IADI Core Principles for Effective Deposit Insurance Systems
The updated IADI Core Principles reflect the need for effective deposit insurance in preserving financial stability--a key lesson of the 2007-09 financial crisis. In the aftermath of the crisis, many deposit insurers saw their mandates enhanced and, in some cases, expanded to include resolution tools in addition to depositor reimbursement. As a result of the crisis, a greater emphasis has also been placed on ensuring that the deposit insurer has the necessary operational independence to fulfil its mandate. The crisis has shown that deposit insurers need to have additional tools and an ability to be better integrated into the financial safety-net.
The updated Core Principles address a range of issues, including: public policy objectives, mandate and powers, governance, relationships with other safety-net participants, cross-border issues, deposit insurer’s role in contingency planning and crisis management, membership in the deposit insurance system, coverage, sources and uses of funds, public awareness, legal protection, dealing with parties at fault in a bank failure, early detection and timely intervention, failure resolution, reimbursing depositors, and recoveries.
The Core Principles are reflective of, and designed to be adaptable to, a broad range of jurisdictional circumstances, settings and structures. The Core Principles are intended as a framework supporting effective deposit insurance practices. National authorities are free to put in place supplementary measures that they deem necessary to achieve effective deposit insurance in their jurisdictions.
International Endorsement : The amendments to the Core Principles were developed by an international steering committee of IADI members from 20 jurisdictions. The IADI proposal was then presented to a Joint Working Group, which included representatives from the BCBS, the European Forum of Deposit Insurers, the European Commission, the FSB, the IMF and the World Bank.
International Application : The original IADI-BCBS Core Principles for Effective Deposit Insurance Systems, which these Principles supersede, have been used by the Financial Stability Board as part of its Thematic Review on Deposit Insurance Systems (2012) and by the IMF and World Bank as part of their FSAP process and technical assistance missions. They have also been used by a number of national jurisdictions to self-assess their deposit insurance systems.
The assessment methodology was developed collaboratively by IADI members and by a Joint Working Group, comprising IADI representatives and representatives from the BCBS, the European Forum of Deposit Insurers, the European Commission, the FSB, the IMF and the World Bank. It is intended for use in multiple contexts: (i) self-assessment performed by the deposit insurer; (ii) IMF and World Bank assessments of the quality of deposit insurance systems, for example, in the context of the FSAP; (iii) reviews conducted by private third parties such as consulting firms; and (iv) peer reviews conducted, for example, by the FSB or within IADI regional committees.