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Dhaka Tribune

Govt to form FSC to deal with financial crises

Update : 04 Aug 2017, 12:02 AM
The government will form an apex body – Financial Stability Council (FSC) – to deal with financial crises of banks and financial institutions and bail them out in need, officials have said. The decision to set up an FSC came at a meeting attended by Bangladesh Bank Deputy Governor SK Sur Chowdhury and Finance Minister AMA Muhith who was in the chair. Sur presented the concept paper on Financial Stability Council at the Finance Division meeting held on Thursday. Officials that attended the meeting said the proposed council would work as a resolution authority to solve financial crises of banks and financial institutions. The FSC will include all financial sector regulators, Ministry of Finance, Bangladesh Bank, Bangladesh Security Exchange Commission, Micro-credit Regulatory Authority, Insurance Development Regulatory Authority and National Board of Revenue. Against the backdrop of global financial crisis, many countries have come up with large-scale government support and financial bailout for failed banks and other financial conglomerates in order to maintain financial stability. According to the presentation paper, bailout programmes may not bring an expected outcome if the loopholes in the existing resolution mechanism are not fixed. In the current resolution mechanism, many regulators come up with separate problem-solving ideas which ultimately fail to address the issues. There is a need to set up an apex body to deal with crisis resolution, especially when it comes to making decision on bailout for the banks and financial institutions (FIs) hit by cash crunch. Under the FSC, two working groups – Resolution Regime for Banks/FIs and Macro-financial Monitoring – have been proposed along with a coordination council headed by the governor of Bangladesh Bank. The framework and terms of references for the proposed FSC and two working groups have been extensively discussed at the meeting which will be finalised by the government after a critical review and feedback from participating regulators and think tanks.
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