## Appendix 1–2: International Standards on Bank Resolution and Deposit Insurance (tnmea2025005)

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### Executive summary — key findings
- Bank resolution and deposit insurance functions are intertwined and present similar governance challenges.
- The Financial Stability Board Key Attributes (KA) and IADI Core Principles (CP) recognize interdependency: both aim to protect depositors and contribute to financial stability.
- The two functions share similar potential conflicts of interest with other financial safety net components and with the banking industry.
- Institutional placement patterns:
  - About two-thirds of jurisdictions have housed the resolution function in an agency with multiple mandates.
  - Stand-alone resolution authorities are uncommon.
  - Most countries have established stand-alone deposit insurance agencies, largely under a paybox or paybox plus mandate.
- In low-capacity countries, integrating DIS within an existing agency can efficiently use scarce expertise if autonomy and conflict‑mitigation safeguards exist.
- Governance arrangements must identify and properly manage material conflicts of interest (examples: supervisor vs RA, central bank as ELA provider and large creditor, government fiscal interests, industry representation in governance).
- Operational modalities should allow flexible scaling of resources as a bank approaches failure.
- With rising use of special bank resolution frameworks, depositor payout may become less the norm; integrated resolution/DIS mandates can enable faster depositor access and lower DIF costs relative to liquidation/payout.
- Establishing sound governance to manage overlapping mandates and conflicts is critical.

### Location, institutional placement, and empirical patterns
- Placement options:
  - Add functions to an existing institution (central bank or supervisor) or establish a new stand-alone agency.
  - Models: Separated model (independent agencies), Integrated model (joint RA and DIS), Combined model (RA/DIS combine with another agency).
- Empirical patterns and sample figures:
  - A large majority of jurisdictions place the resolution mandate in either the supervisory agency or the central bank.
  - A stand-alone RA is uncommon among the 63 member jurisdictions of the Bank for International Settlements.
  - In the IADI sample:
    - 74 public DISs for banks are identified as set up as a separate entity;
    - of these, 60 operate under a paybox/paybox plus mandate;
    - 11 agencies have a joined RA/DIS mandate;
    - the remaining 3 agencies combine additional supervisory powers.
  - In less than 20 percent of the 92 jurisdictions included in the IADI annual surveys, the deposit insurance function is housed within the central bank or another financial authority.
- Considerations for choosing setup:
  - Guided by existing institutional arrangements, financial sector structure, and cost/capacity considerations.
  - Stand-alone DIAs may suit large banking sectors with sufficient resources.
  - Housing DIS within central bank or supervisor may suit limited-capacity countries (IMF 2019).

### Mandates, powers, and preparedness activities
- Complementarity and interdependence:
  - Prudential supervision, DIS, and resolution are complementary; effectiveness of DIS depends on strength of supervision and resolution regime, and vice versa.
  - Robust governance and legal protections for decision makers, staff, and agents are required.
- Routine preparedness activities (common to both functions):
  - Crisis preparedness: regular event-specific and comprehensive crisis-simulation exercises; assign responsibilities for updating crisis management plans and escalation procedures.
  - Managing funds:
    - DIS should include an ex ante funded DIF with annual levies collected from member banks.
    - Well-funded DIF authorized to contribute to resolution measures should be prioritized (IMF 2018).
    - Some countries have separate resolution funds; where they exist, RAs (and sometimes the DIA for the RA) manage these.
    - Public backstops are critical and should be operationalized (for example, through memorandums of understanding with the MOF).
  - Cross-border cooperation: RAs and DISs must engage foreign counterparts; in currency unions, cross-border cooperation is typically built into the framework.
- Resolution-specific preparedness:
  - Resolution planning: RAs develop bank-specific resolution plans supported by funding plans and secondary strategies; consult other safety net members.
  - Resolvability assessments: identify obstacles and require structural changes to ensure critical functions can be segregated.
- Deposit insurance-specific preparedness:
  - Reimbursement strategies: prepare methods for reimbursing depositors; regularly verify depositor records and test data availability.
  - Public awareness: DIS and banks should inform depositors about benefits and limits of deposit insurance to maintain confidence and mitigate runs.
- Early intervention and escalation:
  - Supervisors should have a clear framework with a broad range of measures and require recovery plans prepared annually by banks.
  - RAs and DISs should be notified as supervisory risk assessments worsen; tying notification to supervisory escalation improves predictability.
- Resolution and crisis management roles:
  - Supervisor hands over nonviable bank to RA once resolution triggers are met; RA determines resolution strategy and applies powers (transfer, bridge bank, bail-in, liquidation).
  - DIS with “paybox plus” mandate could fund resolution measures subject to least-cost safeguard.
  - In liquidation without transfer of insured deposits, DIS prepares and executes reimbursement; payout ideally within seven working days.
  - In systemic crises, DIS typically lacks sufficient funds for systemic failure; RA manages systemic bank failures while DIS focuses on communications.

### Potential conflicts of interest — typology and implications
- Conflicts depend on DIS mandate and discretion:
  - Paybox mandate involves less discretion; paybox plus and broader mandates increase discretion and potential conflicts.
  - Least-cost tests can bring conflicts to fore when RA and DIS disagree on safeguard outcomes or strategy credibility.
- Conflicts among safety net authorities:
  - Supervisor vs RA: “going-concern” supervisory incentives can delay resolution while RA seeks earlier “gone-concern” determination.
  - Central bank: ELA discretion and creditor status can complicate resolution timing and strategy.
  - Government/MOF: political involvement may pressure delays or national-favoring decisions; decisions involving public funds should be flagged to MOF.
  - Consent by other safety net authorities for DIS decisions (coverage level, levy rates, DIF target) may be warranted given broader fiscal and stability implications.
- Conflicts with industry:
  - Active industry representation in governance of DIS or RA creates conflicts given access to confidential data and incentives to minimize premiums.
  - Close to 30 percent of jurisdictions have either a private or hybrid DIS; such structures may be difficult to integrate into safety net arrangements.
  - RA/DIS ownership stakes or bridge bank operations can create conflicts between market activity and balance-sheet risk management; preferable for MOF to assume ownership and manage at arm’s length (IMF 2022a).

### Governance — autonomy, functional separation, and accountability
- Four components of operational autonomy (KA and CP):
  - Institutional autonomy: RAs and DISs should not accept instructions from political bodies or the financial industry; should have independent legal personality.
  - Functional autonomy: free to adopt policies and statutory powers; autonomy over workplans and analyses.
  - Personal autonomy: transparent appointments on set terms (preferably longer than political cycles); removal only for reasons in law; legal protection for decision makers and staff.
  - Financial autonomy: budgetary autonomy for operations and staffing; DIF and resolution fund resources should not be comingled and should have separate budget lines if housed within other authorities.
- Functional separation within multimandate organizations:
  - Dedicated teams: full-time staff for resolution and deposit insurance core tasks; surge resources as needed.
  - Reporting lines: functions should report to different sublevels (for example, deputy governors or executive directors); resolution function should report at same seniority as supervision.
  - Transparent decision making: multiple perspectives presented to highest decision-making body; document deliberations and outcomes.
  - Agility: functional separation must not impede prompt decision making; accelerated procedures should be in contingency plans.
- Board composition and incompatibilities:
  - Oversight vs executive management: governing body should provide oversight; executives should not chair the board or participate in deliberations about their own duties; majority of non-executive members in single-board structures is recommended.
  - Multimandate boards must reflect all mandates and ensure pertinent expertise; ex officio members must act in the best interest of the body.
  - Specific incompatibilities and safeguards:
    - Industry representatives, active managers, shareholders, creditors, industry association nominees should not serve on RA or DIS boards.
    - Political appointments should be avoided, especially where appointees are creditors/shareholders of state-owned banks.
    - Representatives of other safety net agencies on the board can create conflicts; where present, a majority of independent experts must act as counterweight.
    - Formal qualifications and disqualification rules (criminal record, bankruptcies, professional misconduct) should be statutory.
    - Code of conduct, conflict-of-interest rules, recusal provisions, and appointment/dismissal processes with security of tenure are required.

### Interagency cooperation, scaling up, and operational capacity
- Legal and operational frameworks:
  - Primary law should ensure cooperation by allowing interagency information exchange and outlining cooperation areas, typically via a national crisis management committee.
  - Memoranda of understanding should detail operational modalities, contact persons, and timelines.
- Operational coordination requirements:
  - Procedures should specify when and how supervisors and ELA providers inform RA and DIS of developments.
  - RA and DIS should coordinate contingency plans; RA needs verified depositor data from DIS for transfer tools.
- Respect autonomy and committee design:
  - Cooperation arrangements should respect each authority’s autonomy; committees should be consultative without decision-making powers or document deliberations if empowered.
  - When DIF funding is required by a resolution strategy, safeguards must ensure DIA receives sufficient advance notification and information with specified deadlines.
- Scaling up operational capacity:
  - Operational modalities should permit flexible expansion of resources as a bank approaches failure.
  - Resolution teams will need additional staffing and different expertise during live contingency planning, implementation, and postresolution restructuring.
  - Teams should be able to draw internal and external resources; policies and budgeting rules should facilitate rapid redeployment.
  - Authorities should maintain lists of vetted external experts (legal, valuation, IT).
  - DIS arrangements needed for confirming depositor data, recalculating payouts, undertaking payouts, and overseeing liquidators.
  - Establish these arrangements in peacetime to enable prompt scaling.

### Transparency, accountability, and legal protection
- Transparency requirements:
  - RAs and DISs should be held accountable; KA and CP prescribe rigorous accountability and transparency.
  - Combined functions can publish dedicated sections in agency annual reports and financial statements.
  - Typical disclosures: annual report, ex post assessment reports on individual resolution/compensation cases, reports to higher authority (government/parliament), external audits of DIFs/resolution funds.
  - Transparency must balance scrutiny with confidentiality needs; avoid publishing detailed firm-specific resolution plans or bank risk assessments used for DIF contributions.
- Accountability mechanisms:
  - External and internal audits to ensure cost-effective exercise of authority consistent with least-cost safeguards and risk policies.
  - Audit bodies or supreme audit institutions typically undertake regular audits and crisis-readiness evaluations.
- Legal protection:
  - Financial safety net participants and their current/former officials, staff, agents, and advisors should enjoy strong legal protection focusing judicial scrutiny on good-faith actions.
  - Legal protection is not immunity and should not cover criminal offenses.
  - Legal protection should cover litigation costs (damages, legal fees) borne upfront by authorities, not individuals.
  - Operational arrangements should cover timing/choice of legal representation, protection against self-incrimination, realistic liability and legal aid insurance, and statutory provisions supplementing insurance/contractual indemnity.

### Funds, DIF design, and resolution funding policy guidance
- General considerations:
  - DIFs should contribute to funding bank resolution measures but cannot be expected to cover systemic events.
  - Funding resolution measures in nonsystemic cases can lower DIF costs relative to payouts.
  - For systemic events, separate funding arrangements and prompt government backstops with ex post recovery from the banking sector are needed.
  - Prioritize sufficiently funded DIFs (paybox plus) over establishing separate ex ante resolution funds for infrequent systemic events.
- Design features where ex ante DIFs and resolution funds coexist:
  - Clarity: legal framework must specify uses and sources; safeguards/procedures required if RA can use DIF for resolution.
  - Efficiencies: assigning levy management for both funds to the same entity is efficient.
  - Separation: two funds must remain legally separate; a resolution fund should not borrow from a DIF.
  - Accountability: both funds should be externally audited and accounted for separately; supreme audit institute reviews may be required.
- Evolving DIS role and operational implications:
  - With effective resolution frameworks, DIS paybox role may decline in favor of transfer tools ensuring continuity of depositor services and cost-effectiveness.
  - Newly establishing jurisdictions should consider integrating DIS within the RA to align operations and reduce disputes over least-cost tests and resolution viability.
  - Integration advantages (as listed in the source):
    - Shared public policy objectives (financial stability, depositor protection).
    - Common monitoring of failure risk, depositor effects, resolution costs, and recoveries.
    - Shared interest in early resolution to maintain franchise value, limit costs, and keep recoveries high.
    - Transfer tool usable in restructuring and liquidation, subject to RA decision and DIF use.
    - Use of DIF by RA provides reliable funding source and aligns with insured depositors’ interests.
    - Joint staff enable synergies in skill sets, expertise, operations, and contingency planning.
  - Integration caveats and safeguards:
    - Legal segregation of DIF to protect RA patrimony and ensure DIF not depleted through resolution funding.
    - Maintain payout capacity as fallback; least-cost test must consider public resources including DIF and financial stability.

### Country examples — multimandated authorities and integrated agencies
- Netherlands (De Nederlandsche Bank, DNB):
  - DNB supervises the financial sector, administers the deposit insurance system, provides ELA, and resolves financial firms.
  - Managed by a Governing Board: a president and four executive directors.
  - One executive director is responsible for resolution (with casting vote on certain matters); two executive directors are mandated with supervisory tasks to ensure functional separation.
  - Decision making on supervision and resolution prepared by a Supervision Council and a Resolution Council, respectively.
- South Africa:
  - Resolution mandate carried out by the Resolution Planning Division of the South African Reserve Bank.
  - Division part of Financial Stability Department reporting to deputy governor for financial stability.
  - Corporation for Deposit Insurance reports to the same deputy governor.
  - Resolution and DIS functions operationally distinct from the Prudential Authority (CEO is another deputy governor).
- United Kingdom (Bank of England, BOE):
  - BOE is RA and responsible for liquidity support (traditional ELA and resolution liquidity framework).
  - Through PRA, BOE supervises firms; PRA determines failing/likely-to-fail and is consulted on resolution decisions.
  - Most important resolution decisions reserved for or escalated to the governor (advised by deputy governors).
  - Day-to-day resolution management by executive director for resolution reporting to deputy governor for markets and banking.
  - Resolution Committee advises deputy governor; executive director decides most resolution matters after advice from Resolution Advisory Committee.
- Denmark (Finansiel Stabilitet, FSC):
  - FSC is a public entity that is an RA with DIS responsibilities; tasked with contributing to financial stability and executing powers under the Resolution Act and the Deposit Insurance Act.
  - Established in 2008; appointed RA together with Danish supervisor in 2015; assets/liabilities of prior DIS transferred to FSC in 2015.
  - FSC manages resolution fund, deposit guarantee fund, and legacy portfolios; statutory requirement to segregate assets.
  - FSC is not liable for the guarantee fund or resolution fund; funds are not independent legal entities; FSC acts on their behalf (e.g., when applying for government backstop funding).
  - After using resolution powers, FSC winds down failed entities and pursues liability lawsuits against former management.
  - Staffing: In 2022, FSC had a staff of 41.
  - Relation to international standards: KA and CP prescriptions on autonomy, governance, accountability, resource adequacy, and legal protection apply (KA 2.5; KA Assessment Methodology 2016; CP 3 and CP 11; BCP 2, revised April 2024).

*Source: tnmea2025005 - Appendix 1 and Appendix 2 (IMF Technical Notes and Manuals).*

### Appendix 1. International Standards on Bank Resolution and Deposit Insurance . . . . . . . . . . . . . . . . . . . . . .

### Appendix 1. International Standards on Bank Resolution and Deposit Insurance

### Abbreviations
- BCP Basel Core Principles for Effective Banking Supervision
- CP Core Principles for Effective Deposit Insurance Systems; Core Principle(s)
- DIA deposit insurance agency
- DIF deposit insurance fund
- DIS deposit insurance system
- ELA emergency liquidity assistance
- FDIC Federal Deposit Insurance Corporation
- FSB Financial Stability Board
- IADI International Association of Deposit Insurers
- KA Key Attributes of Effective Resolution Regimes for Financial Institutions; Key Attribute(s)
- MOF ministry of finance
- RA resolution authority

### Executive Summary
- Bank resolution and deposit insurance functions are intertwined and present similar challenges and considerations for their governance structures.
- The Financial Stability Board Key Attributes of Effective Resolution Regimes for Financial Institutions and the International Association of Deposit Insurers Core Principles for Effective Deposit Insurance Systems recognize these functions’ interdependency, including that they both aim to protect depositors and contribute to financial stability.
- The two functions share similar potential conflicts of interest with other components of a country’s financial safety net and with the banking industry.
- About two-thirds of jurisdictions have housed the bank resolution function in an agency with multiple mandates.
  - Typically, the resolution function is combined with the bank supervision function or with the central bank—especially when the latter is also responsible for bank supervision.
  - Several jurisdictions have combined resolution and deposit insurance functions.
  - A stand-alone resolution authority is quite uncommon.
- In contrast, most countries have established stand-alone deposit insurance agencies, albeit mostly under a paybox or paybox plus mandate.
- In countries with low capacity, housing the deposit insurance function within an existing agency may most efficiently use existing capabilities and scarce expertise, provided that the deposit insurance function can be exercised with autonomy and that potential policy conflicts between mandates are mitigated.
- Institutional arrangements must identify and properly manage material conflicts of interest.
  - Potential conflicts include: the bank resolution authority selling (parts of) the failed bank during resolution while the bank supervisor is concerned about the health of the purchasing bank; the central bank being a large creditor because of liquidity assistance; and the government aiming to mitigate taxpayer risks.
  - The extent of potential policy conflicts partly depends on the mandate of the deposit insurance system and has a lower intensity for a narrow paybox plan.
  - Severe conflicts of interest may arise with the banking industry, for example, if representatives of the latter reside in the governance structures of the resolution and deposit insurance functions.
- Governance structures should reflect the need for autonomy, functional separation, agility, and technical expertise.
  - When combined with other mandates, functional separation should be supported with dedicated teams, separate reporting lines, and transparent decision making.
  - The governing body composition of a multimandated agency should reflect its broad mandate and ensure that specialized expertise and experience required by these functions are sufficiently represented.
  - Governing bodies should reinforce autonomy and mitigate potential conflicts of interest with the industry, politics, and other financial safety net members.
  - Operational modalities should enable flexibly expanding the bank resolution and deposit insurance functions’ resources as a bank approaches failure.
- Particularly in jurisdictions newly establishing a deposit insurance system, authorities should consider integrating the deposit insurance function within their resolution authority.
  - With special bank resolution frameworks becoming more prevalent, depositor payouts can be expected to become less the norm.
  - A resolution action that transfers insured deposits will likely deliver better outcomes than liquidation and deposit payout by instilling confidence (depositors do not lose access to their deposits) and by minimizing costs to a deposit insurance fund (asset values are better preserved).
- The banking turmoil in early 2023 demonstrated that the speed of restoring depositor access to their funds is becoming more important in an era of 24/7 internet banking, social media, and shifting depositor expectations.
- An integrated mandate for resolution and deposit insurance may most efficiently use scarce expertise in countries with low capacity, with one authority responsible for dealing with problem banks in the interest of financial stability and depositor protection.
- Establishing sound governance arrangements to manage complementary or overlapping mandates and potential conflicts of interest is critical.

### Introduction and International Standards Context
- The 2008–09 global financial crisis revealed that many countries’ financial safety nets needed to be significantly strengthened.
- To address key gaps in financial safety nets, the Financial Stability Board developed the Key Attributes of Effective Resolution Regimes for Financial Institutions (Key Attributes; KA; FSB 2014), and the International Association of Deposit Insurers (IADI) issued the Core Principles for Effective Deposit Insurance Systems (Core Principles; CP; IADI 2014).
- Bank resolution and deposit insurance functions complement each other and require sound governance structures.
  - The international standards acknowledge the interdependencies of the two functions: they both aim to protect depositors and contribute to financial stability.
  - These functions share (real or potential) conflicts of interest with other components of a country’s financial safety net and with the banking industry.
  - Resolution actions—be they restructuring or liquidation—are typically more intrusive than regular supervision, with shareholders and creditors at risk of having their property rights overridden.
  - Accordingly, both the resolution authority (RA) and the deposit insurance system (DIS) must be supported by robust governance structures and legal safeguards to mitigate potential conflicts.

*Editor’s note: After the original publication of this note, in the second paragraph on page 5, “Finland and Sweden” was corrected to “Sweden.”*

### Appendix  2).  Adding  these  functions  to  existing  institutions  (such  as  a  central  bank  or  a  banking  super-

### tnmea2025005 - Appendix  2).  Adding  these  functions  to  existing  institutions  (such  as  a  central  bank  or  a  banking  super-

### Location, Location, Location
- Institutional placement options for bank resolution (RA) and deposit insurance (DIS) functions:
  - Add functions to existing institution (central bank or supervisor) or establish a new stand-alone agency.
  - Models illustrated: Separated model (independent agencies), Integrated model (joint resolution and deposit insurance functions), Combined model (resolution and deposit insurance functions combine, individually, or jointly with another agency).
- Empirical patterns:
  - A large majority of jurisdictions have placed the resolution mandate in either the supervisory agency or the central bank.
  - A stand-alone RA is uncommon among the 63 member jurisdictions of the Bank for International Settlements.
  - About two-thirds of jurisdictions have housed the resolution function in an agency with multiple mandates.
  - In the IADI sample:
    - 74 public DISs for banks are identified as set up as a separate entity;
    - of these, 60 operate under a paybox/paybox plus mandate;
    - 11 agencies have a joined RA/DIS mandate;
    - the remaining 3 agencies combine additional supervisory powers.
  - In less than 20 percent of the 92 jurisdictions included in the IADI annual surveys, the deposit insurance function is housed within the central bank or another financial authority.
- Considerations for choosing setup:
  - Guided by existing institutional arrangements, financial sector structure, and cost/capacity considerations.
  - Stand-alone DIAs may be appropriate in countries with a large banking sector and sufficient resources for infrastructure.
  - Housing deposit insurance within central bank or supervisor may suit countries with limited capacity (IMF 2019).

### A Tale of Two Mandates and Their Powers
- Complementarity and interdependence:
  - Prudential supervision, deposit insurance, and bank resolution are complementary and interdependent per international standards.
  - Effectiveness of DIS relies significantly on strength of prudential supervision and resolution regime; conversely, deposit insurance and supervision are preconditions for effective resolution.
  - Sound governance and legal protection for decision makers, staff, and agents are required (see Appendix 1).
- Routine preparedness activities (common to both functions):
  - Crisis preparedness: regular event-specific and comprehensive crisis-simulation exercises; assign responsibilities for updating crisis management plans and escalation procedures.
  - Managing funds:
    - DIS should include an ex ante funded DIF with annual levies collected from member banks.
    - Well-funded DIF authorized to contribute to resolution measures should be prioritized (IMF 2018).
    - Some countries have separate resolution funds; where they exist, RAs (and sometimes the DIA for the RA) manage these.
    - Public backstops are critical and should be operationalized (for example, through memorandums of understanding with the MOF).
  - Cross-border cooperation: RAs and DISs must engage foreign counterparts; in currency unions, cross-border cooperation typically built into framework.
- Resolution-specific preparedness:
  - Resolution planning: RAs develop bank-specific resolution plans supported by funding plans and secondary strategies; consult other safety net members.
  - Resolvability assessments: identify obstacles to resolution and require changes in banks’ business practices, structure, or organization to ensure critical functions can be segregated.
- Deposit insurance-specific preparedness:
  - Reimbursement strategies: prepare methods for reimbursing depositors (through other banks or direct payments); regularly verify depositor records and test data availability.
  - Public awareness: DIS and banks should inform depositors about benefits and limits of deposit insurance to maintain confidence and mitigate deposit runs.
- Early intervention:
  - Supervisors should have a clear framework with a broad range of measures for early intervention, supported by recovery plans prepared annually by banks.
  - RAs and DISs should be informed as supervisory risk assessments worsen; tying notification to supervisory escalation improves predictability and preparedness.
- Resolution and crisis management:
  - Supervisor hands over nonviable bank to RA once resolution triggers met; RA leads in determining resolution strategy and applying resolution powers (transfer, bridge bank, bail-in, liquidation).
  - DIS with “paybox plus” mandate could fund resolution measures subject to least-cost safeguard.
  - In liquidation without transfer of insured deposits, DIS prepares and executes reimbursement; payout ideally within seven working days.
  - In systemic crises, DIS typically not sufficiently funded for systemic failures; RA may manage systemic bank failures while DIS focuses on crisis communications.

### Potential Conflicts — "Agree to Disagree"
- Conflicts can arise among RAs, DISs, supervisors, central banks, MOF, and industry participants in certain resolution scenarios.
- Conflicts between RA and DIS:
  - DEPENDS on DIS mandate and discretion (paybox, paybox plus, loss and risk minimizer).
  - Paybox mandate requires less discretion; paybox plus and broader mandates increase discretion and potential conflicts.
  - Least-cost test as a safeguard can bring conflicts to fore when RA and DIS disagree on whether safeguards are met or on the credibility of the resolution strategy.
- Conflicts with other safety net authorities:
  - Supervisor vs RA: supervisor may delay acknowledging nonviability (going-concern view) while RA may want earlier determination (gone-concern view); delay can increase resolution costs and enable asset stripping or “gambling for redemption.”
  - Central bank: ELA provision rests with central bank discretion; differing views on resolution strategy credibility or recipient’s repayability can delay resolution decisions.
  - Government/MOF: political involvement risks pressure to delay resolution or favor national interests; resolution measures not requiring public funds should fall under RA’s sole mandate, though MOF should be informed when taxpayer money could be at risk.
  - Consent by other safety net authorities for DIS decisions (coverage level, levy rates, DIF target) may be warranted given wider financial stability and fiscal implications.
- Conflicts with industry:
  - Active industry representation in governance of DIS or RA can create significant conflicts of interest given access to confidential supervisory data and incentives to keep premiums low.
  - Globally, close to 30 percent of jurisdictions have either a private or hybrid DIS; private/hybrid DISs may be difficult to integrate into safety net and crisis management arrangements.
  - Allowing RA or DIS to hold ownership stakes or operate bridge banks can create conflicts between market activity and balance-sheet risk management; preferable for MOF to assume ownership and manage at arm’s length through an independent party (IMF 2022a).

### Governance
- Four components of operational autonomy (KA and CP), subject to legislative constraints:
  - Institutional autonomy: RAs and DISs should not seek or accept instructions from political bodies or the financial industry; should have own legal personality separate from political or commercial entities.
  - Functional autonomy: free to adopt policies and choose statutory powers; autonomous adoption of annual and multiyear workplans and capacity for risk and policy analyses.
  - Personal autonomy: transparent appointment on set terms for senior officials (preferably longer than political cycle); removal only for reasons set out in law or rules of professional conduct; strong legal protection for current and former decision makers, staff, and agents.
  - Financial autonomy: budgetary autonomy for operational financing, investments, and staffing; DIF and resolution fund resources should not be comingled and should have separate budget lines if housed within other authorities.
- Functional separation within multimandate organizations is critical:
  - Dedicated teams: assign dedicated expert teams to each function, including full-time staff for resolution and deposit insurance core tasks, with surge resources as needed.
  - Reporting lines: functions should report to different sublevels (for example, deputy governors or executive directors); resolution function should report to same seniority as supervision.
  - Transparent decision making: present multiple perspectives and analyses to highest decision-making body and document deliberation outcomes.
  - Agility: functional separation must not impede prompt decision making; accelerated decision-making procedures should be part of contingency planning.
- Organizational measures and examples:
  - Functional separation need not require separate boards or committees.
  - Examples of different approaches in RAs cited (Netherlands, South Africa, United Kingdom) illustrate varying arrangements.

*Source: tnmea2025005 - Appendix 2, IMF Technical Notes and Manuals.*

### BOX 1.   Multimandated   Resolution   Authorities—Governance   Arrangements   in   the

### BOX 1.   Multimandated   Resolution   Authorities—Governance   Arrangements   in   the Netherlands, South Africa, and the United Kingdom

### Country examples: institutional arrangements
- The Netherlands
  - De Nederlandsche Bank (DNB) is tasked with supervising the financial sector, administering the deposit insurance system, extending emergency liquidity assistance, and resolution of financial firms.
  - DNB is managed by a Governing Board, comprising a president and four executive directors.
  - One executive director is responsible for resolution (and has, among others, a casting vote on certain resolution matters).
  - Two executive directors are, in principle, mandated with the supervisory task to ensure functional separation.
  - Decision making on supervision and resolution is being prepared by a Supervision Council and a Resolution Council, respectively.

- South Africa
  - The resolution mandate is carried out by the Resolution Planning Division of the South African Reserve Bank.
  - The division is part of the Financial Stability Department, which reports to the deputy governor for financial stability.
  - The recently established Corporation for Deposit Insurance is reporting to the same deputy governor.
  - The resolution and deposit insurance functions are operationally distinct from the Prudential Authority, whose CEO is another deputy governor of the South African Reserve Bank.

- United Kingdom (UK)
  - The Bank of England (BOE) is the resolution authority and is responsible for liquidity support, including traditional emergency liquidity assistance and the resolution liquidity framework when acting to resolve a firm.
  - Through its Prudential Regulation Authority (PRA) responsibilities, the BOE supervises financial firms; the PRA is tasked with determining whether an institution is failing or likely to fail and is consulted on other resolution decisions.
  - The most important resolution decisions are reserved for, or may be escalated to, the governor (who is advised by the deputy governors in the Executive Committee).
  - Day-to-day management of resolution matters is the responsibility of the executive director for resolution who reports to the deputy governor for markets and banking.
  - A Resolution Committee, with members from across the BOE including the PRA, advises the deputy governor on the most significant firms.
  - The executive director for resolution decides (after advice from the Resolution Advisory Committee) on most other resolution matters.

### B. Composition of the Board — governance principles and incompatibilities
- Oversight vs executive management
  - A governing body should direct and oversee senior management, provide strategic direction, and deal with major plans of action, risk management and investment policies, internal control systems, integrity of accounting and financial reporting systems, annual budgets, business plans, and the agency’s overall performance.
  - Senior management translates the governing body’s directions into action and carries out daily operations.
  - In single-board structures where executives sit on the agency’s board, there should be a majority of non-executive members to mitigate conflicts of interest and ensure effective oversight.
  - The responsible manager or executive should not chair the board.
  - Executives should not participate in deliberations and decisions regarding the discharge of their duties or in matters where they, or their (extended) family members, have an interest.

- Multimandate boards
  - When resolution and deposit insurance functions are combined with other mandates, the composition of the governing body should reflect its broad mandate and ensure pertinent expertise for all mandates.
  - The composition should reinforce autonomy and mitigate conflicts of interest with the industry, politics, and other safety net members.
  - In the case of ex officio members, legislation should require all governing body members to act in the best interest of that body instead of their home authority.

- Specific incompatibilities and safeguards
  - Industry: Active managers, shareholders, creditors of financial firms, their industry associations and their representatives or nominees should not serve on RA or DIS boards. Autonomy from the industry is prioritized over accountability to the levy-paying industry.
  - Political appointments: Members of elected or appointed political bodies should not be involved in the governance of an RA and a DIS, especially if they are also creditors and shareholders of state-owned banks.
  - Financial safety net representation: Representatives from other safety net agencies (e.g., the supervisor or the MOF) acting as chair or having a voting majority can create conflicts of interest; interagency consultation is preferred and, if representatives have a board seat, a majority of independent, qualified experts must act as a counterweight.
  - Qualifications: Members and senior management should meet formal qualifications (for example, a pertinent higher education degree) and have pertinent professional experience (for example, in banking, economics, law, or finance).
  - Disqualifications: Persons with a criminal record or histories of bankruptcies and professional misconduct should be excluded in statute from the governing body or senior management.
  - Code of conduct: Binding members to relevant laws, conflict of interest codes (including recusal rules), and codes of conduct is required; such safeguards cannot undo fundamental concerns about active bankers and politicians participating in governance.
  - Appointment and dismissal: The law should set out the process for appointing and removing board members and senior management. Ideally, two political bodies should be involved (in addition to a potential proposing role of the relevant agency itself). Security of tenure should be set with terms longer than the political cycle and protection against arbitrary dismissal. Only specific and exceptional grounds (such as criminal behavior or gross misconduct) should allow removal during the term, with grounds publicly disclosed in case of early dismissal and subject to legal safeguards. Provisions regarding subsequent services (such as a cooling-off period) can help prevent conflicts of interest during tenure.

### C. Interagency / functional cooperation
- Importance and legal framework
  - Interagency cooperation underpins good governance and is critical for an effective financial safety net; primary law should ensure cooperation by allowing interagency information exchange and outlining areas for cooperation and coordination, typically through a national crisis management committee.
  - Memoranda of understanding or equivalents should detail operational modalities for exchange and cooperation duties, including identifying contact persons and timelines.

- Operational coordination
  - Procedures should specify when and how the banking supervisor and the ELA provider should inform the RA and the DIS about developments and interventions at distressed banks.
  - An RA and a DIS should coordinate contingency plans with each other and the wider safety net to ensure complementarity and cohesiveness (for example, the RA enabling a transfer of insured deposits will need depositor data verified by the DIS).

- Respecting autonomy and committee design
  - Cooperation arrangements should respect the autonomy of each safety net authority and should not be subjugated to the will of other safety net members (for example, by a majority vote in committees).
  - Best practice: committees should be consultative without decision-making powers; if they do decide, deliberations and decisions should be transparently documented.
  - When a resolution strategy requires DIF funding, safeguards should ensure the DIA receives sufficient advance notification and information to fulfill its obligations; arrangements should specify information needs and deadlines for making DIF funds available.

- Internal arrangements when functions are co-located
  - Where resolution and supervisory functions are domiciled in a single agency, functional separation should be complemented with formal arrangements specifying when and how the two functions exchange information and coordinate actions.
  - Internal coordination committees or other in-house cooperation arrangements can serve as platforms for exchanging information, planning efforts, preparing decisions, and resolving conflicts of interest.

### D. Scaling up — operational capacity for stressed episodes
- Operational modalities should enable flexibly expanding resources for resolution and deposit insurance functions as a bank approaches failure.
- The resolution team will need more staffing and different expertise during prolonged live contingency planning and implementation and in postresolution restructuring.
- Teams should be able to draw additional resources from within and outside the organization; internal policies and budgeting rules should facilitate this.
- External expertise may be needed for legal, valuation, and IT work; authorities should have a list of vetted and approved experts to help with management of a bridge bank or an institution undergoing resolution.
- Deposit insurance functions need arrangements for confirming depositor data, recalculating payout amounts, undertaking payouts, and overseeing liquidators.
- Establishing these arrangements in peacetime allows functions to scale up promptly and flexibly.

### E. Transparency and accountability
- Transparency requirements
  - RAs and DISs should be held accountable and transparently execute their functions; KA prescribe rigorous accountability mechanisms for RAs and IADI CP require DISs be held accountable to a higher political authority, be regularly assessed on fulfilling their mandate, and regularly disclose pertinent information.
  - If functions are combined with other mandates, transparency can be afforded by dedicated sections in an agency’s annual report and financial statements.
  - Typically, RAs and DISs publish an annual report and ex post assessment reports on individual resolution or compensation cases and report to a higher authority such as government or parliament.
  - External audits of industry-funded DIFs and resolution funds should be published.
  - Transparency rules must balance public scrutiny and oversight against legitimate confidentiality needs (for example, protection of market-sensitive or confidential prudential/banking information).
  - Public disclosure should not include publishing detailed firm-specific resolution plans or risk assessments of individual banks for calculating risk-based contributions to the DIF.

- Accountability mechanisms
  - Accountability mechanisms (such as external and internal audits) should ensure RAs and DISs exercise authority in a cost-effective way consistent with (least-cost) safeguards and sound financial and operational risk policies.
  - Typically, an authority’s audit body or a country’s supreme audit institution would undertake regular audits; some audit organizations also undertake evaluations of the agency’s crisis readiness.

### VII. Legal protection
- Rationale and scope
  - Financial safety net participants and their current and former officials, staff, agents, and advisors should enjoy strong legal protection.
  - Legal protection supports accountability and autonomy by focusing judicial scrutiny on whether actions were taken in good faith. Legal protection is not legal immunity and should not cover criminal offenses.
  - Legal protection should cover the financial cost of litigation (including damages, legal fees, and other associated costs), which should be borne upfront by the authorities and not by individuals.

- Operational arrangements
  - Arrangements should cover choice and timing of payment of legal representation and protection against self-incrimination during internal investigations.
  - Liability and legal aid insurance must cover realistic monetary amounts given the high financial stakes in resolution cases.
  - Statutory provisions on legal protection are needed in addition to insurance and contractual indemnity.

### VIII. Two funds in one? — design and policy guidance on DIFs and resolution funding
- General considerations
  - DIFs should contribute to funding bank resolution measures but cannot be expected to have sufficient funds for a systemic event.
  - Funding resolution measures—rather than direct payouts—in nonsystemic cases could help lower costs for DIFs.
  - For systemic cases, separate funding arrangements are needed to protect uninsured depositors when needed to prevent contagion.
  - Rather than establishing a separate ex ante resolution fund, countries should ensure mechanisms for prompt resolution funding by the government with ex post recovery from the banking sector.
  - It is important to use bank levies to prioritize sufficiently funded DIFs (with a paybox plus model which would also allow its use for resolution funding) to deal with regular bank failures instead of establishing separate resolution funds for infrequent systemic events.

- Design features where ex ante DIFs and resolution funds coexist
  - Clarity: The use of funds and their sources should rest on a clear legal framework; safeguards and procedures are needed if the RA can use the DIF for resolution measures.
  - Efficiencies: Managing bank levies for both a DIF and a resolution fund requires the same expertise; it is efficient to assign these responsibilities for both funds to the same entity.
  - Separation: Where both funds are managed by a single entity, the two funds must remain legally separate. A resolution fund should not borrow from a DIF.
  - Accountability: Both DIFs and resolution funds should be externally audited and accounted for separately from the audit and annual report of the hosting entity; additional audits by a supreme audit institute may be required.

- Evolving role of DIS and operational implications
  - With more effective resolution frameworks, DISs’ traditional paybox role may become less the norm in favor of resolution options such as a deposit transfer tool that better ensures continuity of depositor services and may be more cost-effective.
  - Jurisdictions newly establishing a DIS (or both bank resolution and deposit insurance functions) should consider integrating the deposit insurance function within their RA to ensure operational alignment and reduce back-and-forth delays over resolution strategy viability or least-cost tests.
  - If an RA is responsible for the DIF, mandates and operations can be better aligned because:
    - The functions share public policy objectives to support financial stability and protect depositors.
    - Both functions monitor risk of failure of the same group or firm, depositor effects, estimated resolution costs and expected recoveries.
    - Both have a shared interest in triggering resolution early to maintain franchise value, limit costs, and keep recoveries high.
    - The transfer tool can be applied in both restructuring and liquidation, subject to the RA’s decision and use of a DIF.
    - Use of a DIF by the RA provides a reliable funding source and is in the interest of insured depositors and the DIF.
    - Joint staff allow synergies in skill sets, expertise, and operations, enhancing capabilities and reducing administrative costs while improving integrated contingency planning.
  - Integrating the DIF into the RA helps mitigate conflicts of interest between formally autonomous institutions and ensures proper information exchange and coordination; it may be efficient for countries with low capacity.
  - Under integration, the RA would manage the DIF to contribute to resolution funding in nonsystemic events and maintain payout capacity as a fallback option; the least-cost test would require the RA to choose the option that costs the least in terms of public resources, including the DIF, and is in the interest of financial stability.
  - Integration should involve legal safeguards such as legal segregation of the DIF to protect the RA’s patrimony from DIF liabilities (and vice versa) and ensure a DIF is not completely depleted through funding resolution to maintain depositor confidence.

*Source: BOX 1. Multimandated Resolution Authorities—Governance Arrangements in the Netherlands, South Africa, and the United Kingdom (from the provided PDF content).*

### BOX 2.    Denmark’s    Finansiel    Stabilitet—An    Integrated    Resolution    and    Deposit

### BOX 2.    Denmark’s    Finansiel    Stabilitet—An    Integrated    Resolution    and    Deposit Insurance Agency

### Mandate and institutional form
- Finansiel Stabilitet (FSC) is a public entity that is an RA with deposit insurance system responsibilities.
- Primarily tasked with contributing to financial stability in Denmark and discharging the responsibilities and powers assigned to it, particularly under the Resolution Act and the Deposit Insurance Act.

### History and organizational changes
- The FSC was established in 2008 in response to the global financial crisis with a mandate to resolve failing banks.
- In 2015, it was appointed RA together with the Danish supervisor.
- The assets and liabilities of the then separate deposit insurance system were transferred to the FSC in 2015.

### Funds, legal form, and segregation
- The FSC manages the resolution fund, the deposit guarantee fund, and the legacy portfolios from bank support packages extended by the Danish government during the global financial crisis.
- Under a statutory requirement, these assets must be managed separately and segregated from each other.
- FSC is not liable for the guarantee fund or the resolution fund, and these are only liable for their own obligations and liabilities.
- The funds are not independent legal entities, and the FSC acts on their behalf, for example, when applying for backstop funding from the government.

### Resolution powers and post-resolution responsibilities
- After the use of resolution powers, the FSC is responsible for winding down the failed entity and its remaining assets.
- The FSC also pursues liability lawsuits against the former management of failed banks.

### Staffing
- In 2022, FSC had a staff of 41.

### Relationship to international standards (as summarized in the source)
- The Key Attributes of Effective Resolution Regimes for Financial Institutions (KA) prescribe designating a public body as the administrative RA with powers to ensure continuity of critical functions through measures such as sale or transfer of the firm’s shares, transfer of all or parts of a firm’s business (purchase and assumption transaction), a publicly owned bridge institution, or a mandated creditor-financed recapitalization (bail-in). Many KAs apply to any financial institution that could be systemically significant or critical at the time of their failure (KA 1.1).
- The Core Principles for Effective Deposit Insurance Systems (CP) emphasize deposit insurance’s role in maintaining depositor confidence and preserving financial stability; the CP were adopted in 2009 and revised in 2014. The 16 CP set a benchmark for establishing or strengthening a deposit insurance system.
- Governance-related standards highlighted in the source:
  - KA 2.5 (FSB 2014) — RA should have operational autonomy consistent with its statutory responsibilities, transparent processes, sound governance, adequate resources, and be subject to rigorous evaluation and accountability.
  - KA Assessment Methodology for the Banking Sector (FSB 2016) — operational autonomy does not require institutional separation; governance arrangements should manage conflicts of interest; accountability is strengthened through internal and external reviews and publication of an annual report.
  - CP 3 (IADI 2014) — the deposit insurer should be operationally autonomous, well governed, transparent, accountable, and insulated from external interference.
  - CP Essential Criteria and Assessment Handbook (IADI 2016) — stress the need for adequate resources and accountability; note potential conflicts of interest from involvement of active bankers and representatives of other safety net organizations.
  - CP 11 — deposit insurer and individuals working both currently and formerly for the deposit insurer must be protected from liability for actions, claims, lawsuits, or other proceedings for decisions, actions, or omissions taken in good faith in the normal course of their duties.
  - Basel Core Principles for Effective Banking Supervision (BCP), revised April 2024 — BCP 2 prescribes that the supervisor has operational autonomy, transparent processes, sound governance, budgetary processes that do not undermine autonomy, and adequate resources; the supervisor should be accountable for discharge of duties and use of resources and the legal framework should protect the supervisor.

*Sources: 2020 Denmark; FSAP; and Fund staff.*

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_Source: https://www.imf.org/-/media/files/publications/tnm/2025/english/tnmea2025005.pdf_