Principles for Cross-border Cooperation on Crisis Management
The objective of financial crisis management is to seek to prevent serious domestic or international financial instability that would have an adverse impact on the real economy. In so doing, authorities will be mindful of the impact interventions may have on the public purse and will, as far as possible:
- maintain incentives for financial institutions to behave prudently,
- promote private sector solutions and use public sector interventions only when this is necessary to preserve financial stability, and
- maintain a level competitive international playing field, in the spirit of the Basel Accord.
While financial crisis management remains a domestic competence, the growing interactions between national financial systems require international cooperation by authorities. Home authorities should lead work with the key host authorities to look at the practical barriers to achieving coordinated action in the event of a financial crisis involving specific firms, for every cross-border bank identified by the FSF as having or going to have a core supervisory college. Some of these barriers will be common to more than one firm, and these principles suggest common support tools. Home authorities of other important banks and other financial firms that have systemic implications in several countries may also wish to coordinate the development of crisis management arrangements around those firms. Continue reading