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Dons proffer new ideas for banking, insolvency

By Benjamin Alade
26 September 2022   |   3:06 am
Conventional methods of resolving bank crises like asset management and bridge bank resolution are no longer effective and call for the necessity of having “solid insolvency regimes” that enhance financial and economic stability.

Conventional methods of resolving bank crises like asset management and bridge bank resolution are no longer effective and call for the necessity of having “solid insolvency regimes” that enhance financial and economic stability.

This is the position of a book titled, ‘Bank insolvency laws in developing economies’ and edited by Dr. Folashade Adeyemo and Dr. Kayode Akintola. The book provides the much-needed insight into the dearth of literature on bank insolvency.

According to Adeyemo, the book adds rarely seen, but much-needed insight into the scant existing literature on the viability of banks in developing economies.

She says that bank insolvencies and failures may pose problems to countries in both developing and developed economies. This is particularly the case when banks are poorly managed, experience governance issues, have challenges with general operations or experience crises/failures.

She reveals that in many of the cases, central banks in affected countries have come to the aid of such banks and financial institutions.

Although banks in less developed economies tend to face more challenges in staying afloat than their counterparts in more developed economies, there is far less focus on them and on the general topic of bank insolvencies by the international community, she argues.

“Several banks in these jurisdictions, particularly, in Africa and the Middle East, have suffered failures and insolvencies over the past decade, thereby impacting negatively on the economies of their home countries.

“In many cases, the glaring absence of appropriate legislation to handle crises in times of insolvency contributes to the problem in these jurisdictions. It is against this backdrop that the need to advance these discussions has become apparent.

“It focuses its attention on the legislative issues with the existing legislative frameworks in the Global South and Middle East region and provides some comparison to those in the EMEA region,” the book states.

The book attempts to answer the question of whether the current frameworks in the countries under consideration are effective in preventing or resolving bank insolvencies.

It argues that conventional methods of resolving bank crises like asset management and bridge bank financial resolution are no longer effective and raise calls for regimes that enhance financial and economic stability.