Maintenance of Competitive Conditions

Bank restructuring should not distort competition, subsidize failure, or penalize the more efficient banks in the system. This principle may be contained in competition law and enforced by the relevant authorities, though often in cooperation with the banking authorities.

G.5.3.6 Accountability and Transparency of Process

Bank restructuring should be carried out in a framework of fairness and transparency. Autonomous banking authorities should be held accountable for their actions. In par­ticular, information should be made public about the rationale for important decisions, such as those involving the use and allocation of public funds, government assumption of control and ownership of a weak bank on systemic stability grounds (see section G.5.5 below for a discussion), the sale of banks to private investors, or the definitive closure and liquidation of insolvent institutions. Nonetheless, the authorities should retain sufficient flexibility to make decisions rapidly and without having to disclose relevant information in advance. In particular, they should be able to negotiate and implement in confidence certain actions, such as the sale of the bank under insolvency proceedings to a solvent acquirer or the transfer of its assets and liabilities to other institutions in the context of purchase-and-assumption transactions. In those cases, public disclosure of all relevant information should occur once the relevant transactions have been completed.

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