The IMF/World Bank Global Insolvency Initiative—Its Purpose and Principal Features

Abstract

Bank insolvency can threaten financial stability. The failure of a large, important bank can bring about the collapse of a country’s financial system and its economy. There are far too many examples of single or multiple bank failures that have sent shock waves through a country’s economy and sparked a balance of payments crisis. It is, therefore, essential that a country’s financial supervisors have the necessary tools to effectively prevent and resolve bank insolvencies. Foremost among these tools is a strong legal framework.

A previous version of this chapter was presented at the Seventh Meeting of Central Bank Legal Advisers organized by the Center for Latin-American Monetary Studies in Buenos Aires, Argentina in September, 2005. The views expressed in this chapter are those of the author and should not be attributed to the International Monetary Fund, its Executive Board, or its management.