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Presentation Outline: Preparation of Statement of Affairs (Assets and Liabilities) of
a Failed or Closed Bank
I. Introduction
A. Objective of the Presentation
Explain the process and key principles involved in preparing a Statement of Affairs
(SoA) for a failed or closed bank.
B. Significance of Statement of Affairs
Highlight the importance of an accurate SoA in understanding the financial position of a
failed bank.
C. Overview of the Statement of Affairs
Define the Statement of Affairs as a financial report outlining the bank’s assets and
liabilities, typically used in liquidation or bankruptcy proceedings.
II. Overview of a Closed or Failed Bank
A. Causes of Bank Failure
Insolvency, poor management, regulatory actions, or external factors.
B. Role of the Receiver or Liquidator
The appointment of a liquidator to manage the process of closing the bank and preparing
the Statement of Affairs.
C. Legal and Regulatory Framework
Relevant laws and regulations guiding the preparation of the Statement of Affairs (e.g.,
banking laws, bankruptcy regulations).
III. Components of the Statement of Affairs
A. Overview of Key Sections
Assets: A breakdown of the bank’s resources and possessions.
Liabilities: A breakdown of the bank’s obligations and debts.
B. Detailed Breakdown of Assets
1. Cash and Cash Equivalents
Balances held in liquid form (e.g., cash, short-term deposits).
2. Loans and Advances
Outstanding loans, mortgages, and receivables.
3. Investments
Securities, bonds, or other investments owned by the bank.
4. Real Estate and Other Physical Assets
Properties, equipment, and other fixed assets.
5. Intangible Assets
Brand value, intellectual property, or goodwill (if applicable).
C. Detailed Breakdown of Liabilities
1. Deposits
Demand deposits, savings accounts, and term deposits.
2. Borrowings and Debt
Loans taken from other financial institutions or creditors.
3. Accounts Payable
Outstanding payments to suppliers, vendors, or service providers.
4. Employee Liabilities
Salaries, pensions, and other employee-related obligations.
5. Contingent Liabilities
Potential liabilities (e.g., lawsuits, tax claims) not yet realized but requiring disclosure.
D. Equity and Shareholder Interests
Analysis of capital, retained earnings, and shareholder equity (if applicable).
IV. Process of Preparing the Statement of Affairs
A. Asset Valuation
Determining the fair value of the bank’s assets for liquidation purposes.
Methods of asset valuation (market value, liquidation value, appraisals).
Challenges in valuation (e.g., illiquid assets, market conditions).
B. Liability Identification and Prioritization
Identifying and categorizing liabilities (secured vs. unsecured creditors).
Prioritizing claims in line with legal guidelines (e.g., deposits, secured creditors).
C. Collation of Financial Data
Collecting financial records and statements (balance sheets, accounting records).
Ensuring accuracy and completeness of data for the Statement of Affairs.
D. Documentation and Reporting
Proper documentation of assets and liabilities.
Legal requirements for disclosure and reporting to stakeholders (regulatory bodies,
creditors, etc.).
V. Key Challenges in Preparing the Statement of Affairs
A. Complex Asset Valuation
The difficulty of accurately determining the value of illiquid or hard-to-sell assets.
B. Uncertain Liabilities
Handling contingent liabilities that may arise post-liquidation.
Unresolved claims or potential legal issues.
C. Reconciling Financial Records
Difficulties in reconciling incomplete, outdated, or conflicting financial data.
D. Legal and Regulatory Compliance
Ensuring the Statement of Affairs complies with regulatory requirements and the legal
framework of liquidation.
VI. Example of a Statement of Affairs for a Failed Bank
A. Example Structure of the Statement of Affairs
Present a simplified template or structure of an SoA.
B. Example Case Study
Walk through a hypothetical or real case of a failed bank and how its Statement of Affairs
was prepared.
C. Analysis of Key Figures
Demonstrate how the assets and liabilities are reflected in the example.
VII. Financial Reporting and Stakeholder Impact
A. Impact on Creditors
How creditors (secured and unsecured) are impacted by the SoA and liquidation process.
B. Impact on Depositors
The implications for depositors, especially in terms of insured vs. uninsured deposits.
C. Reporting Requirements
Financial reporting to regulatory authorities (e.g., central bank, liquidation board).
Transparency and clarity in reporting to ensure fairness and accurate settlement of claims.
VIII. Best Practices in Preparing the Statement of Affairs
A. Accuracy and Transparency
Ensuring that all information is accurate, complete, and clear.
B. Collaboration with Auditors and Legal Advisors
Working closely with auditors and legal experts to ensure compliance and thoroughness.
C. Timeliness and Regular Updates
Preparing the Statement of Affairs promptly and updating it regularly during the
liquidation process.
D. Use of Technology and Financial Tools
Leveraging accounting software and financial tools to streamline data collection and
reporting.
IX. Conclusion
A. Recap of Key Points
Summarize the steps and best practices for preparing the Statement of Affairs for a failed
bank.
B. Final Thoughts
Emphasize the importance of accuracy, transparency, and legal compliance in the
preparation of the SoA.
C. Q&A Session
Open the floor for questions and discussion.
X. References
List of relevant regulations, guidelines, and resources for preparing a Statement of Affairs
(e.g., bankruptcy laws, financial reporting standards, case studies).
