- The working group set up by the sub-committee of the Financial Stability and Development Council (FSDC), to help strengthen the resolution regime has recommended setting up of a single Financial Resolution Authority (FRA) that is independent of regulators and the govt.
- It can be set up by either transforming the present Deposit Insurance and Credit Guarantee Corporation (DICGC) into FRA or by setting up FRA itself to subsume DICGC.
- Its features include:
- Being single-handedly responsible for operation and implementation of the financial resolution framework, including the decision to choose the appropriate resolution tool.
- Recommend to the govt institutions to be taken into temporary public ownership (TPO).
- Resolution of failed financial institutions and financial market infrastructures (FMI), besides those owned and operated by the RBI and if required, provide deposit insurance and protection to policy holders and investors/clients within limits.
- Other recommendations of the group:
- Statute for financial resolution framework should explicitly provide for preference to be given to depositors, insurance policyholders and investors over other unsecured creditors in resolution of failed financial institutions.
- Equal treatment should be meted out to uninsured depositors of banks and claims of DICGC on account of payments made to insured depositors.
- Financial sector regulator/supervisor should design a prompt corrective action (PCA) framework for institutions under their regulatory jurisdiction to prevent it from sinking to a situation of non-viability.
- Read at: http://www.thehindu.com/todays-paper/tp-business/highlevel-panel-suggests-setting-up-of-fra/article5971757.ece
Exams Perspective:
- Financial Market Infrastructures (FMI)
- Financial Resolution Authority (FRA)
- Financial Stability and Development Council (FSDC)
- Deposit Insurance and Credit Guarantee Corporation (DICGC)