Regulating, Supervising, and Handling Distress in Public Banks

Effective regulation, supervision, and crisis management frameworks for public banks are as important for financial stability as those for private banks, but do not receive much attention in discussions in policy forums. Public banks exist for variety of reasons (legacy, ideology, public policy) and will likely remain a feature of financial systems in a number of countries. Yet there is no consensus on how to best incorporate public banks in the current regulatory paradigm, in a manner commensurate with their risk profiles.

This paper highlights the distinct challenges and suggests practical solutions to the effective regulation, supervision, and crisis management for public banks. It provides advice on how to best incorporate public banks in the regulatory paradigm commensurate with their risk profiles.