Technical Assistance Reports

Cabo Verde: Technical Assistance Report-Review and Operationalization of the Resolution Framework

March 14, 2025

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International Monetary Fund. Monetary and Capital Markets Department "Cabo Verde: Technical Assistance Report-Review and Operationalization of the Resolution Framework", Technical Assistance Reports 2025, 026 (2025), accessed March 15, 2025, https://doi.org/10.5089/9798229003322.019

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Summary

The International Monetary Fund (IMF) provided technical assistance to the Banco Cabo Verde (BCV) on reforming and operationalizing its bank resolution framework. Cabo Verde's special resolution regime (SRR) has been in place since 2014, with the BCV serving as the Resolution Authority. It has been applied once, in 2017, for a non-systemic publicly owned bank, but falls short of international best practices, with limited resolution tools and inadequate safeguards to protect creditors' rights, resulting in legal uncertainties. The IMF mission recommended several enhancements, including strengthening the conditions for entry into resolution and expanding resolution tools. The operationalization of the SRR is hindered by staffing challenges, with only one full-time staff member dedicated to the resolution function, and a lack of operational independence. The mission suggested restructuring the governance of the resolution function, separating it from the BCV’s macroprudential function and elevating its status within the BCV. Strengthening resolution planning is crucial, as current legal limitations seem to restrict the BCV's ability to prepare and execute resolution plans. The BCV should also be empowered to develop comprehensive resolution plans and crisis preparedness should also be enhanced, including by developing a resolution manual and initiating crisis simulation exercises.

Subject: Bank resolution, Bank resolution framework, Bridge bank, Crisis resolution, Financial crises

Keywords: Bank resolution, Bank Resolution, Bank resolution framework, Bridge bank, Cabo Verde., Crisis Management, Crisis Preparedness, Crisis resolution, Crisis Simulations, Recovery Planning, Resolution Manual, Resolution Planning, Resolution Tools, Special Resolution Regime

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