliam e nt
F e d e ra l
P ro v in c ia lD e p os it Insu re rs
P ro v in c ia lR e g u la to rs
M in is ters o f F in a n ce
L e g is la tu res
P ro v in c ia l
C a n ad ia n P ru d en tia l R e g u la rto ry a nd S up e rv iso ry S ys tem
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Interrelationships Among Financial Safety-Net Players
Coordination is accomplished through the following seven mechanisms:
1. CDIC Board of Directors2. FISC3. SAC
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Interrelationships Among Financial Safety-Net Players
4. Guide to Intervention5. CDIC/OSFI Strategic Alliance Agreement6. Liaison Committee7. Regular meetings with regulators
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Interrelationships Among Financial Safety-Net Players
“…Good Fences Make Good Neighbours…”
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“the more we get together the happier we will be”
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How Good Interrelationships Promote Effective Deposit Insurance
December 8, 2003
J. R. LaBrosseSecretary General