The following will be discussed in this chapter: What is deposit insurance, state of deposit insurance in Pakistan, draft deposit protection ACT of Pakistan, policy resolution approaches, guiding principles for bank resolution policy, resolution techniques,. | MBF-705 LEGAL AND REGULATORY ASPECTS OF BANKING SUPERVISION OSMAN BIN SAIF Session: TWENTY FIVE Summary of last session SECTION 6 Systemic Banking Crisis Indicators of Banking Crisis Others Causes of Banking Crisis Fundamental Factors behind most Crisis Crisis Containment Policies Policy responses for Resolution Crisis Containment Tools Policy resolution Approaches Guiding principles for bank resolution policy Resolution Techniques 2 Agenda of this session What is Deposit Insurance State of Deposit Insurance in Pakistan Draft Deposit Protection ACT of Pakistan 3 Deposit insurance Deposit insurance is a measure implemented in many countries to protect bank depositors, in full or in part, from losses caused by a banks inability to pay its debts when due. Deposit insurance systems are one component of a financial system safety net that promotes financial stability. 4 Deposit insurance (Contd.) The primary purposes of the Deposit Insurance Fund (DIF) are: (1) to insure the deposits and . | MBF-705 LEGAL AND REGULATORY ASPECTS OF BANKING SUPERVISION OSMAN BIN SAIF Session: TWENTY FIVE Summary of last session SECTION 6 Systemic Banking Crisis Indicators of Banking Crisis Others Causes of Banking Crisis Fundamental Factors behind most Crisis Crisis Containment Policies Policy responses for Resolution Crisis Containment Tools Policy resolution Approaches Guiding principles for bank resolution policy Resolution Techniques 2 Agenda of this session What is Deposit Insurance State of Deposit Insurance in Pakistan Draft Deposit Protection ACT of Pakistan 3 Deposit insurance Deposit insurance is a measure implemented in many countries to protect bank depositors, in full or in part, from losses caused by a banks inability to pay its debts when due. Deposit insurance systems are one component of a financial system safety net that promotes financial stability. 4 Deposit insurance (Contd.) The primary purposes of the Deposit Insurance Fund (DIF) are: (1) to insure the deposits and protect the depositors of insured banks and (2) to resolve failed banks. The DIF is funded mainly through quarterly assessments on insured banks, but also receives interest income on its securities. 5 Deposit Insurance In Pakistan Denationalization of state owned banks coupled with entry of new private institutions has left the safety of deposits in case of a bank failure to an arbitrary and implicit deposit protection mechanism, as the Bank Nationalization Act, 1974 covers only depositors of nationalized banks 6 Deposit Insurance In Pakistan (Contd.) Accordingly, need has been felt to set up a formal system of explicit deposit protection during the second half of 2008. A number of steps were taken. A ‘concept paper’ on the subject was developed, and the scheme was prepared after consultation with the stakeholders. 7 Deposit Insurance In Pakistan (Contd.) Additionally, a draft Act for establishment of deposit protection fund was prepared and sent to the Ministry of Finance for approval.
