Thank you, David, for the kind introduction. It is my pleasure and honor to speak with you today to celebrate IADI’s 20th anniversary.
This is an exciting day for me and I regret not being able to be with you in person. I take tremendous satisfaction in all that IADI has accomplished in its twenty-year history and the contributions it has made to a more stable global financial system.
At the outset, I would also like to acknowledge the leadership of the current President of IADI, Alejandro Lopez, and the former IADI Presidents who are participating in this 20th Anniversary Conference – J.P. Sabourin, the founding President of IADI, Jerzy Pruski, and Katsunori Mikuniya. I would also like to recognize another former President of IADI, Tom Hoenig, who unfortunately couldn’t participate in this conference. This anniversary celebration would not be possible without their commitment and dedication to the mission of IADI.
IADI was established in 2002 by 26 founding members with a keen sense of vision - to bring together the deposit insurers of the world to share technical expertise, undertake research, sponsor training, and develop guidance for the operation of effective deposit insurance systems. Looking back on the last 20 years, I think it is clear that vision has been realized and even exceeded.
IADI has grown from the 26 founding members to 92 Members, 9 Associates, and 17 Partners today. It is a testament to the value participation in IADI brings not only to its members, but also to the global financial community.
As David mentioned, I had the privilege of serving as IADI’s President from 2007 – 2012. My tenure as IADI President was one of my most rewarding experiences while serving at the FDIC. I take particular satisfaction in IADI’s collective effort to develop the first internationally accepted standards for effective deposit insurance systems, which is what I am here to talk to you about today.
The Development of the Core Principles
As many of you know, the Global Financial Crisis of 2008 had a transformative impact on the international recognition of the importance of deposit insurance to financial stability. As a result, the need for international standards to provide guidance to countries in developing and strengthening deposit insurance systems became apparent.
In 2008, the Financial Stability Forum (FSF), the predecessor to the Financial Stability Board (FSB) of the Group of 20 (G-20) countries, recommended that national authorities develop a set of international principles for effective deposit insurance systems.1 I believe this was the first formal, international recognition of the importance of effective deposit insurance systems in maintaining financial stability.
At the time, although there were international standards for banking supervision and the regulation of securities and insurance, there were no comparable guidelines or best practices for deposit insurance systems. The FSF cited a need for standards that would provide for effective deposit insurance systems, while accommodating the unique circumstances of countries at different stages of economic and financial development that operate under different institutional frameworks.
IADI had already been working on the development of Core Principles for some time and was well positioned to respond to the FSF’s call for international standards. The association formed a joint working group consisting of deposit insurers from IADI, bank supervisors from the Basel Committee on Banking Supervision (BCBS), the European Forum of Deposit Insurers (EFDI), and the G10 Task Force on Deposit Insurance. The working group developed a document entitled Core Principles for Effective Deposit Insurance Systems.2 The executive bodies of IADI and the Basel Committee approved the Core Principles in June 2009. Since then, the Core Principles have served as a valuable benchmark for jurisdictions working to develop new systems of deposit insurance or strengthen existing systems.
Once the Core Principles were established, IADI saw the importance of developing a corresponding methodology to provide additional guidance for assessing a jurisdiction’s compliance with the principles. This significant milestone was achieved in December 2010 with the release of the Core Principles Methodology.3 The development of the methodology was a collaborative effort led by IADI in partnership with the Basel Committee, the International Monetary Fund (IMF), the World Bank, the European Federation of Deposit Insurers (EFDI), and the European Commission. With the release of the methodology, the Core Principles could now be used by deposit insurers and other interested parties to assess compliance with a recognized set of international standards.
IADI reached another major milestone with its recognition as an international standard setter in early 2011, when the FSB approved a revision of its Compendium of Standards to include the Core Principles among its Key Standards for Sound Financial Systems.4 The IMF and World Bank also officially recognized the Core Principles for use in their Financial Sector Assessment Programs (FSAPs), which they conduct to review the adequacy of national systems of financial regulation. Deposit insurance, as spelled out by the Core Principles, is now an integral part of the FSAP process. For example, for the last U.S. FSAP in 2020, the FDIC completed a self-assessment against the Core Principles and was evaluated by the IMF in a Technical Note on Financial Crisis Preparedness and Deposit Insurance.5
These measures demonstrate the international financial community’s recognition that effective systems of deposit insurance are essential for financial stability.
The Value of Core Principles
Just a few additional points on the value of the Core Principles.
The Core Principles serve as a benchmark for jurisdictions to develop new systems of deposit insurance and reform existing deposit insurance systems. The principles are comprehensive, addressing such issues as coverage, funding, powers, membership, cross-border cooperation, transitioning from blanket to limited coverage, early detection and timely intervention, reimbursement of depositors, and recoveries on assets of failed institutions. Moreover, the principles can be adapted to a broad range of circumstances.
In 2014, the Core Principles were revised to reflect lessons learned from the global financial crisis of 2008, as well as experiences with compliance assessments conducted through the FSB Peer Review process. Some noted enhancements to the Core Principles include:
- Expanded guidance on reimbursements, public awareness, coverage, and funding;
- New guidance on the deposit insurers’ role in crisis preparedness and management; and
- Standards addressing cross-border deposit insurance issues.
IADI also published an updated Handbook for the Assessment of Compliance with the Core Principles to reflect the 2014 revisions.6 The handbook is designed as a “how-to” guide, providing additional guidance on assessing a jurisdiction’s compliance with the Core Principles, and includes lessons learned from collaboration with IMF and World Bank FSAP review teams, IADI Core Principles Regional Workshops, and the IADI Self-Assessment Technical Assistance Program.
Through the development of standards, and by bringing together deposit insurers from around the world, IADI has gained worldwide recognition as the primary source of quality training, research, conferences (such as this), and educational programs in areas related to deposit insurance, crisis management, and resolution. Since 2009, IADI has developed and delivered more than 50 training programs and workshops specifically designed to promote compliance with the Core Principles.
IADI has also partnered with other international organizations including the World Bank, IMF, European Forum of Deposit Insurers (EFDI), Toronto Centre, Asian Development Bank, and the U.S. Agency for International Development, to provide training related to deposit insurance. There is also a well-established partnership between IADI and the Financial Stability Institute. This relationship is formalized through the joint hosting of a Biennial Seminar on Bank Resolution, Crisis Management, and Deposit Insurance Issues, as well as a high-level roundtable discussion on financial regulatory issues that takes place every other year in Basel, Switzerland.
IADI has also continued to collaborate with other international standard setting bodies. IADI’s collaboration with the FSB has included participation on thematic peer reviews of the G-20 countries utilizing the Core Principles, as well as the creation of the FSB’s Key Attributes of Effective Resolution Regimes for financial institutions7 and Assessment Methodology.8 In addition, IADI participates on the FSB’s Resolution Steering Group. The ability of authorities to manage the orderly resolution of systemically important financial institutions is a foundation of financial stability. IADI and its members can play an important role in bringing the deposit insurer perspective to the resolution discussion.
The Core Principles and related efforts to support compliance have contributed to stronger deposit insurance systems around the world. If we step back and consider these developments, it is clear that IADI has achieved a great deal in a relatively short period of time. Within 10 years of its establishment, the association became recognized as the standard-setting body for deposit insurance by all the major public international financial institutions, including the FSB, BCBS, IMF, and World Bank. This is remarkable, really, and IADI members deserve a great deal of credit for their important contribution to global financial stability. It is truly a global association and an important source of strength and credibility in its role as standard setter for the world’s deposit insurance systems.
Outlook for the Future
In conclusion, when I last addressed the IADI membership in 2017, I shared my enthusiasm for the progress IADI had made towards achieving its strategic goals through the reorganization of its governance and expansion of the Secretariat’s resources. I am even more encouraged to see the progress that has happened since:
First, strengthening the Secretariat by hiring staff to lead and support development of both policy and research, as well as training and technical assistance programs.
Second, developing and executing initiatives to monitor and report on Core Principles’ compliance and helping members identify gaps in their deposit insurance systems.
Third, delivering more training, technical assistance, and capacity building programs to meet growing member needs.
I am particularly pleased to see the strengthening of the Secretariat in the areas of research and policy analysis. In order for IADI to fulfill its role as global standard setter, the Secretariat must have sufficient capacity to manage the output by the association in all three of its key strategic areas: Core Principles’ compliance, research, and technical assistance. I now believe that it does.
With this strengthened foundation, IADI is beginning the process of reviewing the Core Principles to ensure they continue to reflect the risks, challenges, and opportunities that its members confront today.
I commend the initiative the Secretariat has taken to survey members and create a diverse Steering Committee that understands the challenges of the members.
As we have all experienced, priorities shift and risks change. It is IADI’s responsibility to ensure that the Core Principles remain relevant and adapt to changing technologies and risks. I believe IADI is well-positioned to address emerging risks and provide critically important international leadership for deposit insurance.
Thank you again for the privilege of speaking with you today. Congratulations to IADI for a remarkable first 20 years. It is gratifying to see the progress that has been made and the work that has been done. I look forward to seeing great things from IADI to come.
1 See Financial Stability Forum, Enhancing Market and Institutional Resilience (April 7, 2008), at https://www.fsb.org/wp-content/uploads/r_0804.pdf?page_moved=1
2 See International Association of Deposit Insurers, Core Principles for Effective Deposit Insurance Systems, at https://www.iadi.org/en/core-principles-and-guidance/core-principles/
3 See International Association of Deposit Insurers, Core Principles for Effective Deposit Insurance Systems A proposed methodology for compliance assessment (November 2010), at https://www.bis.org/publ/bcbs182.pdf
4 See Financial Stability Board, The Compendium of Standards, Key Standards for Sound Financial Systems (November 1, 2014), at https://www.fsb.org/work-of-the-fsb/about-the-compendium-of-standards/key_standards/
5 See International Monetary Fund, United States: Financial Sector Assessment Program-Technical Note-Financial Crisis Preparedness and Deposit Insurance (August 10, 2020), at https://www.imf.org/en/Publications/CR/Issues/2020/08/07/United-States-Financial-Sector-Assessment-Program-Technical-Note-Financial-Crisis-49654
6 See International Association of Deposit Insurers, A Handbook for the Assessment of Compliance with the Core Principles for Effective Depoist Insurance (March 14, 2016), at https://www.iadi.org/en/assets/File/Core%20Principles/IADI_CP_Assessment_Handbook_FINAL_14May2016.pdf
7 See Financial Stability Board, Key Attributes of Effective Resolution Regimes for Financial Institutions (October 15 2014), at https://www.fsb.org/2014/10/key-attributes-of-effective-resolution-regimes-for-financial-institutions-2/
8 See Financial Stability Board, Key Attributes Assessment Methodology for the Banking Sector (October 19, 2016) at https://www.fsb.org/2016/10/key-attributes-assessment-methodology-for-the-banking-sector/