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Early intervention regimes for weak banks

Summary:
By Jean-Philippe Svoronos Supervisors conduct early interventions with the aim of prompting banks to address their weaknesses. Interventions are normally based on discretionary powers and supervisory judgment. But some jurisdictions have introduced more formal intervention regimes which include sets of actions to be implemented when specific triggers are hit. Formal regimes vary significantly, particularly in how much discretion is allowed to supervisors in deciding on whether, when and how to initiate an early intervention. Formal regimes can generally provide useful backstops to discretionary regimes, as their existence can constitute a credible inducement to institutions in need of remedial action. Full

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Supervisors conduct early interventions with the aim of prompting banks to address their weaknesses. Interventions are normally based on discretionary powers and supervisory judgment. But some jurisdictions have introduced more formal intervention regimes which include sets of actions to be implemented when specific triggers are hit. Formal regimes vary significantly, particularly in how much discretion is allowed to supervisors in deciding on whether, when and how to initiate an early intervention. Formal regimes can generally provide useful backstops to discretionary regimes, as their existence can constitute a credible inducement to institutions in need of remedial action.

International Settlement
The Bank for International Settlements (BIS) is an international company limited by shares owned by central banks which "fosters international monetary and financial cooperation and serves as a bank for central banks". The BIS carries out its work through subcommittees, the secretariats it hosts and through an annual general meeting of all member banks. It also provides banking services, but only to central banks and other international organizations. It is based in Basel, Switzerland, with representative offices in Hong Kong and Mexico City.

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