Developing Effective Reimbursement Systems and Processes
The Guidance on Developing Effective Reimbursement Systems and Processes is the product of research, deliberation and public consultation undertaken by a subcommittee of IADI on Reimbursement Systems and Processes. The guidance was approved by the Executive Council of IADI.
The guidance in the paper is intended to support Core Principle 17 of the BCBS/IADI Core Principles for Effective Deposit Insurance Systems (June 2009). That is, it exists in addition to the guidance set out under that Core Principle and the guidance set out in the essential criteria of Core Principle 17 as per the Methodology for Compliance Assessment for the BCBS/IADI Core Principles for Effective Deposit Insurance Systems (December 2010). The paper identifies 13 supporting guidance points to Core Principle 17:
- A deposit insurer should have access to depositor records at all times and undertake preparatory reviews of bank deposit liability records to ensure prompt and accurate reimbursement of insured deposits.
- Authorities should issue guidelines or regulations to ensure that banks can provide accurate deposit liability records, within a specific time frame, for aggregation of depositors' funds and when required by law or regulation, a single customer view (SCV).
- Authorities should work on the elimination of impediments to prompt reimbursement. These could include eliminating the right of set-off and disaggregation of multiple ownership accounts. These agreements should be put in place in good times.
- Transit items of banks should be subject to agreements with all clearing and settlement system agencies to ensure that the items, after a bank failure, are dealt with in an appropriate and consistent manner.
- To expedite the reimbursement process, a deposit insurer should rely on technology-based systems to process depositor information in a systematic and accurate manner.
- The limits and scope of coverage and product insurability must be set out in law, clearly defined and communicated to depositors to mitigate confusion.
- A deposit insurer should consider a range of payment methods that would expedite the reimbursement process.
- A deposit insurer must communicate clearly the payment methods and timing for payments to depositors as part of a comprehensive communications strategy to manage public expectations.
- A deposit insurer may provide interim payments in circumstances when the deposit insurer is of the view that insured depositors require access to their funds before the start of actual reimbursement is made, if it could do so without impeding the overall reimbursement process.
- It is an effective practice to conduct an audit of the reimbursement process by an independent party to confirm that appropriate internal controls have been applied during the reimbursement process and that reimbursements are accurate.
- Adequate resources and trained personnel dedicated to the reimbursement function should be made available to ensure readiness in undertaking reimbursements. Where internal resources are insufficient, a contingency plan should be in place to augment resources in times of need.
- Where reimbursement-related cross-border issues exist, such as who would perform a reimbursement in an affected jurisdiction, these should be addressed well in advance to ensure that effective and timely reimbursements can be implemented. This would involve developing coordination protocols to define the responsibilities for performing reimbursement-related activities, developing consistent communication messages and strategies, and addressing other reimbursement-related issues.
- Effective practices should be in place to conduct regular simulation exercises to test the operational readiness of the deposit insurer in carrying out reimbursements.