Cross-border crisis simulation exercise in South America

In March 2021, the Financial Stability Institute (FSI) of the BIS, with the support of a consultant, coordinated a cross-border crisis simulation exercise (CSE) involving 11 authorities with responsibilities for crisis response and bank failure management from six countries in South America: Argentina, Brazil, Chile, Colombia, Paraguay and Uruguay.

During the CSE, participants responded to an invented scenario that modelled the increasing financial stress and failure of a fictional regionally systemic cross-border banking group. The CSE's objective was to enable the authorities to assess the effectiveness of their crisis management frameworks and cross-border cooperative arrangements in a controlled environment, and identify areas for improvement.

This report was prepared by the FSI and consultants following the CSE and sets out general findings and recommendations on a range of topics, including crisis management tools; recovery and resolution planning; liquidity and resolution funding; domestic decision-making procedures; and cross-border cooperation and information-sharing.

JEL classification: G01, G21, G28, G33

Keywords: crisis simulation exercise, crisis management, bank resolution, cross-border cooperation, information sharing, resolution funding

The views expressed in this publication are those of the authors and do not necessarily reflect the views of the BIS, its member central banks or the Basel-based standard-setting bodies.