Call to form a separate court for liquidation of BFIs, insurance cos
KATHMANDU, July 9 :
Insolvency experts have underlined the need to form a separate commercial court in the country to deal with the liquidation of banks and financial institutions (BFIs) and insurance companies for smooth and speedy resolution of the failing institutions.
They have also called for a provision for voluntary and honorable exit for firms that cannot survive due to various reasons, including the entity becoming obsolete due to changes in the consumer behavior, technology and market, among other reasons.
“The bitter experience of court procedures in Nepal is that judges get frequently transferred which hinders fast conclusion of the liquidation process. So there should be a law to form a separate commercial court with judges having tremendous knowledge on insolvency and the financial complexity,” Bharat Raj Upreti, president of Nepal Insolvency Practitioners Association (NIPA), said, sharing the conclusions of the two-day seminar on ´Insolvency Law: Local Issues, Global Views´.
The seminar was organized NIPA in collaboration with the Nepal Rastra Bank (NRB). Nepal Banking Institute was the co-organizer of the seminar.
He also said there was an urgent need for legal reforms in regards to the resolution of the failing BFIs and insurance companies. “There is no special law dealing with resolution of failing insurance companies. Also, there is a need for harmonization of corporate sector laws like Bank and Financial Institution Act, Insurance Act, Companies Act, and NRB directives on blacklisting laws dealing with governmental ownership,” said Upreti, a former Supreme Court Justice.
“There should be a new rule for liquidation procedure of BFIs and insurance companies. It should include key policies like who should be in charge of the insolvency procedure, and capacity building of judges, regulators, judicial personnel and insolvency practitioner.”
Speaking at a panel discussion during the seminar, James M Peck, former US Bankruptcy Judge, said the regulators and court should work in tandem for the resolution of failing BFIs and insurance companies. “The regulatory body and the court should consist of highly qualified professionals who have sophisticated understanding on financial complexities so that they can make good and prudent decision in term of resolution of the failing institutions,” Peck, who presided over the insolvency filing case of the Lehman Brothers -- the largest insolvency case in the US, said.
Pointing out the flaws in the Insolvency Act 2006 which fails to lay down the process of voluntary filing for insolvency, NRB Governor Dr Yuba Raj Khatiwada opined that the existing exit process for any firm or company was very complicated. “We make entry procedure easy, but often forget to offer honorable exit to them. The insolvency law should have clear provisions for such rituals,” he added.
Khatiwada informed the participants that the central bank has introduced a separate chapter on resolution framework mechanism of BFIs in the draft amendment to the Nepal Rastra Bank Act.
“The provision has been introduced to expedite the liquidation process of failing BFIs so that depositors don not have to wait for long to get their hard-earned money back,” he added.
NRB deputy governor Maha Prasad Adhikari said the central bank would consider inputs from the seminar while framing laws and regulations in the coming days.
Source: Republica
