World Bank2013-03-292013-03-292010-10-31https://hdl.handle.net/10986/13062The Nepalese authorities have made important progress in strengthening the financial stability framework. This framework consists of provisions for liquidity support to banks, supervisory practices, and problem bank resolution mechanisms. Some liquidity facilities have been put in place, supervisory actions strengthened, and amendments to bank resolution laws have been passed that improved the ability of the Nepalese Government to manage the growing financial sector. Notwithstanding this progress, some additional refinements are warranted. The banking sector is growing rapidly, with new entrants increasing the risk profile of the system. At the same time, the economic conditions of the country are less beneficial than in the past. Accordingly, some strengthening of the existing framework is advisable. Areas for strengthening include: preconditions for effective crisis management; development of a crisis management framework; and preparation of a step-by-step plan for meeting the crisis. This report focuses on two aspects of contingency planning. First, a number of structural reforms are necessary to make the crisis management framework efficient. These preconditions for an effective crisis management framework may take time to implement but should be initiated immediately. If a crisis were to emerge before these reforms are completed, the crisis will be more difficult to contain and resolve. Second, an Action Plan for dealing with the unfolding crisis is proposed. While the specifics will depend on the causes of the crisis and the particular path the crisis takes, principles for addressing the crisis will be discussed.en-USCC BY 3.0 IGOACCESS TO DEPOSITACCOUNTINGAPPROPRIATE INTEREST RATEAPPROVAL PROCESSASSET PRICESASSET SALESAUDITINGAUDITSBAILOUTBALANCE OF PAYMENTSBALANCE SHEETBALANCE SHEETSBANK ACTIVITIESBANK ASSETSBANK CREDITBANK DEBTBANK FAILUREBANK FAILURESBANK LIQUIDITYBANK RATEBANK RECAPITALIZATIONBANK RESTRUCTURINGBANK SUPERVISIONBANKING CRISISBANKING DISTRESSBANKING EXPERTSBANKING RISKSBANKING SECTORBANKING SYSTEMBANKSBONDBOOK VALUEBORROWERBORROWINGBUSINESS PLANBUSINESS PLANSBUY BACKSCAPITAL ADEQUACYCAPITAL FUNDSCAPITAL REQUIREMENTSCASH HOLDINGSCENTRAL BANKCENTRAL BANKSCOLLATERALCOLLATERAL REQUIREMENTSCOMMERCIAL BANKINGCONSOLIDATIONCONTINGENCY PLANNINGCORRECTIVE ACTIONCORRECTIVE ACTIONSCREDIT GROWTHCREDIT LINECREDIT LINESCREDIT PORTFOLIOSCREDITORSCURRENCYDEBIT CARDSDEBTDEBT MANAGEMENTDEBT OBLIGATIONSDEBT PAYMENTSDEBT SERVICEDEPOSITDEPOSIT BALANCESDEPOSIT INSURANCEDEPOSITORDEPOSITORSDIVIDENDECONOMIC CONDITIONSECONOMIC GROWTHECONOMIC POLICYECONOMIC STABILITYEMERGENCY LENDINGEMERGING MARKETEMERGING MARKET COUNTRIESEQUITY HOLDINGEQUITY INVESTMENTEVERGREENINGEXCHANGE RATEEXPENDITUREEXTERNAL AUDITORSFACE VALUEFINANCESFINANCIAL CRISESFINANCIAL CRISISFINANCIAL DISTRESSFINANCIAL INSTITUTIONFINANCIAL INSTITUTIONSFINANCIAL INTERMEDIATIONFINANCIAL POSITIONFINANCIAL REFORMSFINANCIAL STABILITYFINANCIAL SYSTEMFINANCING NEEDSFORBEARANCEFRAUDFUTURE DEBTFUTURE LOANGOVERNMENT BONDSGOVERNMENT EXPENDITUREGOVERNMENT FINANCESGOVERNMENT OWNERSHIPGOVERNMENT POLICIESGOVERNMENT SECURITIESHOLDINGHOUSINGILLIQUIDITYINDIVIDUAL BANKINFLATIONINFORMATION TECHNOLOGYINJUNCTIONSINSIDER LENDINGINSOLVENCYINSOLVENTINSOLVENT BANKSINSTITUTIONAL ARRANGEMENTSINSTITUTIONAL REFORMSINSTRUMENTINTEREST RATEINTEREST RATESINTERNAL CONTROLSINTERNATIONAL RESERVESINVESTINGISSUANCELAWSLEGAL FRAMEWORKLEGAL PROVISIONSLEGAL REFORMSLEGISLATIONLENDERLENDER OF LAST RESORTLENDER OF LAST RESORT FACILITIESLENDER OF LAST RESORT FACILITYLEVERAGELIABILITYLIABILITY SIDELIQUIDATIONLIQUIDITY ASSISTANCELIQUIDITY CONSTRAINTSLIQUIDITY MANAGEMENTLIQUIDITY POSITIONLIQUIDITY POSITIONSLIQUIDITY RATIOSLIQUIDITY SUPPORTLOANLOAN CLASSIFICATIONLOAN COMMITMENTSLOAN LOSS PROVISIONSLOAN PORTFOLIOSLOSS OF CONFIDENCEMACROECONOMIC POLICIESMACROECONOMIC POLICYMARK-TO-MARKETMARKET CONDITIONSMARKET DEVELOPMENTSMARKET INSTRUMENTSMARKET PRICEMARKET PRICESMARKET VALUEMATURITYMICROFINANCEMICROFINANCE INSTITUTIONSMINIMUM CAPITAL REQUIREMENTSMINORITY SHAREHOLDERSMONETARY POLICYNEW ENTRANTSNPLOPEN MARKETOPEN MARKET OPERATIONSOWNERSHIP STRUCTURESPENALTIESPOLICY RESPONSEPORTFOLIOPRIVATE BANKSPRIVATE INVESTORSPRIVATIZATIONPROBLEM BANKSPROCUREMENTPROFITABILITYPROVISIONING RULESPRUDENTIAL REGULATIONSPRUDENTIAL REQUIREMENTSPUBLIC CONFIDENCEPUBLIC DEBTPUBLIC DEBT MANAGEMENTPUBLIC FUNDSPUBLIC INVESTMENTPUBLIC POLICIESPUBLIC POLICYREAL ESTATERECAPITALIZATIONREPAYMENTREPAYMENT PERIODREPOREPO FACILITYREPOSRESERVERESOLUTION MECHANISMSRESTRUCTURING PLANRESTRUCTURING PROCESSRETURNRETURN ON EQUITYRETURNSRISK MANAGEMENTRISK PROFILESECONDARY MARKETSECURITIESSHAREHOLDERSHAREHOLDERSSINGLE BORROWERSINGLE BORROWERSSOLVENCYSTATE BANKSSUPERVISORY ACTIONSSUPERVISORY AUTHORITIESSUPERVISORY FRAMEWORKSUPPORT TO BANKSSYSTEMIC CRISESSYSTEMIC CRISISSYSTEMIC RISKTECHNICAL ASSISTANCETIER 1 CAPITALTIER 2 CAPITALTIME DEPOSITSTRANSACTIONUNIONVALUATIONVALUATION PROCEDURESVALUE OF ASSETSWAREHOUSEWITHDRAWALWORKING CAPITALWorld Bank10.1596/13062