Cross-border Crisis Simulation Exercise in Latin America

• The Financial Stability Institute conducted a cross-border crisis simulation exercise with financial authorities from seven countries in Latin America.
• The participants developed sound strategies for managing the crisis, focusing primarily on domestic solutions.
• The report makes recommendations based on the findings of the exercise.

In February 2024, financial authorities in seven countries in Latin America participated in a crisis simulation exercise (CSE) to test their preparedness for managing a bank failure.

Seventeen central banks, supervisory authorities and deposit insurers from Costa Rica, the Dominican Republic, Ecuador, Guatemala, Honduras, Mexico and Peru managed the simulated failure of a fictional regionally systemic cross-border banking group.

The CSE's objective was to enable the participating authorities to assess the effectiveness of their crisis management frameworks and cross-border cooperative arrangements and identify areas for improvement.

The report contains general findings and recommendations on topics including resolution tools, recovery and resolution planning, liquidity and funding, domestic coordination 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