Understanding the Cross-Border Aspects in Bank Insolvency: International Institute for the Unification of Private Law and India.

Abstract

Bank failures not only impact the global financial systems but also raise questions on the capabilities of cross-border resolution of financial firms/banks.Currently, there are deliberations ongoing at the International Institute for the Unification of Private Law (UNIDROIT) Working Group on Bank Insolvency (WG) where an international soft law instrument, in the form of a Legislative Guide (Guide) covering the key features of bank liquidation proceedings, is being developed. India being elected as Chair of the UNIDROIT General Assembly (2022-2023), and the Reserve Bank of India (RBI) being accorded observer status to participate in these deliberations are crucial developments that come at an opportune time to enable us to inform the WG to inculcate, in the forthcoming Guide, the Indian experience of dealing with issues relating to bank resolution – with the Financial Resolution and Deposit Insurance Bill, 2017 (FRDI Bill), as a point of reference. In this context, this article highlights an important aspect of the ongoing WG deliberations, i.e., Cross-Border Aspects/Foreign Resolution Action. It gives an overview of the elements of cross-border aspects of bank insolvency and dives into the WG discussions on the same. Further, the article draws cross border aspects from the Indian experience as emanating from the FRDI Bill. Finally, the article pin-points suggestions, in relation to the preceding discussion, which the Guide may benefit from.