Maldives: Financial Sector Assessment Program-Technical Note on Financial Safety Net and Crisis Management Arrangements

Maldives legislation includes important elements of a financial safety net and crisis management framework but there are areas for streamlining and improvement. Shortcomings in the early intervention and bank resolution frameworks need to be addressed, including internal arrangements on the escalation process from the exercise of the MMA’s power to take enforcement actions through to the initiation of resolution. The overall design of the resolution tools is complex -the MBA includes different mechanisms for the same resolution tools- and requires streamlining. MMA should develop an effective emergency liquidity assistance framework. Deposit insurance system should be enhanced.