Indonesia: Anatomy of a Banking Crisis

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Author/Editor:

Enoch, Charles | Baldwin, Barbara E. | Frécaut, Olivier | Kovanen, Arto

Authorized for Distribution:

May 1, 2001

Electronic Access:

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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: This study looks at the first two years of the banking crisis that erupted in Indonesia in late 1997. It finds that the banking sector was weak at the outset, and that governance problems intensified the crisis and seriously delayed its resolution. Although a strategy was put in place over the initial months, protracted delays in implementation led to an explosion in the costs of resolution. By end-1999, the critical elements to reconstruct the banking system were in place, and the political transition seemed completed; but, in a continuing unsettled environment, the new authorities still faced daunting challenges. This study looks at the first two years of the banking crisis that erupted in Indonesia in late 1997. It finds that the banking sector was weak at the outset, and that governance problems intensified the crisis and seriously delayed its resolution. Although a strategy was put in place over the initial months, protracted delays in implementation led to an explosion in the costs of resolution. By end-1999, the critical elements to reconstruct the banking system were in place, and the political transition seemed completed; but, in a continuing unsettled environment, the new authorities still faced daunting challenges. This study looks at the first two years of the banking crisis that erupted in Indonesia in late 1997. It finds that the banking sector was weak at the outset, and that governance problems intensified the crisis and seriously delayed its resolution. Although a strategy was put in place over the initial months, protracted delays in implementation led to an explosion in the costs of resolution. By end-1999, the critical elements to reconstruct the banking system were in place, and the political transition seemed completed; but, in a continuing unsettled environment, the new authorities still faced daunting challenges.

Series:

Working Paper No. 01/52

Subject(s):

Banking | Indonesia | Financial sector | Financial crisis | Bank supervision

Author's keyword(s):

Banking crisis | bank restructuring | blanket guarantee | lender of last resort | banking supervision

English

Published:	May 1, 2001
ISBN/ISSN:	1934-7073	Format:	Paper
Stock No:	WPIEA0522001	Pages:	139
Price:	US$15.00


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