Perbadanan Insurans Deposit Malaysia (PIDM) recently hosted its second National Resolution Symposium (NRS 2024) themed ‘Building Collaborative Resolvability: From Policy to Practice’. The event brought together 450 participants, including local and international experts, to discuss crisis preparedness and collaborative strategies for resolving financial institutions in times of failure.
The 2008 Global Financial Crisis and the failure of Lehman Brothers – still the largest bankruptcy in history 16 years later – and the more recent collapses of Silicon Valley Bank and Credit Suisse are stark reminders of the critical importance of being crisis-prepared. The rise of social media and digital banking has further accelerated the speed at which crises unfold, adding complexity to the resolution process.
Dato Sri (Dr) Zukri Samat, PIDM’s Chairman, in his welcoming address, highlighted that the strength of a financial system is only as strong as its weakest link. A robust and effective financial system is built from a solid foundation of best practices of crisis preparedness and requires the collaborative efforts of all relevant stakeholders.
In his keynote speech, Dato’ Seri Abdul Rasheed Ghaffour, Governor of Bank Negara Malaysia, emphasised that crisis readiness is critical for Malaysia as we navigate an increasingly complex and interconnected global financial landscape. The financial industry must be prepared to act swiftly and effectively by cultivating a proactive and resilient mindset to constantly anticipate, manage and mitigate the impact of crises that can ripple across borders.
Day 1 highlights – Resolution planning as valuable tool for crisis preparedness
The symposium started with a discussion on PIDM’s preferred resolution strategy of “transfer” and contrasting that to a business-as-usual (“BAU”) merger and acquisition to understand the key enablers for facilitating an orderly business transfer, the potential challenges as well as synergies that can be gained from the transfer ready preparatory work done during BAU. And last but not least, the panel also delved into some key issues in the merger and acquisition involving Islamic bank.
In summary, while there are many similarities between a transfer in resolution and a BAU merger and acquisition, there are also notable differences, the key being time. A transfer in resolution often occurs under severe time constraints, which is why preparedness is crucial to ensure a prompt and successful transfer. Resolution planning therefore serves as a vital tool for building the required capabilities for such preparedness.
Following the panel discussions, masterclasses were held for participants with interests in banking, insurance, and Shariah-compliant resolution to delve deeper into how resolution planning could play a role in addressing these transfer-related challenges. Through these masterclasses, participants also gained valuable insights from industry experts who demonstrated how the resolution frameworks and policies were successfully translated into actionable strategies in real life resolution scenarios:
* The banking masterclass explored resolution planning and resolvability frameworks and practical application from several jurisdictions, including Europe’s Single Resolution Board
(SRB), the Hong Kong Monetary Authority (HKMA), the Korea Deposit Insurance Corporation (KDIC) and PIDM’s approaches.
* The insurance masterclass discussed case studies of insolvent insurers and how countries like South Korea, Canada and Australia approach resolution planning for insurers in their respective jurisdictions to prepare for insurer failures.
* The Shariah masterclass covered the Shariah framework for bank resolution in Indonesia and explored potential solutions for Islamic banks in Malaysia, which follows from a recent muzakarah (Arabic term meaning discussion or discourse) that PIDM organised with the banking industry’s Shariah fraternity.
Day 2 highlights – Preparing today for future crisis readiness
Day 2 of the symposium began with an interesting panel discussion on one of the key elements of crisis management – crisis communication. The panel highlighted the need for timely, authentic messaging to maintain public confidence. Speakers shared guiding points for effective crisis communications and emphasised the need to respond quickly to address financial consumers’ concerns, failing which will allow other parties to take control of the narrative and potentially allow misinformation to spread.
Futurist Brett King offered a glimpse into the year 2050 and discussed key trends, risks and opportunities that could shape financial services in the coming decades and how institutions must adapt to stay relevant. These shifts may in turn influence the nature of future crises and must be taken into consideration in the financial institutions and regulators’ crisis preparedness.
Following this, the final panel on the future of crisis preparedness in the digital age explored crisis preparedness in the digital age, focusing on how emerging technologies can support crisis management while addressing the risks they may pose to financial stability.
As a platform, the NRS 2024 achieved its objective of bringing PIDM’s stakeholders together to exchange valuable insights, real-world experiences and lessons learned on managing financial institution crises. We look forward to more thought-provoking discussions and greater collaboration with our stakeholders at the next symposium in 2025.