Monitoring financial firms
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Monitoring financial firms

News:

  1. The Financial Resolution and Deposit Insurance Bill, 2017

Important facts:

2. The key features of the Bill:

  • The Bill proposes a comprehensive resolution framework for specified financial sector entities and service providers.
  • It will deal with bankruptcy in banks, insurance companies and financial sector entities.
  • The Bill seeks to give comfort to the consumers of financial service providers in financial distress.
  • Its objectives include the maintenance of financial stability during a crisis.
  • The Bill lists 11 categories of institutions which would come under the definition of specified service providers.
  • The Bill proposes the setting up of a Resolution Corporation by the Central government.
  • It would lead to repeal or amendment of resolution-related provisions in legislation, including the repeal of the Deposit Insurance and Credit Guarantee Corporation Act, 1961.
  • This would mean the transfer of deposit insurance powers and responsibilities to the Resolution Corporation to streamline the deposit insurance framework for the benefit of retail depositors.
  • The government listed the functions of the Resolution Corporation  which includes:
  • Protecting the stability and resilience of the financial system, public funds, and consumers of covered obligations up to a “reasonable limit”.
  • The Bill also details the powers and functions of the Corporation , which are listed below:
  1. To include providing deposit insurance to banking institutions,
  2. specifying the criteria for classification of a specified service provider into one of the categories of risk to viability,
  3. acting as an administrator for a specified service provider under critical risk,
  4. exercising powers in relation to certain termination rights in respect of specified service providers,
  5. resolving a specified service provider under critical risk,
  6. Acting as a liquidator for a specified service provider.
  • The recently enacted Insolvency and Bankruptcy Code, 2016 to deal with the insolvency resolution issues of non-financial entities will be complemented by the proposed Bill.
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