## PREFACE

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---

### Mission and participants
- IMF MCM/LEG hybrid TA mission visited Chisinau, Moldova, during November 28 to December 5, 2022.
- Mission led by Mr. João Marques (MCM) in person; Messrs. Mario Tamez (LEG) and Marco Bodellini (LEG STX) participated remotely.
- Met with NBM staff including: Mr. Arcadie Albul, Vice-Governor; Mr. Ion Ropot, Head of the Bank Resolution Division; Ms. Maria Iovu, Head of the Bank Resolution Unit; Ms. Corina Turcan, Head of the Legislation and International Law Department; Ms. Svetlana Aghenie, Head of the Bank Legislation Division; and Mr. Grigore Olaru and Ms. Silvia Marcu, Bank Liquidators.
- Mission thanked the NBM and staff for cooperation, productive discussions, and hospitality.

### Executive summary — key findings
- The 2021 FSSR recommended revision of the liquidation legal framework.
- The Moldovan bank liquidation regime currently in force is purely administrative and under the NBM’s control.
- The NBM reports significant challenges with the current framework: "more than 50 legal actions were brought against 29 decisions of the NBM related to the liquidation of banks from 2016 to 2020," and considers the framework "not fit for purpose" and exposing the central bank to excessive risks, resource diversion, liabilities, and reputational costs.
- Liquidation of banks that failed in 2014 has faced challenges and implies a diversion of resources within the NBM.

### Policy rationale and model options
- Reasons for a key role for an administrative authority like the NBM:
  - Maintain financial stability.
  - Ensure depositors’ protection.
  - Achieve value maximization (noting value maximization is more associated with corporate insolvency regimes led by courts).
  - Continuity of critical services and economies of scale from administrative authorities’ tasks.
- Bank liquidation model typologies:
  - Administrative model: public administrative authority directs liquidation or appoints a liquidator who reports to it; actions are subject to judicial review.
  - Judicial model: court-supervised liquidation for all corporate entities; administrative resolution authority does not direct the liquidator; theoretically possible but "almost inexistent."
  - Hybrid model: liquidator carries out process, court oversees and decides on creditor lists/ranking and disputed claims; scope varies by jurisdiction and legal tradition.
- The Fund generally supports models where administrative authorities retain substantive powers when adequately designed and implemented.

### Design considerations and key issues addressed
- Key issues covered: (i) triggers; (ii) initiative to initiate the liquidation process; (iii) transfer powers; (iv) liquidators; (v) legal protection of the NBM; and (vi) the NBM’s role (institutional set-up and financial stability concerns).
- Triggers:
  - Should allow timely intervention and enable starting the procedure before balance-sheet insolvency; align with resolution triggers.
  - Current trigger: withdrawal of the bank license; alignment should be furthered.
- Initiation:
  - NBM should have clear and prominent role in initiation (e.g., exclusive power to file a petition with the competent court after ascertaining triggers are met).
- Transfer powers (P&A transactions):
  - Legal framework must include administrative powers for P&A transactions to transfer deposits to a willing buyer.
  - Any asset–liability gap should be financed by the DGF, subject to a least-cost test.
  - Transfer of deposits and liabilities offers advantages over deposit payout (continuity of services, reduced costs).
- Liquidators:
  - Selection and appointment are critical.
  - Primary responsibility to control and oversee liquidator should be assigned to the appointing authority (courts), but the NBM should participate in decisions, monitor performance, and be able to propose removal.
- Legal protection and liability:
  - Legal protection framework aligns with best international practices but appears ignored in practice.
  - NBM Law indicates the NBM, its staff, and agents "shall not be held liable for their actions under the civil and administrative law when fulfilling their duties, except when adopted in bad faith," yet staff indicated this provision has been disregarded and employees have been subject to legal procedures.
  - Non-observance of statutory deadlines could entail liability for the NBM; recommended to assess liability risks and design incentives to prevent excessive duration (e.g., remuneration policies, liquidation plans, enhanced transparency).
- Institutional set-up:
  - Should reduce conflicts of interest even in a hybrid model (e.g., Chinese walls, different reporting lines).
- Other design considerations: consequences of opening liquidation; treatment of pending contracts; accountability of bank owners and related parties; treatment of pre-insolvency transactions (avoidance rules).

### Key recommendations (from Table 1) — with timeframes
- Timeframe definitions: Near term: < 12 months; Medium term: 12 to 24 months.
- No. 1: Draft changes to the current regime where the NBM still maintains active participation, taking into account the strengths of the corporate insolvency framework and judicial capacity. Paragraphs 15 to 18. Timeframe: Near-Term.
- No. 2: Align liquidation and resolution triggers. Paragraph 25. Timeframe: Near-Term.
- No. 3: Ensure that the NBM controls the initiation of the liquidation process (e.g., retains the exclusive power to petition the court). Paragraphs 28 to 31. Timeframe: Near-Term.
- No. 4: Include the administrative power to arrange and implement the sale of assets and liabilities if a buyer is available (P&A transaction), designed within a coherent framework and financed by the DGF, subject to a least-cost test. Paragraphs 34 to 38. Timeframe: Near-Term.
- No. 5: Amend the legal framework so liquidators are appointed by the court upon a proposal of the NBM based on clear criteria and allow legal persons to be eligible as bank liquidators; NBM to have prominent role in monitoring. Paragraphs 42 to 45. Timeframe: Near-Term.
- No. 6: Revisit the current internal administrative sanction framework for NBM officials. Paragraph 49. Timeframe: Near-term.
- No. 7: Clarify the liability of the NBM and its staff when deadlines are beyond the control of the authorities. Paragraph 51. Timeframe: Near-Term.
- No. 8: Evaluate and design incentives that prevent liquidation from extending for too long (e.g., remuneration policies, liquidation plans and enhanced transparency). Paragraph 52. Timeframe: Near-Term.

### TA project stages and scope
- Phase 1 (completed): preliminary desk review of the current bank liquidation law in Moldova (Desk Review).
- Phase 2: identification of key reform modalities with concrete recommendations on policy options.
- Phase 3 (possible): assist the NBM in drafting a new bank liquidation law on selected aspects central to the NBM’s mandate.
- TA provides considerations and recommendations as a reference; does not advocate a single model and emphasizes tailoring to Moldovan legal and procedural traditions and judicial capacity.

---

### System-wide considerations and the administrative authority role

### Rationale for an administrative model and NBM role
- Administrative authorities argued better placed than courts to foresee consequences of a bank crisis and pursue financial stability as a legal objective.
- A key role for the NBM may be needed to maintain financial stability.
- When resolution and liquidation functions are within the same authority, economies of scale and organizational expertise development can follow—relevant where many banks would be liquidated and few resolved (as in Moldova).

### Interaction with courts and discretion
- Administrative authorities should have ample discretion; courts should defer to administrative expertise and limit review to legality and due process.
- NBM should be recognized as stakeholder: (a) a party to be heard before a court decision; and (b) granted a right to apply to court for instructions or to appeal liquidator’s decisions.

### Speed and effectiveness of intervention
- Administrative authorities can prepare and act more swiftly than courts, reducing delays in executing P&A transactions.
- Benefits of P&A: prompt access for depositors to insured deposits; rapid transfer of performing assets preserving value; promotion of confidence; minimization of disruption and contagion; near-instant access to funds with DGF assistance under forced liquidation.

### Litigation, reputational risk, and resource burdens on NBM
- Litigation and reputational risk from NBM’s active liquidation role impair other core functions.
- Creditors and debtors have used civil and criminal courts against NBM decisions.
- As of 2021, the Resolution Division has at least half of its allocated staff dedicated to liquidator functions, leaving few staff for resolution authority functions.

### Suggested continued substantive role for NBM and synergies
- 2021 FSSR recommendation to change regime does not exclude NBM retaining a prominent role.
- Per FSB Key Attributes, administrative authorities should maintain prominent roles regarding:
  - (a) ascertaining triggers; (b) withdrawing the banking license; (c) starting liquidation via court petition; (d) identifying/appointing liquidators with banking skills; (e) participating in strategy and execution (particularly asset/liability transfer).
- Rationale: maintain financial stability, protect public confidence, ensure continuity of services, protect depositors, avoid unnecessary destruction of value and minimize costs.
- Synergies: access to supervisory data; ability to adopt early intervention and resolution measures; better information flow compared with courts.

### Litigation risk persistence and limits of regime change
- Liquidation distributes losses and is prone to legal challenges; litigation risks persist under hybrid models if administrative authority retains license withdrawal power and substantial liquidation role.
- Some challenges reflect idiosyncrasies of the Moldovan legal and judicial system beyond this TA.

### Potential benefits of regime change
- A new bank liquidation regime could free NBM resources to focus on financial stability tasks.
- Changes to appointment and accountability of liquidators expected to decrease burden on NBM’s Resolution Division.

### Key features of current Moldovan legal framework: Triggers
- Current trigger: liquidation triggered by withdrawal of the bank license (Art. 38(1) of the Law on Bank Liquidation).
- Grounds for NBM withdrawal/initiation of forced liquidation (Article 22 para (2) of Law no. 202/2017 and related provisions) include:
  - a) bank not starting activity within 1 year from license granting, renounces it, or ceased activity for more than 6 months;
  - b) license obtained on basis of false information or unlawful means;
  - c) bank no longer meets conditions on which license was granted;
  - d) bank no longer meets prudential requirements regarding own funds for covering risks, large exposures or liquidity, or elements indicate that within 12 months the bank will not be able to fulfill obligations to creditors and cannot guarantee safety of depositors’ assets;
  - e) bank commits sanctionable acts in Article 140;
  - h) activities in first 3 years differ considerably from those envisaged at license issuance and deviation not justified;
  - i) direct and indirect holders of shares, including beneficial owner, do not comply with conditions to ensure prudent and sound management or do not allow efficient supervision;
  - j) circumstances that served as basis for appointment of temporary administrator under Law no. 232/2016 have not been removed or cannot be removed during period of temporary measures.
- Insolvency situations under art. 22 para (2) that trigger license withdrawal include:
  - a) bank unable to execute creditors' requests regarding payment of outstanding pecuniary obligations (default);
  - b) bank's assets no longer cover its obligations (over-indebtedness);
  - c) absolute amount of the bank's own funds is less than 1/4 compared to the minimum amount of own funds established in the normative acts of the National Bank of Moldova.
- Suggested clarification: whether adequacy indicators of own funds calculated according to Article 60 para (5) below 1/4 should trigger license withdrawal and start of liquidation.

### Resolution triggers and potential limbo situations
- Resolution first condition (art. 59 of Law n. 232/2016): NBM determines bank enters or is likely to be in a state of major difficulty if at least one condition met, including:
  - (a) violation of requirements underlying license or objective elements indicating near-future violation justifying withdrawal, including losses that will exhaust all or significant part of own funds;
  - (b) bank’s assets are inferior to debts or objective elements indicating this will happen in near future;
  - (c) bank is unable to pay debts or obligations at maturity or objective elements indicating this will happen in near future;
  - (d) extraordinary public financial support is needed;
  - (e) bank’s capital is held at least 50 percent by persons who do not have NBM’s permission when mandatory, or when shares representing at least 50 percent of share capital have been cancelled for noncompliance with shareholder quality requirements.
- Resolution second condition (art. 58(1) Lett. b) of Law n. 232/2016): lack of effective alternatives — no reasonable prospect that state of major difficulty could be prevented within a reasonable period by private sector measures or supervisory measures, including early intervention or measures to reduce value or convert relevant capital instruments (Article 220).
- Resolution third condition: liquidation unable to reach resolution objectives to the same extent as resolution; where public interest is at stake, liquidation cannot take place.
- Questionable equivalence between Lett. d) of article 22 of Law no. 202/2017 and art. 59 of Law n. 232/2016; differences in terminology can produce limbo situations where a bank meets resolution triggers but not liquidation triggers.

### Recommendation on aligning triggers and ensuring consistency
- Triggers for resolution and liquidation should be further aligned to prevent uncertainty undermining financial stability.
- Alignment helps ensure banks meeting resolution triggers (except public interest test) can be placed quickly into liquidation with activation of the safety net to protect depositors.
- Consistency should be guaranteed between resolution, deposit guarantee framework, and other building blocks of the financial safety net.

---

### Triggers, transfer powers, liquidators, legal protection, and institutional considerations

### A. Triggers and Initiative to Start Liquidation
- Key principles:
  - Triggers should be forward-looking; central concept is “nonviability.”
  - Simple approach: use resolution triggers to also trigger liquidation, using same terminology.
  - Proposed triggers for liquidation:
    1. bank entering or likely to enter into a state of major difficulty;
    2. lack of alternative to private sector or supervisory measures;
    3. liquidation gauged by authorities as capable to enable achievement of resolution objectives to the same extent as resolution.
  - Maintaining a public interest test in Moldova could undermine ability to apply resolution to small and medium entities and predictability.
- Roles and process:
  - Initiative typically joint between bank supervisor and resolution authority; in Moldova both functions are within the NBM.
  - In hybrid regime, competent court assesses legal conditions while refraining from overstepping administrative expertise on non-viability.
  - Formal commencement of liquidation follows a petition to competent court; NBM should have prerogative to file such a petition.
  - On application, court may grant, adjourn, or dismiss application.
  - Judicial control should refrain from questioning discretionary assessments unless manifest mistakes or procedural breaches exist.

### B. Transfer Powers (P&A, deposit transfers, and financing)
- Rationale and benefits:
  - Per FSB Key Attributes (KA 3.2 (xxii)), resolution authorities should have power to transfer insured deposits and liquidate whole or part of failing bank.
  - Under current forced liquidation, liquidator under NBM’s direction can sell assets and liabilities; DGF allowed to finance gaps up to amount of covered deposits.
  - Transferring deposits to a healthy firm with deposit insurance covering gaps (least cost basis) offers advantages over payout.
- Legal and operational recommendations:
  - Legal framework should contain administrative power to arrange and transfer assets and liabilities within coherent resolution and liquidation framework for quick and cost-effective handling.
  - Administrative authority should retain option to transfer good assets and selected liabilities (including insured depositors) prior to or aside from court-led procedure, with preparatory work and negotiations, and seek prior court approval where applicable.
  - Transfers mitigate value destruction caused by slow court decisions as loans lose recoverable value over time.
- Minimum legal elements for administrative transfer:
  i. Option to exercise transfer powers prior to liquidation without notification/consent of interested parties.  
  ii. Specify criteria grounding administrative actions, including financial stability or depositor protection.  
  iii. Administrative powers should include, at minimum, all powers provided by corporate law to executive boards, supervisory bodies, and general assemblies.  
  iv. Exclude any fiduciary duty toward the credit institution, its shareholders and creditors.
- Financing and safeguards:
  - Preserve mechanism where DGF finances asset gaps up to bank’s covered deposits, subject to least-cost test (DGF funding not to exceed losses DGF would have borne under counterfactual payout net of recoveries).
  - Include a “no creditor worse-off” compensation entitlement with independent valuation; responsibility for payment should rest with financing mechanism (DGF).
- Judicial review and enforceability:
  - Provide for judicial review of administrative transfer decisions at request of affected parties, but initiation of proceedings should not suspend implementation; administrative decisions should be immediately enforceable.
  - Courts should be limited to awarding monetary compensation and should not invalidate transfers of assets and liabilities.
  - Authorities should pursue provisions barring legal actions that obstruct implementation or result in invalidation of transfers, consistent with Constitution and legal framework.

### C. Liquidators: roles, appointment, and capacity
- Core role and powers:
  - Manage insolvent estate, realize assets, verify claims, pay creditors; powers include preparing insolvency accounts, representing estate, verifying and ranking claims, selling assets, drawing up insolvency plan.
- Challenges in Moldova:
  - Narrow pool of qualified candidates; unwillingness to accept legal risks and low salary.
  - NBM often appoints its own staff as liquidators, diverting resources from resolution functions, especially after transfers protecting depositors.
- Recommended reforms:
  - Address appointment procedure and suitability, accountability, remuneration, and legal protection.
  - In hybrid model, appointment competence should rest with the court but be subject to NBM control through a proposal by the NBM.
  - Legal framework should specify suitability criteria aligned with corporate insolvency practitioner standards and include experience in financial and banking business.
  - Permit appointment of legal entities as professional liquidators (e.g., audit firms) with conditions to avoid conflicts of interest.

### Accountability of liquidators and NBM role
- NBM should have prominent role in monitoring liquidation, including involvement in determining remuneration.
- Legal-framework items recommended:
  - i. Regular report obligations to administrative authority;
  - ii. Require consultation/approval by administrative authority for disposal of assets above threshold;
  - iii. Reaction mechanism for administrative authority to request court injunctions or instruct liquidator to fulfill responsibilities without undue delays;
  - iv. Power to propose removal of liquidator or liquidation committee;
  - v. Obligations vis-à-vis DGF for information exchange and coordination to allow prompt payout.

### Remuneration policy for liquidators
- Recommended to align incentives with swift liquidation:
  - NBM should refer to a list of criteria when proposing remuneration policy to the judge.
  - Policy should allow variable remuneration linked to length of liquidation as incentive for expeditious winding-up.
  - Example: fixed remuneration plus additional amounts increasing when time-set internal thresholds are met.

### Legal protection of the NBM
- Design issues:
  - i. Persons to which protection should extend (personnel, agents, liquidators, external professionals);
  - ii. Delineate limitations (administrative, civil claims);
  - iii. Standard of protection (e.g., actions adopted in “good faith”);
  - iv. Determine burden of proof.
- Current Moldovan regime (article 35 of the NBM Law):
  - NBM, members of decision-making bodies, liquidator, and employees “shall not be liable under the civil, administrative or criminal law, for the acts or facts performed or for failure to fulfil certain acts or facts related to exercising the duties conferred to the National Bank by the law..., except for the cases when the judicial court finds the fulfilment or omission to fulfil by these people, with bad-faith, of any act or fact related to the exercise of the National Bank`s duties, which caused damage to third parties.”
  - Provision indicates NBM will cover expenses incurred as result of proceedings and extends protection after termination of mandate or employment.
- Implementation issues:
  - NBM staff reported the provision has been disregarded in practice; officials acting as liquidators and the NBM have been subject to legal actions.
  - Recommendations: enhance understanding of legal framework (tailored training) and revisit internal administrative sanctions framework.

### Timeframe for conclusion of liquidation procedures
- Statutory term:
  - Art. 38 1 paragraph 7 of Law no. 550/1995: bank’s liquidation process may not exceed five years from date of withdrawal of its license.
  - Such term may be extended by the NBM for a maximum of two (additional) years based on reasoned approach of the bank’s liquidator.
- Practical observations:
  - NBM indicated the timeframe is not realistic; liquidation procedures might take longer (four liquidation procedures ongoing initiated in 2014).
  - A statutory timeframe could give rise to litigation if unable to comply.
- Guidance to prevent excessive duration:
  - Design variable remuneration linked to duration.
  - Require a liquidation plan with timeline and obligate liquidator to transparently explain delays.

### Institutional set-up and financial stability concerns
- Current NBM roles: central bank, bank supervisor, and resolution authority.
- Organizational structure and staffing (as of 2021):
  - Banking Resolution Division (BRD) is independent subdivision reporting to Executive Board member responsible for resolution.
  - BRD purpose: exercise NBM competencies as resolution authority, apply resolution instruments, organize and supervise liquidation until conclusion and erasing from State Register of Legal Entities.
  - BRD has two sub-units: Resolution Division and Liquidation Unit.
  - Total approved headcount for the Division was 15 Full-Time Equivalent (FTE).
  - BRD had a Bank Resolution Unit with seven staff and a liquidation unit with four staff (excluding managers).
  - For all tasks concerning resolution and liquidation, only seven staff are available.
  - Bank supervision function shared by at least two departments with different report lines:
    - Bank Supervision Department, approved headcount 57 FTE.
    - Department of Regulation and Authorization, approved headcount 24 FTE.
- Assessment:
  - Central bank acting as supervisor and resolution authority can ensure financial stability considerations; NBM institutional set-up observes best practice via separate units and different reporting lines.

### Other issues
- Court jurisdiction:
  - Jurisdiction is key; regional courts may lack readiness and sophistication.
  - Options: assign to specialized Insolvency/Corporate Law courts or a central court with experienced judges; specialize commercial courts where banks’ headquarters are located.
- Creditor’s Committee:
  - NBM exploring inclusion; if established, NBM should assess participation to avoid exclusion from information-sharing.
  - DGF or Resolution Fund membership risks over-representation of public authorities; administrative authority should be limited-observer, not full member.
  - Creditor Committee role should be minimal and consultative, not involved in financial-stability-related aspects (e.g., asset/liability transfer).
- Interaction with prior resolution measures:
  - Legal framework should explicitly leave outside the court’s scope any reversal of resolution measures previously applied by the resolution authority.
  - Court responsible for liquidation should abstain from decisions hindering ongoing implementation of resolution measures.

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### PREFACE

### PREFACE

### Mission and participants
- At the request of the National Bank of Moldova (NBM), a Monetary and Capital Markets (MCM) Department and Legal Department (LEG) hybrid technical assistance (TA) mission visited Chisinau, Moldova, during November 28 to December 5, 2022, to assist the authorities in the design of a revised bank liquidation model.
- The mission was led by Mr. João Marques (MCM), who participated in person at meetings in Chisinau, and included Messrs. Mario Tamez (LEG) and Marco Bodellini (LEG STX), who participated remotely via videoconference.
- The mission met with NBM staff including: Mr. Arcadie Albul, Vice-Governor; Mr. Ion Ropot, Head of the Bank Resolution Division; Ms. Maria Iovu, Head of the Bank Resolution Unit; Ms. Corina Turcan, Head of the Legislation and International Law Department; Ms. Svetlana Aghenie, Head of the Bank Legislation Division; and Mr. Grigore Olaru and Ms. Silvia Marcu, Bank Liquidators.
- The mission thanks the NBM and staff for cooperation, productive discussions, and hospitality.

### Executive summary — key findings
- The 2021 FSSR recommended revision of the liquidation legal framework.
- The Moldovan bank liquidation regime currently in force is purely administrative and under the NBM’s control.
- The NBM reports significant challenges with the current framework: "more than 50 legal actions were brought against 29 decisions of the NBM related to the liquidation of banks from 2016 to 2020," and considers the framework "not fit for purpose" and exposing the central bank to excessive risks, resource diversion, liabilities, and reputational costs.
- The report notes that liquidation of banks that failed in 2014 has faced challenges and implies a diversion of resources within the NBM.
- The FSSR mission recommended a revision with a more active role by the courts to mitigate NBM challenges, while preserving an administrative pre-judicial phase.

### Policy rationale and model options
- Reasons for a key role for an administrative authority like the NBM:
  - Maintain financial stability.
  - Ensure depositors’ protection.
  - Achieve value maximization (noting value maximization is more associated with corporate insolvency regimes led by courts).
  - Continuity of critical services and economies of scale from administrative authorities’ tasks.
- Bank liquidation model typologies described:
  - Administrative model: public administrative authority directs liquidation or appoints a liquidator who reports to it; actions are subject to judicial review.
  - Judicial model: court-supervised liquidation for all corporate entities; administrative resolution authority does not direct the liquidator; model is theoretically possible but "almost inexistent."
  - Hybrid model: liquidator carries out process, court oversees and decides on creditor lists/ranking and disputed claims; scope varies by jurisdiction and legal tradition.
- The Fund has usually supported models where administrative authorities retain substantive powers because of flexibility, efficiency, and control to protect financial stability and depositors when adequately designed and implemented.

### Design considerations and key issues addressed
- The report addresses the following key issues: (i) triggers; (ii) initiative to initiate the liquidation process; (iii) transfer powers; (iv) liquidators; (v) legal protection of the NBM; and (vi) the NBM’s role (institutional set-up and financial stability concerns).
- Triggers:
  - Should allow for timely intervention and enable starting the procedure before an institution becomes balance-sheet insolvent.
  - Triggers for liquidation should be aligned with triggers for resolution.
  - Currently, liquidation is triggered by the withdrawal of the bank license; alignment should be furthered.
- Initiation:
  - The NBM should have a clear and prominent role in initiation, e.g., exclusive power to file a petition with the competent court after ascertaining triggers are met, or a required consent before formal initiation if creditors can apply to court.
- Transfer powers (P&A transactions):
  - The legal framework must include administrative powers for P&A transactions to transfer deposits to a willing buyer.
  - Any gap between assets and liabilities should be financed by the DGF, subject to a least-cost test.
  - Transfer of deposits and liabilities offers advantages over deposit payout in continuity of services and reduced costs.
- Liquidators:
  - Selection and appointment of liquidators are critical.
  - Primary responsibility to control and oversee liquidator should be assigned to the appointing authority (courts), but the NBM should participate in decisions, monitor discharge of functions, and be able to propose removal.
- Legal protection and liability:
  - Legal protection framework aligns with best international practices but appears to be ignored in practice.
  - The NBM Law indicates the NBM, its staff, and its agents "shall not be held liable for their actions under the civil and administrative law when fulfilling their duties, except when adopted in bad faith," yet staff indicated this provision has been disregarded and employees have been subject to legal procedures.
  - Non-observance of statutory deadlines could entail liability for the NBM; liquidation duration is beyond authorities’ control. The NBM should assess liability risks and design incentives to prevent excessive duration (e.g., remuneration policies, liquidation plans, enhanced transparency).
- Institutional set-up:
  - Should reduce conflicts of interest even in a hybrid model (e.g., Chinese walls, different reporting lines).
- The report notes the design should also consider: (i) consequences of opening liquidation; (ii) treatment of pending contracts; (iii) accountability of bank owners and related parties; and (iv) treatment of pre-insolvency transactions (avoidance rules).

### Key recommendations (from Table 1)
- Timeframe definitions: Near term: < 12 months; Medium term: 12 to 24 months.
- No. 1: Draft changes to the current regime where the NBM still maintains active participation, taking into account the current strengths of the corporate insolvency framework and the institutional capacity of the judicial system in dealing with bank failures. Paragraphs 15 to 18. Timeframe: Near-Term.
- No. 2: Align liquidation and resolution triggers. Paragraph 25. Timeframe: Near-Term.
- No. 3: Ensure that the NBM controls the initiation of the liquidation process (e.g., retains the exclusive power to petition the court to start formal liquidation procedures). Paragraphs 28 to 31. Timeframe: Near-Term.
- No. 4: Include the administrative power to arrange and implement the sale of assets and liabilities if a buyer is available (P&A transaction), designed in the context of a coherent resolution and liquidation framework allowing the authorities to handle the failure of all banks in a quick and cost-effective manner. Such transaction should be financed by the DGF, subject to a least-cost test. Paragraphs 34 to 38. Timeframe: Near-Term.
- No. 5: Draft amendments to the legal framework to establish that liquidators should be appointed by the court upon a proposal of the NBM based on clear criteria and allow legal persons to be eligible to be appointed as bank liquidators. The NBM should have a prominent role in monitoring the liquidator’s actions. Paragraphs 42 to 45. Timeframe: Near-Term.
- No. 6: Revisit the current internal administrative sanction framework for NBM officials. Paragraph 49. Timeframe: Near-term.
- No. 7: Clarify the liability of the NBM and its staff when deadlines are beyond the control of the authorities. Paragraph 51. Timeframe: Near-Term.
- No. 8: Evaluate and design incentives that prevent liquidation from extending for too long (e.g., remuneration policies, liquidation plans and enhance transparency). Paragraph 52. Timeframe: Near-Term.

### Context and scope of the TA
- The TA project has three stages:
  - Phase 1 (completed): preliminary desk review of the current bank liquidation law in Moldova (Desk Review).
  - Phase 2: identification of key reform modalities with concrete recommendations on policy options.
  - Phase 3 (possible): assist the NBM in drafting a new bank liquidation law on selected aspects central to the NBM’s mandate.
- The TA provides considerations and recommendations as a reference to inform design; it does not advocate a single model and emphasizes tailoring to Moldovan legal and procedural traditions and the capacity of the judicial system.

_Italic: PREFACE (Content unit) from tarea2024055-print-pdf - PREFACE._

### 9. System-wide considerations can typically be more easily and efficiently made by an

### 9. System-wide considerations can typically be more easily and efficiently made by an administrative authority

### Rationale for an administrative model and NBM role
- Administrative authorities (e.g., banking supervisors or resolution authorities) are argued to be better placed than courts to foresee consequences arising from a bank crisis and to pursue financial stability as a legal objective.
- A key role for NBM in the procedure might be needed to maintain financial stability.
- When resolution and liquidation functions are within the same authority, economies of scale and development of organizational structures conducive to enhancing expertise can result—particularly relevant where a substantial share of banks would be liquidated while only a small number would be resolved (as in Moldova).

### Interaction with courts and discretion
- An administrative bank liquidation model aims to preserve institutional role in interaction with the courts:
  - Administrative authorities should have ample discretion when acting.
  - Courts should defer to administrative authorities on issues related to their assigned discretionary power and limit review to legality of the decision-making process and whether mandatory decision-making observed the legal framework and due process requirements.
  - The NBM should be recognized as a stakeholder: (a) as a party to be heard before a court decision; and (b) granted a right to apply to court for instructions or to appeal liquidator’s decisions.

### Speed and effectiveness of intervention
- Administrative authorities can undertake advance preparations and act more swiftly than courts, reducing the risk of delays in executing P&A transactions, which can be highly effective for dealing with distressed banks.
- Benefits of a P&A transaction (as noted): prompt access for depositors to insured deposits; rapid transfer of performing assets to a healthy bank preserving their value; promotion of confidence in the banking sector; minimization of disruption and contagion; provision of almost instant access to funds with financial assistance from the DGF, as is the case with the forced liquidation mechanism.

### Litigation, reputational risk, and resource burdens on NBM
- The NBM has argued that litigation and reputational risk from playing an active role in liquidation impairs discharge of other core functions:
  - Creditors and debtors have resorted to litigation in civil and criminal courts, impairing regular exercise of NBM functions and staff, despite legal protection.
  - Litigation risk stems from decisions to place a bank in liquidation and executing or overseeing the preferred strategy, affecting shareholders and creditors and giving rise to legal claims against NBM and appointed liquidators.
  - NBM sees involvement in liquidation responsibilities as a potential drain on scarce resources and a source of reputational risk.
- As of 2021, the Resolution Division has at least half of its allocated staff members dedicated to functions of bank liquidators in liquidation procedures, leaving very few staff for resolution authority functions.

### Suggested continued substantive role for NBM and synergies
- The 2021 FSSR recommendation to change the regime does not exclude NBM retaining a prominent role.
- According to the FSB Key Attributes, administrative authorities should maintain a prominent role regarding functions typically relating to:
  - (a) ascertaining whether the triggers are met;
  - (b) withdrawing the banking license;
  - (c) starting the liquidation procedure through a petition to the court;
  - (d) identifying (appointing or proposing to the court) liquidators with specific skills in banking matters; and
  - (e) participating in discussions with appointed liquidators on liquidation strategy and execution (particularly transfer of assets and liabilities).
- Rationale for these functions: achieving objectives of (i) maintaining financial stability; (ii) protecting and enhancing public confidence; (iii) ensuring continuity of critical financial services and functions; (iv) ensuring depositors’ protection; and (v) avoiding unnecessary destruction of value and minimizing overall costs, where consistent with other objectives.
- Synergies from NBM acting as supervisor and resolution authority include access to relevant data and information, ability to adopt early intervention measures and resolution measures to ensure continuity of financial services, and better flow of information compared with courts that typically lack technical expertise.
- Important synergies exist between planning bank liquidation and NBM responsibilities for early intervention measures (particularly, temporary administration).

### Litigation risk persistence and limits of regime change
- Liquidation entails distribution of losses among stakeholders and is prone to legal challenges; stakeholders may challenge transfers that leave them exposed to losses.
- Litigation risks will persist under a hybrid model because they are inherently associated with NBM’s roles as prudential supervisor and resolution authority.
- Moving from an administrative regime could distribute some litigation responsibilities to courts but will not eliminate exposure if an administrative authority retains license withdrawal power and substantial liquidation role.
- Some challenges to efficient liquidation may stem from idiosyncrasies of the Moldovan legal and judicial system, which exceed the scope of this TA.

### Potential benefits of changing the liquidation regime
- A new bank liquidation regime could free NBM resources to focus on tasks promoting financial stability.
- Changes to the framework concerning appointment and accountability of liquidators are expected to significantly decrease the burden on NBM’s Resolution Division related to bank liquidation.

### Key features of the current Moldovan legal framework: Triggers
- Current regime: liquidation is triggered by withdrawal of the bank license (Art. 38(1) of the Law on Bank Liquidation).
- The license is withdrawn primarily, but not exclusively, due to the bank becoming insolvent.
- Grounds for NBM withdrawal and initiation of forced liquidation include (per Article 22 para (2) of Law no. 202/2017 and related provisions):
  - a) the bank has not started the activity for which it was authorized within 1 year from the date of granting the license, expressly renounces it or has ceased to carry out activity for more than 6 months;
  - b) the license was obtained on the basis of false information or by any other unlawful means;
  - c) the bank no longer meets the conditions on which the license was granted;
  - d) the bank no longer meets the prudential requirements regarding its own funds for covering the risks, large exposures or liquidity imposed, according to this law and the normative acts issued in its application, or there are elements that lead to the conclusion that, within 12 months, the bank will no longer be able to fulfill its obligations towards its creditors and, in particular, can no longer guarantee the safety of the assets entrusted to it by its depositors;
  - e) the bank shall commit one of the sanctionable acts provided for in Article 140;
  - h) activities in first 3 years differ considerably from those envisaged at license issuance and such deviation is not justified; 
  - i) direct and indirect holders of shares, including beneficial owner, do not comply with conditions to ensure prudent and sound management or do not allow efficient supervision;
  - j) circumstances that served as a basis for appointment of temporary administrator under Law no. 232/2016 have not been removed or cannot be removed during period of temporary measures.
- Insolvency situations under art. 22 para (2) of Law no. 202/2017 that trigger license withdrawal include:
  - a) bank is not able to execute creditors' requests regarding payment of outstanding pecuniary obligations (default);
  - b) bank's assets no longer cover its obligations (over-indebtedness);
  - c) the absolute amount of the bank's own funds is less than 1/4 compared to the minimum amount of own funds established in the normative acts of the National Bank of Moldova.
- Possible clarification suggested: whether adequacy indicators of own funds calculated according to Article 60 para (5) being below the level of 1/4 of adequacy indicators should trigger license withdrawal and start of liquidation.

### Resolution triggers and potential limbo situations
- First condition for resolution: NBM determines the bank enters or is likely to be in a state of major difficulty (art. 59 of Law n. 232/2016). A bank shall be considered entering or likely to enter a state of major difficulty if at least one condition is met, including:
  - (a) violation of requirements underlying maintenance of license or objective elements indicating likely near-future violation justifying withdrawal, including losses that will exhaust all or significant part of own funds;
  - (b) bank’s assets are inferior to debts or objective elements indicating this will happen in near future;
  - (c) bank is unable to pay debts or other obligations at maturity or objective elements indicating this will happen in near future;
  - (d) extraordinary public financial support is needed;
  - (e) bank’s capital is held at least 50 percent by persons who do not have the NBM’s permission when mandatory, or when shares representing at least 50 percent of share capital have been cancelled as a result of noncompliance with shareholder quality requirements.
- Second condition for resolution: lack of effective alternatives (art. 58(1) Lett. b) of Law n. 232/2016): “taking into account the time horizon and other relevant circumstances, there is no reasonable prospect that the state of major difficulty could be prevented, within a reasonable period of time, by alternative private sector measures, including measures taken by an institutional protection system, or by supervisory measures, including early intervention measures or measures to reduce the value or convert relevant capital instruments, in accordance with the provisions of Article 220, taken in liaison with the bank concerned.”
- Third condition for resolution: liquidation is considered unable to reach the resolution objectives to the same extent as resolution; where public interest is at stake, liquidation cannot take place.
- Questionable equivalence between Lett. d) of article 22 of Law no. 202/2017 and art. 59 of Law n. 232/2016; differences in terminology can lead to different interpretations and may produce limbo situations where a bank meets resolution triggers but not liquidation triggers, leaving it neither resolvable nor liquidatable.

### Recommendation on aligning triggers and ensuring consistency
- Triggers for resolution and liquidation should be further aligned to prevent uncertainty that could undermine financial stability.
- Alignment would help ensure that every bank that meets triggers for resolution (except the public interest test applicable to resolution in Moldova) can be placed quickly into liquidation with activation of the safety net architecture to protect depositors without needing additional actions.
- Consistency should be guaranteed between the resolution, deposit guarantee framework, and other building blocks of the financial safety net architecture.

*Source: Excerpt from IMF technical assistance report (tarea2024055-print-pdf).*

### 26.  A timely intervention is essential in order to avoid value destruction, harm to

### 26.  A timely intervention is essential in order to avoid value destruction, harm to depositors and, thus,  potential impacts to the system’s stability, which could lead to a loss of confidence in it. On these grounds, triggers should have a forward-looking approach since this would enable the procedure to start before the institution becomes balance-sheet insolvent. The key concept in this regard is “nonviability.”

### A. Triggers and Initiative to Start Liquidation
- Key findings and principles:
  - Triggers should be forward-looking to enable action before balance-sheet insolvency; the key concept is “nonviability.”
  - A simple alignment approach is to use the triggers already in force for resolution to also trigger liquidation, using the same terminology in the relevant provisions.
  - Proposed triggers for liquidation: (1) the bank entering or likely to enter into a state of major difficulty; (2) the lack of alternative to private sector measures, including measures taken by an institutional protection system, or supervisory measures; and (3) liquidation being gauged by the authorities as capable to enable the achievement of the resolution objectives to the same extent as resolution.
  - Maintaining a public interest test in Moldova could undermine the ability to apply resolution to small and medium-size entities and predictability, with potential financial stability consequences.
- Roles and process:
  - Initiative to start liquidation is typically a joint initiative by different authorities (bank supervisor and resolution authority). In Moldova these functions are both within the NBM.
  - In a hybrid regime, the competent court is involved to a certain extent to assess whether legal conditions for liquidation are met, while refraining from overstepping administrative expertise regarding non-viability and avoiding manifest error or procedural violations.
  - Once conditions for liquidation are ascertained, liquidation can formally commence following a petition to the competent court. To ensure administrative control over initiation, a clear role and required consent of an administrative authority should be assigned (e.g., petition filed by the bank supervisor, by the resolution authority, or jointly). In Moldova it would be a prerogative of the NBM to file such a petition.
  - On application for a bank liquidation order, the court may: (a) grant the application; (b) adjourn the application; or (c) dismiss the application.
  - Judicial control should generally refrain from questioning discretionary evaluations/assessments by the bank supervisor and resolution authority unless manifest mistakes or procedural breaches are present. Court control should focus on observance of legal framework and procedural requirements.

### B. Transfer Powers (P&A, deposit transfers, and financing)
- Rationale and benefits:
  - As per the FSB Key Attributes (KA 3.2 (xxii)), resolution authorities should have the power to transfer insured deposits and liquidate the whole or part of the failing bank.
  - Under the current forced liquidation procedure in Moldova, under the NBM’s direction, the liquidator has the power to execute the sale of a bank’s assets and liabilities; the DGF is allowed to finance gaps between assets up to the amount of the bank’s covered deposits.
  - Transferring deposits to a healthy firm with deposit insurance covering any potential gap (on a least cost basis) can deliver significant benefits versus placing the whole bank into liquidation and paying out depositors, preserving depositors’ access and potentially securing higher “going-concern” values for assets.
- Legal and operational recommendations:
  - The Moldovan legal framework should contain administrative power to arrange and transfer assets and liabilities within a coherent resolution and liquidation framework to handle failures quickly and cost-effectively.
  - Administrative authority should retain the option to transfer good assets and selected liabilities (including insured depositors) aside from the court-led procedure, requiring preparatory work and negotiations for a full or partial transfer (P&A transaction) and seeking prior court approval where applicable.
  - Transfers can mitigate value destruction caused by slow court decisions, especially as loans (key assets) lose recoverable value over time.
- Minimum legal framework elements for administrative transfer:
  i. Provide the administrative authority with the option to exercise transfer powers prior to liquidation without requiring notification or consent of interested parties (shareholders, depositors, other creditors).  
  ii. Specify criteria grounding the administrative authority’s actions, including financial stability considerations or the need to protect depositors.  
  iii. Administrative authority’s powers should include, at minimum, all powers provided by corporate law to executive boards, supervisory bodies, and general assemblies, and be able to exercise requiring the consent.  
  iv. Exclude any fiduciary duty toward the credit institution, its shareholders and creditors.
- Financing and safeguards:
  - Preserve a financing mechanism whereby the DGF finances asset gaps up to the amount of the bank’s covered deposits, subject to a least-cost test under which the DGF may provide funding for a P&A up to an amount that would not exceed the amount of losses the DGF would have borne under a counterfactual payout to depositors net of expected recoveries.
  - The P&A legal framework should include a “no creditor worse-off” compensation entitlement for affected creditors with an independent valuation to set compensation and provisions that prevent public funds being used for compensation where possible; responsibility for payment of compensation should rest with the financing mechanism (the DGF).
- Judicial review and enforceability:
  - The legal framework should provide for judicial review of administrative transfer decisions at the request of affected parties, but initiation of legal proceedings should not suspend implementation; administrative decisions should be immediately enforceable.
  - Courts should be limited to awarding monetary compensation and should not invalidate transfers of assets and liabilities, since invalidation would have retroactive effects that could compromise credibility and financial stability.
  - Authorities should pursue provisions barring legal actions that could obstruct implementation of P&A or result in invalidation of transfers, consistent with the Constitution and legal framework.

### C. Liquidators: roles, appointment, and capacity
- Core role and powers of liquidators:
  - Liquidators manage the insolvent estate, realize assets, verify claims, and pay creditors. Typical powers include: (i) prepare payment of insolvency debts and preserve rights of the insolvent; (ii) prepare and present insolvency accounts; (iii) represent the insolvent estate in legal acts; (iv) verify and rank claims; (v) sell and choose methods of selling assets; (vi) pay creditors; and (vii) draw up an insolvency plan.
- Challenges identified in Moldova:
  - NBM reports difficulties appointing bank liquidators due to a narrow pool of qualified candidates, unwillingness to accept legal risks and low salary; no apparent legal impediments.
  - NBM has frequently chosen its own staff as liquidators, diverting resources from regular resolution authority functions to liquidator duties, especially after transfers protecting depositors.
- Recommendations to strengthen liquidator framework:
  - Address the following areas: (i) appointment procedure and suitability; (ii) accountability; (iii) remuneration; and (iv) legal protection.
  - In a hybrid liquidation model, appointment competence should rest with the court but be subject to NBM’s control through a proposal made by it. This aligns court ultimate direction with the resolution authority’s input on suitable liquidators.
  - Legal framework should specify suitability criteria for liquidators aligned with standard criteria for corporate insolvency practitioners and include experience in financial and banking business.
  - Permit appointment of legal entities as professional liquidators (for example, audit firms) while imposing conditions to avoid conflicts of interest.

*Source: Extracted text from the provided IMF content unit.*

### 45. Even though the liquidators are appointed by, and accountable to, the court, some

### 45. Even though the liquidators are appointed by, and accountable to, the court, some

### Accountability of liquidators and role of the NBM
- Although liquidators are appointed by, and accountable to, the court, some accountability to the administrative authority should also be provided.
- The NBM should have a prominent role in monitoring the conduct of the liquidation process, including involvement in the determination of liquidator’s remuneration.
- Legal-framework items recommended to ensure liquidation is executed as intended:
  - i. Regular report obligations to the administrative authority;
  - ii. Providing that certain acts taken by the liquidators, including the disposal of assets above a certain threshold, should be previously subjected to a consultation or approval procedure from the administrative authority;
  - iii. Introduction of a reaction mechanism by the administrative authority, for example, by asking for the court to issue an injunction to the liquidator, in the event of any lack of provision of information, or possible provision of false or incomplete information by the liquidator or liquidation commission, or instruct the liquidator to fulfill its responsibilities without undue delays;
  - iv. The power to propose the removal of the liquidator or liquidation committee, if established; and
  - v. Obligations of the liquidator vis-à-vis the DGF, such as adequate exchange of information and coordination that would allow a prompt payout and coordination.

### Remuneration policy for liquidators
- A sound remuneration policy aligning liquidation objectives with liquidator incentives is vital for a swift and successful liquidation outcome.
- Risk: misaligned incentives may lead liquidators to procrastinate, delaying conclusion and continuing salary receipt.
- Recommended elements:
  - The NBM should refer to a list of criteria when proposing to the judge the remuneration policy for liquidators.
  - The policy should allow liquidators to receive a variable remuneration linked to the length of the liquidation procedure as an incentive to conduct the winding-up procedure expeditiously.
  - Example approach: provide on top of a fixed remuneration an additional amount increasing when time-set (internally determined) thresholds are met.

### Legal protection of the NBM
- Objective: ensure authorities can take decisive actions by mitigating chilling effects of potential lawsuits while preserving reasonable accountability.
- Key design issues for legal protection:
  - i. Persons to which legal protection should be extended for actions and omissions taken while discharging their legal responsibilities;
  - ii. Delineate the limitations of the legal protection (e.g., would it cover administrative, and civil claims);
  - iii. Standard of protection, indicating the test to determine if protection will be available (e.g., actions adopted in “good faith”);
  - iv. Determine the burden of proof.
- Scope recommended:
  - Legal protection should extend to personnel of the administrative authority and its agents (including liquidators and external professionals acting under control or on behalf of the liquidation authority).
- Current Moldovan regime (article 35 of the NBM Law) summary:
  - The NBM, members of decision-making bodies, liquidator, and its employees “shall not be liable under the civil, administrative or criminal law, for the acts or facts performed or for failure to fulfil certain acts or facts related to exercising the duties conferred to the National Bank by the law..., except for the cases when the judicial court finds the fulfilment or omission to fulfil by these people, with bad-faith, of any act or fact related to the exercise of the National Bank`s duties, which caused damage to third parties.”
  - The provision indicates the NBM will cover expenses incurred as a result of the proceedings and extend the protection after termination of the mandate or employment contract.
  - The legal framework appears to include provisions for legal protection in line with best international practice.
- Implementation issues:
  - NBM staff reported the legal provision has been disregarded in practice; officials acting as liquidators and the NBM have been subject to legal actions by stakeholders (banks’ shareholders and creditors).
  - Recommendations: enhance understanding of the NBM’s legal framework (e.g., capacity development via tailored training to relevant stakeholders) considering Moldovan civil, administrative, and procedural particularities; revisit the internal administrative sanctions framework.

### Timeframe for the conclusion of liquidation procedures
- Legal term in Moldovan law:
  - Art. 38 1 paragraph 7 of Law no. 550/1995 states a bank’s liquidation process may not exceed five years from the date of withdrawal of its license.
  - Such term may be extended by the NBM for a maximum of two (additional) years based on the reasoned approach of the bank’s liquidator.
- Practical observations:
  - The NBM indicated the timeframe is not realistic and cannot always be met; liquidation procedures might take longer (there are currently four liquidation procedures ongoing that were initiated in 2014).
  - A statutory timeframe could give rise to litigation if unable to comply.
- Guidance:
  - Liquidation duration often lies beyond authorities’ control; rigid statutory deadlines can be challenging and the liability of the NBM and its staff should be clarified.
  - To prevent excessively long liquidations, consider incentives aligned with liquidation objectives:
    - Design liquidators’ remuneration with a variable component based on procedure duration (faster procedures yield higher variable pay).
    - Require a liquidation plan with a timeline and obligate the liquidator to transparently explain delays, enhancing transparency and accountability.

### Institutional set-up and financial stability concerns
- Current roles of the NBM:
  - The NBM is the central bank, the bank supervisor, and the resolution authority in charge of both resolution and liquidation.
  - This configuration can yield synergies, economies of scale, and effective information flows, but may create conflicts of interest given potentially conflicting functions.
- Organizational structure and staffing (as of 2021):
  - The Banking Resolution Division (BRD) is an independent structural subdivision of the NBM and reports directly to the member of the Executive Board with responsibility over the resolution function.
  - BRD purpose: organization and exercise of NBM competencies as resolution authority, application of bank resolution instruments, organization and supervision of liquidation processes until conclusion and erasing from the State Register of Legal Entities.
  - BRD is constituted of two sub-units: the Resolution Division and the Liquidation Unit.
  - Total approved headcount for the Division was 15 Full-Time Equivalent (FTE).
  - The BRD had a Bank Resolution Unit with seven staff and a liquidation unit with four staff (excluding managers).
  - For all tasks concerning resolution and liquidation, only seven staff are available, which seems insufficient given the workload.
  - Bank supervision function is shared by at least two departments with different report lines:
    - Bank Supervision Department, with an approved headcount of 57 FTE.
    - Department of Regulation and Authorization, with an approved headcount of 24 FTE.
  - Current report lines of both Departments are structurally independent from the member of the Executive Board with responsibility over the resolution function.
- Assessment:
  - A central bank acting also as bank supervisor and resolution authority can ensure financial stability concerns are considered at all times; central banks typically have financial stability in their mandate.
  - The NBM institutional set-up appears to observe best international practice in mitigating conflicts of interest by establishing separate units with different reporting lines.

### Other issues
- Court jurisdiction:
  - Jurisdiction of the court responsible for liquidation is key; regional courts may lack readiness and legal sophistication to handle bank liquidation.
  - Options: assign liquidation jurisdiction to specialized Insolvency or Corporate Law courts or to a central court with experienced judges; consider specialization of commercial courts where banks’ headquarters are located.
  - Lack of court capacity or governance would undermine liquidation processes.
- Creditor’s Committee:
  - NBM staff indicated exploring inclusion of a Creditor’s Committee.
  - If established, the NBM should assess participation in committee meetings; non-participation risks exclusion from information-sharing and discussions.
  - Risk: DGF or Resolution Fund membership could lead to over-representation of public authorities; administrative authority should be limited-observer, not full member.
  - Role of a Creditor Committee should be minimal and consultative, without involvement in financial-stability-related aspects (e.g., transfer of assets and liabilities).
- Interaction with prior resolution measures:
  - Banks previously subject to resolution might also be subject to liquidation.
  - The legal framework should explicitly leave outside the court’s scope any reversal of resolution measures previously applied by the resolution authority.
  - The court responsible for liquidation should abstain from decisions that could hinder ongoing implementation of the resolution measures.

*Source: https://www.imf.org/-/media/files/publications/tar/2024/english/tarea2024055-print-pdf.pdf*

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_Source: https://www.imf.org/-/media/files/publications/tar/2024/english/tarea2024055-print-pdf.pdf_