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