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Financial Safety Net and Bank Resolution Framework in Maldives

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The International Monetary Fund (IMF) has assessed the financial safety net and bank resolution framework in Maldives. The following are key points from the assessment:

Regulatory Framework and Oversight Bodies

Maldives Monetary Authority (MMA)

• The MMA is responsible for regulating and supervising banks, insurance companies, non-bank financial institutions, and payments institutions.

Regulatory Structure

• The Maldives Banking Act empowers the MMA to regulate and supervise banks.
• The Capital Market Development Authority (CMDA) regulates the securities market.

Deposit Insurance Fund

Deposit Insurance Fund (DIF)

• The DIF is managed by the MMA and provides protection for depositors in case of bank failures.

Resolution Framework

Resolution Mechanisms

• The MMA has the authority to intervene in failing banks, implement resolution actions, and trigger and execute resolution plans.
• The MMA can lend to financial institutions for a maximum 90-day period, which can be extended three times.

Ministry of Finance (MOF)

• The MOF’s role is limited to recapitalization using public funds in cases where financial stability is at risk.

Bank Resolution

Current Structure

• There is no separate unit for bank resolution within the MMA.
• The Banks and Other Financial Institutions Division (BOFD) is responsible for bank resolution, but it does not have dedicated personnel.

Recommendations

The IMF Staff Report recommends establishing a separate Resolution Unit under the BOFD to undertake the work needed on bank resolution. This would ensure operational separation from other functions and allow for effective management of the resolution process.