In light of the outflow of deposits inSerbia in late 2008 and early 2009, a series of measureswere introduced to urgently address stability concerns.These measures included increased deposit insurancecoverage, shortened payout periods, introduction ofregulations on lenders of last report (LoLR) and newliquidity lines, and the possibility for the DepositInsurance Agency (DIA) to purchase shares of insolvent banksunder instruction from the Government of Serbia (GoS). Atthe time, it was understood that, once stability returned,it will be prudent to have a crisis management framework inplace to address systemic financial crises at all times,much like some countries have a framework to deal withnatural disasters. The new framework will seek to minimizethe need for ad hoc measures during crises and limit theneed for the authorities to take measures that aretechnically illegal. Because of the lack of such crisisprovisions, in several past crises, ministers and governorswere forced by deteriorating events to take measures forwhich they had no authority, leaving the passage ofappropriate regulation or laws to the aftermath of thecrisis. This technical note has been prepared in the contextof the initiative, primarily spearheaded by the NationalBank of Serbia (NBS), to develop a contingency managementframework. In particular, the note discusses the keyelements of such a framework, explores how the NBS and othercountries are tackling such contingency planning.
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