Fiscal Aspects of Bank Restructuring

April 1, 1997

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Format: Chicago

James Daniel. Fiscal Aspects of Bank Restructuring, (USA: International Monetary Fund, 1997) accessed September 18, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Governments frequently assist troubled banks. This paper examines the fiscal aspects of such assistance: rationale, design criteria, methods, and macroeconomic implications. It concludes that (1) banks should be assisted only when there is a clear systemic risk; (2) assistance should be tied to a comprehensive restructuring program, minimize fiscal cost, be equitable and transparent, prevent recurrence, and facilitate a sound macroeconomic environment; (3) debt-based assistance will worsen public sector debt sustainability and will probably increase aggregate demand; and (4) assistance may require a substantial fiscal response (especially given the possible need for a looser monetary stance), which should feed iteratively into the choice of restructuring strategy.

Subject: Bank resolution, Bank solvency, Banking, Commercial banks, Expenditure, Financial crises, Financial institutions, Financial sector policy and analysis, Fiscal policy, Fiscal stance

Keywords: Assistance method, Assistance operations, Assistance strategy, Bank assistance measure, Bank assistance operations, Bank assistance strategy, Bank behavior, Bank rescue, Bank resolution, Bank restructuring, Bank shareholder, Bank solvency, Banking system, Banks, Commercial banks, Defaulted debtor, Expenditure, Fiscal, Fiscal stance, Insolvent development bank, Rescues, Restructuring, Restructuring program, Troubled bank, WP

Publication Details

Pages:

33
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1997/052
Stock No:

WPIEA0521997
ISBN:

9781451847215
ISSN:

1018-5941

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