Background

This projectfollows on a pilot financial crisis preparedness project which included a financial crisis simulation exercise that identified many of the issues to be addressed in this project. FIRST assistance was sought because of a need to put in place formalized processes to support the work of the Crisis Coordination Committee, composed of the heads of Superintendencia Financiera de Colombia, Banco de la República, Ministerio de Hacienda y Crédito Público and deposit Insurance Agency of Colombia.

Project

The GOAL of this project is to identify in detail and facilitate solutions to potential institutional weaknesses that may undermine the ability of the authorities to respond effectively to financial distress and systemic crises.  

The PURPOSE is to (i) prepare and deliver an action plan for implementation that will assist in dealing with policy-related shortcomings of the current legal framework, which were detected as a result of the crisis simulation exercise conducted in 2008, including bank resolution, deposit insurance, conglomerates and non-bank financial institutions; (ii) identify the specific responsibilities of each agency in the context of the operation of the Crisis Coordination Committee; (iii) improve coordination and cooperation within and among the agencies; (iv) improve the measures available to the authorities, minimizing moral hazard and fiscal costs in a systemic crisis; and (v) identify improvements in the capacity of the four agencies to contribute effectively to dealing with distress and crisis.

OUTPUTS:  The outputs of the project are: (i) a report which will propose a policy and procedural framework for the functioning of the Crisis Coordination Committee, including a comprehensive inventory of crisis management measures and specific changes in, and enhancements to, the legal and policy framework relevant to dealing with financial sector distress and crisis; (ii) development of a framework for systemic impact assessment; and (iii) an action plan for implementation that will assist in policy related shortcomings of the system.

Project LIFE TIME is 8 months from October 2009 till May 2010.

Project BUDGET is $255,000

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