## 1. Countries Experiencing Crises Within Five Years of Bank Privatization

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### Introduction and research questions
- Paper objective:
  - Examine whether state ownership of commercial banks matters for financial stability and growth.
  - Develop new data on bank privatizations (Appendix I) and use data on systemic crises to address three questions:
    - Do state-owned banks cause banking crises?
    - Does privatization of state-owned banks cause banking crises?
    - To what extent is privatization of state-owned banks after a banking crisis simply a return to the precrisis market structure?
- Key empirical summary:
  - Privatization of banks nationalized during crises accounts for only about one-third of the bank privatizations occurring concurrently or within five years of the end of a banking crisis.
- Data scope notes:
  - Appendix I includes over 235 privatizations in more than 65 countries.
  - Excludes development banks (those not raising deposits from the general public).
  - Includes only banks where government ultimately divested majority ownership; minority sales excluded unless leading to majority divestiture.

### Context, motivations, and rationale
- Motivations for privatization:
  - Expectations of greater financial stability and higher economic growth.
  - Avoidance of fiscal burdens from repeated recapitalizations of state-owned banks after crises.
  - Privatization often part of wider policy packages to strengthen financial systems and reduce likelihood of future crises.
- Two competing views of state-owned banks:
  - Development view: government ownership can stimulate growth where institutions are weak and private banks cannot meet financing needs.
  - Political view: politicians use state-owned banks to provide employment, subsidies, and other benefits to supporters; lending driven by political objectives.
- Common distortions and costs of state-owned banks:
  - Explicit or implicit requirements to finance loss-making state-owned enterprises.
  - Provision of financing on noncommercial terms to regions or sectors.
  - Extension of credit based on political connections rather than risk assessment.
  - Inefficiencies permitting inefficient private banks to survive or allowing efficient banks to earn extraordinary profits.
  - Cost-of-funds advantage from implicit or explicit government guarantees, potentially crowding out private intermediation.
- Historical pattern:
  - Large-scale nationalizations common through the 1960s and 1970s; many governments began privatizing state-owned banks in the 1980s.
  - Despite privatizations, state-owned banks remain significant in many countries.

### III. STATE-OWNED BANKS AND FINANCIAL SECTOR STABILITY — empirical findings
- Generic causes of bank problems (applicable to state and private banks):
  - Microeconomic causes: poor banking practices, inadequate risk management, fraud.
  - Macroeconomic shocks: e.g., the 1970s oil crisis, imprudent fiscal or monetary policies.
  - Structural problems: inadequate legal system for enforcement of contracts.
- Additional vulnerabilities of state-owned banks:
  - Lower profits reduce earnings available to absorb unexpected losses and limit capital generation.
  - Contributing factors include objectives other than profit maximization, less competent management, overstaffing, operational inefficiencies, weaker risk management.
  - Supervision may be less rigorous for state-owned banks, delaying detection and remedial measures.
  - Greater exposure to loans and investments driven by policy or political reasons.

### A. Do State-Owned Banks Cause Banking Crises? — evidence synthesis
- Empirical studies report little or weak evidence of a causal link between state-owned banks and systemic banking crises.
- Representative study results:
  - Barth, Caprio, and Levine (2000): examination of 66 countries finds little evidence of a causal link; uses data on government ownership as of 1997.
  - La Porta, Lopez-de-Silanes, and Shleifer (2002): 92 countries; only a weak relationship between government ownership level and measures of financial instability; rely on 1995 levels in equations and note high correlation between 1970 and 1995 levels.
  - Caprio and Martinez Peria (1999): sample of 64 countries; find greater government ownership increases likelihood of banking crises, but model omits potentially important institutional controls and finding on crisis costs is not statistically significant.
- Explanations for weak empirical link:
  - Individual bank problems need not become systemic.
  - State-owned banks may receive subsidies and be hidden from crisis statistics.
  - State-owned banks are prevalent in countries with weak institutions and policies that may drive crises.
- Policy-relevant implication:
  - Findings consistent with literature that institutions matter more than ownership per se; improving institutions usually involves reducing direct government intervention, including reducing government ownership in the banking sector.

### B. Does Privatization of State-Owned Banks Cause Banking Crises?
- Empirical juxtaposition of privatization dates and crisis dates:
  - Privatization preceding the onset of a crisis by five years or less is rare.
  - Only a handful of countries show major privatizations within five years prior to crisis onset.
- Proximate causes of crises typically identified:
  - Failure to establish preconditions for effective supervision.
  - Deficiencies in regulatory framework and enforcement.
  - Lack of capital and inadequate managerial capacity.
- Privatization outcomes and pitfalls:
  - Partial privatizations that leave government majority control are often ineffective (example: Commercial Bank of Kenya).
  - Privatization without new capital or management skills (e.g., Ukraine share distributions) failed to strengthen banks.
  - Conclusion: Bank privatization is only rarely associated with banking crises; ineffective privatizations do not address underlying weaknesses.

### C. State-Owned Banks and Crisis Management
- Diagnosis and strategy challenges:
  - Problems harder to quantify if state banks avoided standard supervision.
  - Regulatory forbearance often occurs for state banks despite international consensus on equal prudential oversight.
  - Asset valuations and reported profitability of state-owned banks may be less reliable.
- Potential advantage:
  - State-owned banks may be less susceptible to runs if government is perceived as able to stabilize depositors’ confidence.

### Box 2 — Chile and Mexico: privatization preceding crises (selected factual sequence)
- Chile:
  - "19 of 20 state-owned banks were sold to private investors in 1975."
  - Purchasers were often financial conglomerates required to make only a "20 percent initial down payment."
  - By 1981 the banking system was in crisis leading to intervention in eight banks; central bank liquidity support; central bank purchase of nonperforming assets in 1982 and 1984; central bank recapitalization participation in 1985 with five banks returned to private ownership in 1986.
  - Prudential framework subsequently strengthened and supervisory capacity increased.
- Mexico:
  - Government sold controlling stakes in 18 banks over 14 months from June 1991 to July 1992.
  - Sale prices were generally high multiples of book value; competition increased rapidly from 1993 and new regulations in 1994 permitted greater foreign competition.
  - Banks engaged in significant related-party transactions and risky derivative positions; peso devaluation in 1994 led to pressure and a special recapitalization program in 1995.
- Comparative inference:
  - Neither privatization in Chile nor Mexico can be singled out as the sole cause of ensuing crises.
  - Both privatizations occurred in early stages of major liberalization programs; stronger prudential frameworks and supervision could have mitigated problems.
- Broader empirical observation:
  - Of the 65 countries undertaking bank privatizations documented in Appendix I, 39 have experienced banking crises.
  - Of these 39 countries, 23 undertook one or more bank privatizations concurrently with the crisis or within three years of its end.
    - For about one-third of those 23 countries, privatizations were largely the divestiture of banks that had been nationalized as part of the immediate response to the crisis.
    - For the remaining cases, the crisis appears to have provided political impetus for privatization.

### Box 3 — Key considerations for bank privatization (practical checklist)
- Institutional infrastructure preconditions:
  - Macro-economic stability, legal infrastructure, accounting standards, and an appropriate safety net (lender-of-last-resort and possibly deposit insurance).
  - Sound banking supervision to review proposed privatizations and to oversee privatized banks.
- Public policy trade-offs:
  - Objectives such as supporting "national champions" or maintaining employment may conflict with prudential and efficiency goals.
  - Political considerations (national pride, domestic control) often influence privatization choices.
- Preparing banks for privatization — methods and sequencing:
  - Financial restructuring options: "good bank–bad bank" split; transfer bad assets to an asset management company (AMC); government subscription to new equity; issue subordinated debt where feasible.
  - Timing: recapitalization closely linked to privatization recommended; staged recapitalization contingent on restructuring objectives is an alternative.
  - Operational choice: "as is" sale preferable if bank is commercially viable; otherwise financial restructuring may be required to attract reputable investors.
- Methods of privatization:
  - Most common: share sales (public offerings, tenders, auctions); voucher privatizations mainly in transition economies.
  - Empirical evidence: better financial performance when privatization involves a strong financial institution as a significant shareholder.
  - Foreign strategic investors can improve market functioning and long-run benefits.
- Prudential review: supervisory authority should approve ownership changes only if new owners are fit and proper; management competent; source of capital verified; business plan viable.
- Interim measures where privatization is infeasible:
  - Examples include India: reduce barriers to entry, ensure private sector-quality boards, voluntary retrenchment schemes, gradual strengthening of prudential norms.
  - China illustrates long sequencing and time needed for conversion from plan allocation to commercial credit risk assessment.

### Box 4 — India: reforming state banks without privatization (selected facts and outcomes)
- Market structure and ownership:
  - "Public sector banks (PSBs) accounted for about 90 percent of the banking market in 1991 and now have 75 percent of total banking assets."
  - There are 27 PSBs; none has been privatized.
  - 15 PSBs have tapped capital markets and have minority shareholdings ranging from 25 percent to 45 percent.
- Reforms and effects:
  - New prudential and accounting standards introduced in 1992–93 revealed longstanding problems; government injected capital into 19 PSBs in 1993–94 with support contingent on recovery plans.
  - Entry of "24 new private banks, including 15 with foreign ownership, began operations in India between January 1993 and March 1998."
  - Renewed restructuring led all PSBs to meet the 9 percent capital adequacy requirement in 2003.
- Policy measures when privatization is not feasible:
  - Three "half-way" measures: (i) mandate to operate on a commercial basis; (ii) governance structure insulating banks from overt political influence; (iii) application of same supervisory regime as for private banks.
  - Governance mechanisms: independent boards with fixed terms; fiduciary responsibility for directors.
- Continuing challenges:
  - Recapitalizations and AMCs have not fully addressed governance and management problems; weak provisioning and rapid loan growth can mask nonperforming loans.

### Appendix II — bank privatization and crises: data methodology and robust patterns
- Sample and sources:
  - Total sample: 65 countries in Appendix I; 39 of these have experienced banking crises with specific dates identified from combined sources.
  - Crisis definitions:
    - "Crisis 1": any crisis identified by specific dates in at least one study.
    - "Crisis 2": crisis identified by at least two studies (more stringent).
- Robust patterns that persist under "Crisis 2" (stricter definition):
  - Privatization preceding crisis onset by five years or less is rare.
  - Privatizations are common concurrently with crises or within three years of crisis end.
  - Divestiture of banks nationalized as part of crisis management accounts for only a small portion of post-crisis privatization.
- Selected country-level examples (verbatim years and outcomes preserved in data):
  - Chile: "19 banks — Year of Privatization: 1975; Crisis Dates 1: 1981–87; Crisis Dates 2: 1981–87."
  - Mexico: multiple banks privatized in 1991–1992 (examples preserved precisely as listed, e.g., "Banamex — Year of Privatization: 1991; Crisis Dates 1: 1982; 1994–97; Crisis Dates 2: 1982; 1994–97").
  - India: as summarized above.
  - Numerous other country- and bank-level privatization dates and crisis dates compiled in Appendix II support the three central patterns above.

### Policy recommendations (synthesis across boxes and sections)
- Strengthen prudential frameworks and supervision prior to or alongside privatization to limit:
  - insider or related-party transactions,
  - excessive credit risk and currency risk exposures,
  - weaknesses in legal and accounting infrastructure that impede enforcement of contracts or collateral pledges.
- Ensure adequate institutional infrastructure consistent with Basel Core Principles preconditions, including:
  - sustainable macro-economic policies;
  - legal infrastructure for contract law, pledging collateral, and enforcing security agreements;
  - appropriate and widely-used accounting standards.
- Use the bank supervisory authority actively in the privatization process to review and approve changes in ownership and to verify fit-and-proper status, source of capital, and viability of business plans.
- Consider introducing limited deposit insurance prior to privatization to signal the end of an implicit government guarantee and reduce competitive distortions.
- Recognize sequencing constraints:
  - Privatization can proceed concurrently with other reforms when legal and supervisory frameworks are weak, but this increases the importance of supervisory oversight and risk mitigation measures.
  - Where privatization is not immediately feasible, apply the "half-way" measures: mandate commercial operation, insulated governance, and equal supervisory treatment.
- Evaluate trade-offs between rapid divestiture and longer-term government ownership after nationalization:
  - Rapid divestiture can restore a normal banking sector quickly and capture governance and efficiency gains from reputable private acquirers.
  - Longer-term ownership may be argued for potential financial upside but risks political interference and governance problems.

*Source: _wp0510 - 1. Countries Experiencing Crises Within Five Years of Bank Privatization (excerpt).*

### 1. Countries Experiencing Crises Within Five Years of Bank Privatization .......................13

### 1. Countries Experiencing Crises Within Five Years of Bank Privatization

### Introduction and research questions
- The paper examines whether state ownership of commercial banks matters for financial stability and growth.
- The paper develops new data on bank privatizations (Appendix I) and uses data on systemic crises to address three explicit questions:
  - Do state-owned banks cause banking crises?
  - Does privatization of state-owned banks cause banking crises?
  - To what extent is privatization of state-owned banks after a banking crisis simply a return to the precrisis market structure?
- Summary empirical finding highlighted: privatization of banks nationalized during crises accounts for only about one-third of the bank privatizations occurring concurrently or within five years of the end of a banking crisis. This suggests policymakers in postcrisis countries have an increased preference for private ownership of banks.

### Context and motivation
- Policymakers in many countries at all stages of development have opted for bank privatization over the last 25 years, reflecting a growing consensus that state-owned banks are less desirable than privately owned banks.
- Motivations behind privatization include expectations of greater financial stability and higher economic growth, and avoidance of fiscal burdens from repeated recapitalizations of state-owned banks after crises.
- Privatization is frequently part of policy packages intended to strengthen the financial system and reduce likelihood of future crises and output losses.

### Rationale for and pitfalls of state-owned banks
- Two competing views of state-owned banks:
  - Development view: government ownership can stimulate growth when institutions are underdeveloped and private banks cannot meet financing needs; used to finance economically desirable projects neglected by private banks.
  - Political view: politicians use state-owned banks to provide employment, subsidies, and other benefits to supporters, with lending driven by political objectives rather than commercial viability.
- Common distortions and costs of state-owned banks include:
  - Explicit or implicit requirements to finance loss-making state-owned enterprises.
  - Provision of financing on noncommercial terms to regions or sectors.
  - Extension of credit based on political connections rather than risk assessment.
  - Inefficiencies that either permit inefficient private banks to survive in less competitive markets or allow efficient banks to earn extraordinary profits.
  - Cost of funds advantage due to implicit or explicit government guarantees, which can crowd out private intermediation when used to support inefficient state-owned enterprises.
- Historical evolution:
  - Large-scale nationalizations and state involvement in banking were common in the mid-20th century, notably through the 1960s and 1970s.
  - By the 1980s many governments began privatizing state-owned banks as development successes proved elusive and fiscal and economic crises emerged.
  - Despite privatizations, state-owned banks remain significant in many countries; Appendix I includes over 235 privatizations in more than 65 countries.
- Scope and exclusions:
  - The data and discussion exclude development banks (defined as those not raising deposits from the general public).
  - Special-purpose banks are included only if they raise deposits from the general public and thus compete with commercial banks for deposit funding.
  - Appendix I includes only banks in which government ultimately divested majority ownership; sales of minority ownership are excluded unless part of a process leading to majority divestiture.

### Empirical evidence: What can numbers tell us? (Box 1)
- Cross-country studies face identification challenges because state-owned banks are prevalent in countries with other adverse characteristics (interventionist governments, poor property rights).
- La Porta, Lopez-de-Silanes, and Shleifer (2002) construct a database of government ownership of banks in 92 countries and examine:
  - How significant is government ownership in various countries?
  - What types of countries have more government ownership of banks?
  - Does government ownership of banks promote subsequent financial growth?
  - Does government ownership of banks promote subsequent economic growth and how does it affect factor accumulation, savings and growth of productivity?
- Key findings reported:
  - Countries with higher levels of state-bank ownership tend to have lower levels of per capita income, underdeveloped financial systems, interventionist and inefficient governments, and poor protection of property rights.
  - Slower economic growth is associated with higher levels of historical state-ownership of the banking system, but the paper does not empirically infer causality.
- Additional empirical studies:
  - Dinç (2002) uses financial data for state-owned and private banks and finds greater lending and restructuring activities of state-owned banks in election years, supporting the political view and rejecting the development-role hypothesis.
  - Sapienza (2002) on Italian banks finds behaviors (lower interest rates, regional favoritism) consistent with development objectives but also consistent with political motivations given influences of election results and political party affiliation.
- Data limitations:
  - The state-bank ownership data used in these studies has limitations; for example, La Porta, Lopez-de-Silanes, and Shleifer data uses indicators of state-bank ownership in 1970 (not exhaustive across time) and other measurement issues complicate causal inference.

### Paper structure and further research agenda
- The paper’s structure:
  - Section II: overview of case for and against state ownership of banks (overview above).
  - Section III: uses privatization data from Appendix I and crisis dates to consider linkages between state-owned banks and financial stability.
  - Sections IV and V: draw on literature on bank privatization and privatization more generally to discuss issues of concern for policymakers.
  - Penultimate section: provides policy suggestions to mitigate negative influence of state-owned banks where privatization cannot be quickly achieved.
  - Final section: brief concluding remarks.
- The paper notes recurring theme: financial sector stability, supervisory strength, and bank soundness are intertwined with growth and fiscal issues that drive policy decisions on state-owned banks.
- The paper suggests further research into the topic given continued prevalence of state-owned banks in many countries.

*Source: _wp0510 - 1. Countries Experiencing Crises Within Five Years of Bank Privatization*

### 1995. To the extent that state-owned banks are indicative of institutional factors that change only

### 1995. To the extent that state-owned banks are indicative of institutional factors that change only slowly, use of data for only two dates may well be indicative of the influence of state-owned banks on growth. However, when examining specific countries use of data for two dates may not provide an indication of some important episodes in a country’s banking history. For example, the nationalization of most Mexican banks in 1982 and subsequent privatization in 1991–92 falls in between the two dates. Similarly, the nationalization of major banks in response to a banking crisis can be a major blip in the long-term trend of declining state-ownership of banks, and in many countries, 1995 was far from an end point in bank privatization.

### III. STATE-OWNED BANKS AND FINANCIAL SECTOR STABILITY
- Problems in state-owned banks arise from the same three generic causes as private banks: 
  - Microeconomic causes: poor banking practices, inadequate management of credit and other risks, fraud.
  - Macroeconomic shocks: e.g., the 1970s oil crisis, imprudent fiscal or monetary policies.
  - Structural problems: inadequate legal system for enforcement of contracts.
- State-owned banks may be more exposed to solvency-threatening losses because:
  - Profits of state-owned banks are lower than they otherwise might be, reducing earnings available to absorb unexpected losses and limiting capital generation through retained earnings.10
  - Possible contributing factors: objectives other than profit maximization, less competent management, overstaffing, operational inefficiencies, less well developed risk management.
  - Supervision may be less rigorous for state-owned banks, lowering likelihood of early detection and remedial measures.
- Additional vulnerability:
  - State banks are more vulnerable to losses from loans and investments made for policy or political reasons rather than pure commercial terms.
  - State-owned banks follow shareholder directives that can include support for inefficient state-owned enterprises for development or political purposes, increasing risk of loss and causing misallocation of capital.

### A. Do State-Owned Banks Cause Banking Crises?
- Empirical evidence: three studies find little or weak evidence of a causal link between state-owned banks and banking crises.
- Possible explanations for weak empirical link:
  - Individual bank problems do not necessarily lead to systemic crisis.
  - State-owned banks that encounter difficulties may receive subsidies through various channels and thus not be identified as being in crises.11
  - State-owned banks are more prevalent in countries with weak institutions and policies that may be the actual drivers of crises.
- Key study findings and details:
  - Barth, Caprio, and Levine (2000): examination of 66 countries finds little evidence of a causal link; uses data on government ownership as of 1997.
  - La Porta, Lopez de Silanes, and Shleifer (2002): examination of 92 countries finds only a weak relationship between government ownership level and measures of financial instability; note high correlation between 1970 and 1995 levels and rely on 1995 levels in equations.
    - They hypothesize that higher government ownership correlates with being “more backward and statist,” poorer, more interventionist and inefficient governments, and less secure property rights; countries with less developed financial systems seem to have higher government ownership of banks.12 13
  - Caprio and Martinez Peria (1999): sample of 64 countries using La Porta et al. data; find greater government ownership does increase the likelihood of banking crises, but:
    - Model does not control for potentially important institutional factors such as rule of law, property rights, and government efficiency.
    - Finding that greater government ownership increases the costs of crises is not statistically significant; measuring costs of crises is difficult.
- Data limitations and interpretation:
  - Use of data at only one or two points in time (e.g., 1970 and 1995, or ownership as of 1997) may miss important within-country developments such as nationalization followed by divestiture (e.g., Nordic countries in the 1990s) or privatizations occurring after 1995.
  - If slowly changing institutional factors are the causal drivers, then government ownership may be a by-product of state structure and similar results would be expected with additional, more recent data.
- Policy-relevant synthesis:
  - Further empirical work addressing measurement and modeling difficulties might reveal stronger links, but existing empirical ambiguity does not appear to have deterred the global trend toward bank privatization.
  - Findings are consistent with literature indicating institutions matter more than other factors for economic development.14
  - Recent empirical work indicates poor institutional structure is more important than specific financial-sector regulatory framework; weak public sector governance affects financial sector soundness beyond regulatory quality.15
  - Implication: countries with poor institutional structure tend to have state-owned banks and weak public sector governance and are more prone to banking crises; improving institutions usually involves reducing direct government intervention, including reducing government ownership in the banking sector.

### B. Does Privatization of State-Owned Banks Cause Banking Crises?
- Concern: shortcomings in the design or execution of privatization programs are sometimes cited as contributing to future banking crises (examples cited: Mexico, Chile).16
- Empirical juxtaposition:
  - When dates of bank privatizations are compared with dates of banking crises, only a handful of countries show major privatizations within five years prior to crisis onset (Table 1 referenced in source).
  - Some countries experienced “serial” crises over years, indicating difficulty addressing fundamental banking sector problems.
- Proximate causes of crises often identified:
  - Failure to establish preconditions for effective banking supervision.
  - Deficiencies in regulatory framework and enforcement.
  - Lack of capital and inadequate managerial capacity.
- Insights on privatization types and outcomes:
  - Kenya (Commercial Bank of Kenya): initial sale of a small stake while government retained majority control for years—partial privatization ineffective.
  - Korea (Kookmin): privatization had no causal link to the 1997 crisis; weaknesses and need for strengthened prudential supervision became evident after crisis onset.
  - Ukraine: initial privatizations via share distribution failed to bring new capital or expertise.
- Conclusion:
  - Bank privatization is only rarely associated with banking crises.
  - Partial privatizations or privatizations that do not bring new capital or management skills are not effective in addressing weaknesses of state-owned banks.

### C. State-Owned Banks and the Management of a Crisis
- Challenges in crisis diagnosis and strategy when state-owned banks are present:
  - Quantifying problems is more difficult if state banks have not been subject to the same standard of banking supervision as private banks.
  - Although international consensus favors subjecting state-owned banks to the same prudential oversight, in practice regulatory forbearance often occurs for state banks.
    - Reasons: implicit assumption that government backstops depositors; supervisors unable or unwilling to require adherence to regulations.
  - Consequences: asset valuations and reported profitability of state-owned banks may be less reliable than for privately-owned banks.
- Potential benefit of state-owned banks during crises:
  - State-owned banks may be less susceptible to runs because government may be seen as more able to stabilize depositors’ confidence.

*Source: Excerpt from IMF working paper chapter titled "STATE-OWNED BANKS AND FINANCIAL SECTOR STABILITY" (content supplied).*

### Box 2. Privatization Precedes Banking Crises in Chile and Mexico

### _wp0510 - Box 2. Privatization Precedes Banking Crises in Chile and Mexico

### Chile: sequence of events and outcomes
- As part of a broad reform program initiated in 1973, 19 of 20 state-owned banks were sold to private investors in 1975.
- The bulk of these banks were acquired by financial conglomerates, which were required to make only a 20 percent initial down payment toward the purchase price.
- Many conglomerates then used loans from the banks to make down payments on nonfinancial state-owned enterprises being privatized.
- Some changes to the legal framework for banking supervision were implemented in the late 1970s, but were inadequate to deal with the rapidly changing financial sector.
- By 1981 the banking system was in crisis, leading among other things to:
  - intervention in eight banks,
  - central bank liquidity support,
  - in 1982 and 1984, purchase by the central bank of nonperforming bank assets.
- In 1985, the central bank participated directly in recapitalizing banks, five of which were subsequently returned to private ownership in 1986.
- As part of the response to the crisis, the prudential framework was strengthened, and the funding and staffing of the supervisory agency increased.

### Mexico: sequence of events and outcomes
- Government sold controlling stakes in 18 banks over 14 months from June 1991 to July 1992.
- Sale prices were generally high multiples of book value, indicating purchasers expected limited competition and opportunities for large profits.
- Initially spreads widened and large profits were realized, masking lack of operating efficiency.
- Competition increased more rapidly than expected:
  - numerous new domestic banks were chartered beginning in 1993,
  - new regulations in 1994 pursuant to the North American Free Trade Agreement permitted greater foreign competition.
- Banks engaged in significant amounts of related parties’ transactions, and some used derivatives to take risky and leveraged currency positions.
- Banks came under increasing pressure following the peso devaluation in 1994, and in 1995 a special recapitalization program was introduced to deal with a number of problem banks.

### Comparative analysis and causal inference
- Neither in Chile nor in Mexico can the privatization of banks be singled out as the cause of the ensuing crises.
- In both cases, privatizations occurred in the early stages of major liberalization programs.
- Stronger prudential frameworks and better supervision could have mitigated subsequent problems, for instance by:
  - restricting insider transactions,
  - imposing more stringent limits on credit and currency risks.
- In both cases the transformation from a banking system dominated by state-owned institutions to privately-owned institutions took place quickly; it is not clear that extending the privatization program over a longer time would have provided advantages apart from additional time to make progress on other needed reforms.

### Broader empirical observations from the source context
- Of the 65 countries undertaking bank privatizations documented in Appendix I, 39 have also experienced banking crises (Appendix II).
- Of these 39 countries, 23 undertook one or more bank privatizations concurrently with the crisis or within three years of its end.
  - For about one-third of those 23 countries, privatizations were largely the divestiture of banks that had been nationalized as part of the immediate response to the crisis.
  - For the remaining cases, the crisis appears to have provided political impetus for privatization.
- Political economy factors:
  - Politicians may favor privatization when the political cost of maintaining state ownership outweighs benefits.
  - Post-crisis conditions (reduced ability of banks to afford politically motivated credit decisions, need to restructure and rationalize, heightened scrutiny after recapitalization) can reduce the political benefits of state ownership and make privatization more attractive.
  - Conditionality attached to IMF programs or World Bank loans has sometimes influenced privatization timing.

### Policy implications and recommendations (drawn from case discussion)
- Strengthen prudential frameworks and supervision prior to or alongside privatization to limit:
  - insider or related-party transactions,
  - excessive credit risk and currency risk exposures,
  - weaknesses in legal and accounting infrastructure that impede enforcement of contracts or collateral pledges.
- Ensure adequate institutional infrastructure (Basel Core Principles preconditions), including:
  - sustainable macro-economic policies,
  - legal infrastructure for contract law, pledging collateral, and enforcing security agreements,
  - appropriate and widely-used accounting standards.
- Use the bank supervisory authority actively in the privatization process to review and approve changes in ownership.
- Consider introducing limited deposit insurance prior to privatization of state-owned banks to clearly signal the end of an implicit government guarantee and reduce competitive distortions.
- Recognize sequencing constraints: where legal and supervisory frameworks are weak, privatization may proceed concurrently with other reforms, but this increases the importance of supervisory oversight and risk mitigation measures.
- Evaluate trade-offs between rapid divestiture and longer-term government ownership following nationalization:
  - Rapid divestiture can restore a normal banking sector quickly and capture governance and efficiency gains from reputable private acquirers (Sweden 1992–94 cited as an example in the broader discussion).
  - Longer-term ownership may be argued by authorities for potential financial upside but risks political interference and governance problems.

*Source: Box 2. Privatization Precedes Banking Crises in Chile and Mexico (excerpt)._wp0510*

### Box 3. Key Considerations in Bank Privatization

### Box 3. Key Considerations in Bank Privatization

### Institutional infrastructure
- Preconditions for sound banking include macro-economic stability, legal infrastructure, accounting standards and an appropriate safety net (lender-of-last-resort facilities, and, possibly, deposit insurance).
- Sound banking supervision is required to review proposed privatizations from a prudential perspective, and to subsequently oversee the privatized banks.
- Perfect infrastructure and banking supervision will never be in place, so it will generally be preferable to privatize in conjunction with other reforms rather than to wait for ideal circumstances.

### Public policy objectives
- A safe and sound financial system is not the only objective to be met in privatization; there will be inevitable trade-offs.
- Other objectives such as supporting national champions or maintaining employment are likely to have broad political support.
- Prudential issues should not be sacrificed to other policy objectives due to the potentially far-reaching impact of subsequent bank failures.
- Desire for “national champions” and maintaining domestic control frequently influence privatizations; motivations include pride or nationalism and economic arguments such as:
  - “A national economy may be diminished in the long run if it becomes merely a ‘branch plant’ without the benefits of the headquarters functions of international firms.”23
  - “Domestically-owned banks may establish stronger relationships with domestic industry, thus, providing more favorable and consistent trade financing to the nation’s exporters and importers than will foreign banks.”24
  - “Domestically-owned banks are arguably less likely to favor foreign business over domestic customers if faced with capital constraints, and are more susceptible to the exercise of moral suasion by government.”25
- Other policy concerns likely to be raised: maintenance of services in all areas served by state-owned banks prior to privatization, continued servicing of specific sectors, and preserving employment.
- These concerns can conflict with efficiency goals as new private owners typically look to close unprofitable locations, eliminate policy-influenced lending to small business or state-owned enterprises, and improve operating efficiency through staff retrenchments.
- Since privatization is a political process, maintenance of services and employment will influence the privatization process.

### Preparing a bank for privatization (overview)
- Key question: restructure a state-owned bank prior to privatization or sell the government stake “as is”?
- In rare cases where a state-owned bank operates efficiently on a commercial basis, little operational or financial restructuring is needed.
- More typically, state-owned banks require significant restructuring to become fully competitive with privately-owned banks.

### Preparing a bank for privatization (financial restructuring)
- Deeply insolvent state-owned banks are unattractive to private investors; government may need to provide good quality assets to equal liabilities to attract new equity investors.
- Methods of restructuring:
  - “Good bank–bad bank” split, with nonperforming loans left in the bad bank and government providing the good bank with assets (usually bonds) to fill the balance sheet hole.26,27
  - Transfer bad assets to a specialized asset management company (AMC) (used in Ghana, Tanzania, and Uganda, among other countries).
  - Government subscription to new equity issues when volume of bad assets is smaller or bank can work out problem loans itself.
  - Issue subordinated debt to bolster the capital base prior to privatization, available only if the bank is on a reasonably sound financial footing.
- Timing issues:
  - When the state-owned bank is insolvent, delayed recapitalization can increase losses and ultimate cost.
  - Recapitalization often needed to provide earning assets; without them operational restructuring alone may fail to restore profitability.
  - Conversely, recapitalization followed by failed operational restructuring and long privatization delays can lead to additional recapitalization needs.
  - Recommendation: recapitalization be closely linked to the privatization transaction.28
  - Alternative: staged recapitalization contingent on meeting restructuring objectives.29

### Preparing a bank for privatization (operational restructuring vs “as is” sale)
- “As is” sale is preferable if possible because it can be completed quickly and does not entail major public investment in preparing a bank for privatization.
- However, state-owned banks are frequently in such poor condition that financial restructuring is required to attract reputable private investors.
- The “as is” sale price may be higher than the sale price for a restructured bank net of ongoing operating losses and one-off restructuring charges, because restructuring costs may not be fully recovered in subsequent divestiture.
- New owners may be reluctant to take on the burden of staff reductions and branch closures; in politically sensitive contexts new owners may require closures or lay-offs to occur prior to privatization.

### Methods of privatization
- Generic categories: share sales, asset sales, voucher privatizations. Vast majority are some form of share sale.
- “Privatization is a process, not an event.”31 Choice of method influenced by policy objectives and political and fiscal constraints.
- Voucher privatizations:
  - Almost exclusively limited to transition economies of the former Soviet Union.
  - Speed of government divestment and egalitarian distribution were attractions.
  - Process does not raise funds for the state and brought no new equity into the bank, resulting initially in widely-held ownership and limited strategic investor interest; generally unproductive for banks.
- Asset sales:
  - Few cases. Examples include disposition of banks nationalized in Finland in response to the Nordic banking crisis, creation of new banks from Zhilsotsbank branches in Russia, and repackaging of good assets in a good-bank bad-bank split.
  - Centralized AMCs (e.g., Indonesian Bank Restructuring Agency) as variation for disposition of assets of closed banks.
- Share sales:
  - By far the most common type; can be public offerings, tenders, or auctions; phased privatizations often involve an IPO or private placement followed by secondary offerings.
  - Trade-offs:
    - Maximizing government revenues may be achieved by phased privatization, but retaining government majority ownership for an extended period can thwart reform, risk recurring credit or operating losses, and lead to additional recapitalization.32
    - Widely-subscribed IPOs can be politically attractive and foster capital market development, but widely-held ownership can fail to provide strong oversight and may not deliver a strategic investor to strengthen management.
    - IPOs can be disappointing in countries with small and emerging capital markets due to underdeveloped institutional structures and limited investor interest.33
  - Empirical evidence suggests better financial performance when privatization involves a strong financial institution as a significant shareholder.34
  - Ensuring a suitable significant investor can be achieved through sale by tender or reserving a controlling percentage in an IPO for a prequalified investor.
  - Political difficulty arises when suitable strategic investors are likely to be foreign; empirical evidence suggests foreign bank entry can improve domestic market functioning and long-run benefits for banking customers in the form of lower intermediation and service charges.35

### Prudential review
- Supervisory authority should approve ownership changes only if:
  - New owners are fit and proper.
  - Management is competent and experienced.
  - Source of capital is verified.
  - Business plan is viable.
- Common causes of failed privatizations that prudential review should identify: owners and managers lacking banking experience or fitness and probity, investors lacking the promised capital, and unviable business plans.36
- Proceeding with privatization despite prudential concerns, lack of supervisory capacity, or without supervisory involvement has resulted in subsequent intervention in failed privatizations (examples: Croatia, the Czech Republic, Mozambique, and Uganda).

### Obstacles to privatization and interim measures
- Key obstacles: cost, sequencing of other reforms, and achieving political consensus.
- Cost of making weak banks attractive to private investors may far exceed revenues from privatization; immediate fiscal burden may be greater than immediate costs of continued state-ownership.
- Supervisory forbearance can mask true bank condition by not enforcing loan loss provisioning and capital adequacy, creating “wait and hope” incentives that often lead to deterioration.
- Policymakers have half-way measures to avoid repeated recapitalizations or forbearance:
  - India example (alternative to privatization) pursued reform components including:
    - reduction in barriers to entry to foster greater foreign competition
    - ensuring private sector-quality boards of directors and senior management
    - voluntary retrenchment schemes to facilitate needed staff rationalization
    - gradual strengthening of prudential norms
  - Combination intended to improve performance of state-owned banks while retaining majority government ownership and some social commitments.
- China example illustrates sequencing and extended time required for reforms; large state-owned banks historically allocated credit in a planned economy, requiring introduction of commercial banking concepts such as credit risk assessment.37

*Source: Box 3. Key Considerations in Bank Privatization.*

### Box 4. India: Experience With State Bank Reform.

### Box 4. India: Experience With State Bank Reform

### Evolution of the banking sector and market structure
- Public sector banks (PSBs) accounted for about 90 percent of the banking market in 1991 and now have 75 percent of total banking assets.
- There are 27 PSBs; none has been privatized.
- 15 PSBs have tapped the capital markets and have minority shareholdings ranging from 25 percent to 45 percent.
- The policy combined tighter prudential regulations with increased competition through removal of restrictive regulations and permitting new entrants, contributing to improved efficiency in PSBs.
- Asset quality and profitability have converged toward the average for commercial banks in India.

### Recognition of problems and prudential reform
- Prior to 1992–93, interest accrued but not paid could be recognized as income, and banks were widely under provisioned in the absence of specific prudential requirements.
- New prudential and accounting standards introduced in 1992–93 revealed longstanding problems in PSBs.
- New banks entry: 24 new private banks, including 15 with foreign ownership, began operations in India between January 1993 and March 1998.

### Financial distress, government support, and restructuring
- In 1992–93 PSBs, all but one of which had been profitable the previous year, collectively recorded a net loss, and half reported negative net worth.
- Government made capital injections into 19 of the PSBs in 1993–94, with many receiving further support in subsequent years; capital support was contingent on recovery plans.
- A 1999 review identified chronically weak PSBs and rejected merger and closure options; privatization was judged impractical due to restructuring costs and likely inability to attract private investors.
- Renewed restructuring efforts, including staff reductions and branch closures, ultimately resulted in all PSBs meeting the 9 percent capital adequacy requirement in 2003.

### Approach to state-owned bank reform (policy stance and supervisory role)
- India has reformed state-owned banks without privatizing them, retaining some noncommercial mandates such as lending to priority sectors.
- The Reserve Bank of India has been extremely active as banking supervisor in driving restructuring, governance strengthening, and management practice improvements.
- The legal framework for banking supervision and its practical implementation have been greatly expanded; the strengthened prudential regime is intended to prevent other government policy objectives from overwhelming PSBs’ financial viability.

### Recommendations and measures when privatization is not immediately feasible
- Three important “half-way” measures to enhance performance of state-owned banks when privatization cannot be achieved in the short term:
  - (i) A mandate to operate on a commercial basis.
  - (ii) A governance structure to insulate, so far as possible, state-owned banks from overt political influence.
  - (iii) Implementation of the same supervisory regime that is applicable to private banks.
- State-owned banks should be required to operate on a commercial basis, necessitating competent staff and efficient internal systems operating free from political influence.
- Nonmarket lending or provision of other services to meet government policy objectives should be explicitly acknowledged and undertaken transparently, preferably with a government subsidy or guarantee.
- Governance details:
  - A board comprised of independent directors serving for fixed terms can act as a buffer between government and the state-owned bank.
  - Directors should be charged with stewardship of public funds, with fiduciary responsibility taking precedence over partisan affiliation and fixed terms to preclude summary dismissal by the government.
- Applying the same supervisory regime to state-owned and private banks helps minimize market distortions arising from implicit or explicit government guarantees and cost-of-fund advantages.
- Treating government as other bank owners are treated—requiring all prudential norms and capital restoration in the event of losses—provides incentives for commercial operation and helps maintain a level competitive playing field.

### Broader issues and medium-term challenges
- Recapitalizations and creation of asset management companies have not fully addressed fundamental governance and management problems, leading to a continuing flow of new problem assets.
- Weak provisioning rules and rapid loan portfolio growth have helped minimize reported nonperforming loan levels, masking underlying issues.
- Reforming state-owned banks may require removing nonbank social welfare functions (housing, medical, other services) historically provided to employees and retirees if privatization is to be feasible.

### Conclusions and research needs
- The role of state-owned banks and their privatization remains an important policy issue; many countries will continue to feature significant state ownership for years.
- State-owned banks are often associated with shortcomings in institutional preconditions for effective banking (rule of law, strong government infrastructure), which can obscure problems introduced by state banks.
- Policymakers should heed prudential dimensions in privatizations: fit and proper owners, adequate capital, competent management, and viable business plans are essential.
- Governance reforms can mitigate pitfalls of state ownership and help avoid costly cycles of losses and recapitalizations.
- Further research is recommended, including systematic case studies on institutional infrastructure, public policy objectives, preparing banks for privatization, methods of privatization, and prudential review; and further work on banking crises to delineate crises more precisely and identify observable indicators.

*Source: Box 4. India: Experience With State Bank Reform.*

### 1996. Government retained majority stake until

### _wp0510 - 1996. Government retained majority stake until

### Czech Republic privatizations (entries in excerpt)
- Ceska Sporitelna — 2001: June 2001 when government sold 60 percent to Société Générale Czech Republic.
- Investieni a Postovni Banka — 1998: Sold to Nomura Investments, performed poorly and subsequently renationalized.
- Investieni a Postovni Banka — 2000: Sold to CSOB in second privatization attempt.
- CSOB — 2000: (listed as purchaser in 2000 privatization activity).

### Egypt privatizations (entries in excerpt)
- Commercial International Bank — 1993, IPO: Government sold 26.5 percent through IPO November 1993. Retained majority ownership stake.
- Egyptian American Bank — 1996 (listed).
- Egyptian Commercial Bank — 1996 (listed).
- MISR International Bank — 1996 (listed).
- Alexandra Commercial and Maritime Bank — 1997 (listed).
- Cairo Barclays — 1999 (listed).

### Selected country cases and transaction details (excerpted entries)
- Denmark — Girobank — 1993, IPO: Government sold 51 percent to hold 49 percent.
- Fiji — National Bank of Fiji — 1999: Government sold 51 percent to Colonial Limited (New Zealand, ultimate parent in Australia), retaining 51 percent, agreed in 1998, closed February 1999.
- Finland — Savings Bank of Finland — 1993-94, Asset sale: Government sold good assets in four tranches, Savings Bank had been nationalized in dealing with the crisis.
- France — multiple 1987 privatizations (examples):
  - Banque du Bâtiment et Travaux Publics (BTP) — 1987, IPO: Government sold 100 percent by IPO April 1987.
  - Banque Industrielle et Mobilière Privée (BIMP) — 1987, IPO: Government sold 100 percent by IPO April 1987.
  - Compagnie Financière de Paribas — 1987, IPO: Government sold 100 percent by IPO January 1987.
  - Crédit Commercial de France — 1987, IPO: Government sold its 48.99 share by IPO May 1987.
  - Société Générale — 1987, IPO: Government sold 59.1 percent by IPO and 20 percent by private placement, June 1987, to hold 3.9 percent. 17 percent had been privately held prior to IPO.
- France — Credit Local de France — 1991, IPO: Government sold 27.5 percent by IPO December 1991, sold remaining 72.5 percent by secondary offering June 1993.
- France — Banque Nationale de Paris — 1993, IPO: Government sold 73 percent by IPO October 1993, remainder in secondary offering.
- Germany — Deutsche Verkehrskredit bank — 1988, IPO: Government sold 24.9 percent by IPO March 1988, retaining 75.1 percent.
- Germany — Deutsche Suedlunds and Landesrenten-bank — 1989, IPO: Government sold 48 percent by IPO October 1989, retaining 52 percent.
- Germany — Deutsche Pfandbrief-und Hypothekenbank — 1991, IPO: Government sold 46.5 percent by IPO and 40 percent by private placement March 1991, retaining 13.5 percent.
- Ghana — Merchant Bank — 1995 (listed).
- Ghana — Social Security Bank Limited — 1995, IPO: 21 percent sold through IPO March 1995, 40 percent purchased by a strategic investor, 60 percent of shares listed on Ghana Stock Exchange, October 1995.
- Ghana — National Investment Bank — 2000: After three failed attempts to divest since 1995, 60 percent sold to a consortium of foreign banks January 2000.
- Guyana — National Bank of Industry and Commerce — 1997: 51 percent sold by government in October 1997 to the Republic Bank of Trinidad and Tobago.
- Hungary — Budapest Bank — 1995 (listed).
- Hungary — Foreign Trade Bank — 1996 (listed).
- Hungary — Magyar Hitel Bank — 1995-96 (listed).
- Hungary — National Savings and Commercial Bank (OTP) — 1997, IPO: 30 percent sold through IPO October 1997, Further 41 percent divested October 1997, and 14.1 percent by subsequent share offering November 1999.
- Hungary — Kereskedelmi and Hitel Bank — 1997: Minority share sold in 1997.
- Indonesia — Bank Central Asia — 2001, IPO, SEO, Private Placement: Government sold 22.5 percent by IPO, 10 percent by secondary offering July 2001, and 51 percent by private placement in March 2002 to hold 9.3 percent.
- Indonesia — Bank Niaga — 2002, Tender: 51 percent to Commerce Bank Malaysia in 2002, additional 20 percent sold in secondary offering Sept 2003.
- Indonesia — Bank Danamon — 2003, Tender: 51 percent by tender to international consortium including Temasek Holdings (Singapore) and Deutsche Bank.
- Israel — Bank Hapoalim — 1993, IPO: Government sold 20 percent by IPO June 1993, 6.9 percent in secondary offering November 1993, and 34.6 percent by private placement October 1997.
- Italy — Banca Commerciale Italiana — 1981, IPO: Private ownership increased from 11.1 percent to 14.9 percent. Government purchased 85 percent of 1984 secondary offering, so was not diluted, some dilution in March 1986 and March 1987 secondary offerings.
- Italy — Mediobanca — 1988, IPO: Three government owned banks with 56.9 percent share sold 13.3 percent by private placement October 1989, and 18.6 percent by IPO October 1989, to hold 25 percent.
- Italy — Credito Italiano — 1991, SEO: Government divested 6.8 percent to hold 58 percent November 1991, and balance of holdings by secondary offer December 1993.
- Italy — Banca Commerciale Italiana — 1994, SEO: Government divested balance of holdings (54.8 percent) in March 1994 secondary offering.
- Italy — Istituto Mobiliare Italiano — 1994, IPO: Government sold 32 percent by IPO January 1994 to hold 31 percent.
- Jamaica — National Commercial Bank — 1986, IPO: 51 percent sold through IPO December 1986, additional shares sold in market, government sold final 39 percent holding by private placement, December 1999.
- Kazakhstan — Industry and Construction Bank — 1992: Privatized as Kredsoz Bank.
- Kazakhstan — Agroprom Bank — 1993: Completely privatized by 1996.
- Kenya — Kenya Commercial Bank Ltd. — 1988, IPO: Government sold 20 percent by IPO July 1988, 10 percent by secondary offering October 1990, 10.59 percent by secondary offering September 1996, and currently holds 35 percent.
- Korea — Citizens National Bank (Kookmin) — 1994, IPO: 10 percent sold through IPO August 1994, April 1999, Goldman Sachs acquired 17 percent, subsequent sale increased foreign holding to 71.1 percent, leaving government with 9.6 percent.
- Korea — Korea First Bank — 1999, Tender: Korea First Bank was nationalized in 1998 in response to the banking crisis, government sold 51 percent to Newbridge Capital in December 1999.
- Korea — Cheju Bank — 2002, Tender: Government sold 51 percent to Shinhan Financial Holding Company in April 2002.
- Korea — Seoul Bank — 2002, Tender: Sold to Hana Bank in September 2002, purchase price paid in shares giving government 31 percent share in Hana Bank. Government planning to divest its shareholding in Hana Bank.
- Latvia — Unibank — 1995, IPO: Government sold 66 percent through IPO issued for privatization vouchers. Minimal government ownership after 1997 secondary offering of Global Depository Receipts.
- Latvia — Savings Bank — 1997: Control transferred to private sector, government retaining 30 percent share, reduced to less than 1 percent by 2003.
- Lebanon — Banque Nationale du Développement de l'Industrie et du Tourisme — 1994: Bank restructured and opened to majority private sector participation.
- Lebanon — Crédit Libanais — 1997: Acquired by the central bank due to financial distress in 1980s, sold to private investors in 1997.
- Lesotho — Lesotho Bank — 1999, Tender (listed).
- Lithuania — Development Bank — 2000, Tender (listed).
- Lithuania — Savings Bank — 2001, Tender: Government shares sold to Hansabank September 2001.
- Lithuania — Agricultural Bank — 2002, Tender: Government sold 76 percent to Nord LB (Germany).
- Macedonia, FYR — Stopanska Bank — 2000: Majority share sold to Greek National Bank, itself also a state-owned bank.
- Madagascar — BNI-Crédit Lyonnais Madagascar — 1991 (listed).
- Madagascar — National Bank of Commerce (BFV) — 1998: After restructuring and recapitalization, 70 percent sold to Société Générale (France).
- Madagascar — Bank for Rural Development (BTM) — 1999: Newly-licensed bank controlled by foreign investors purchased good assets of the BTM for cash and 15 percent of equity in the new bank.
- Malta — Mid-Med Bank — 1999, Tender: Sale of 67 percent share.
- Mauritius — State Bank of Mauritius, IPO, SEO: Bank founded in 1970, government divested over time through IPO and secondary offerings to hold 37 percent.
- Mexico — Banamex — 1991, Tender: Government sold 70.7 percent, August 1991.
- Mexico — Bancomer — 1991, Tender: Government sold 56 percent, October 1991.
- Mexico — multiple 1991–1992 tender sales with exact percentages preserved as listed (examples include Bancreser 100 percent, Banorie 66 percent, Banpais 100 percent, BCII 100 percent, Confia 78.7 percent, Cremi 66.7 percent, Mercantil 77.2 percent, Atlantico 68.5 percent, Bancen 66.3 percent, Banoro 66 percent, Banorte 66 percent, Comermex 66.5 percent, Internacional 51 percent, Promex 66 percent, Serfin 51 percent, Somex 81.6 percent).
- Mongolia — Trade and Development Bank — 2002, Tender: Government's 76 percent share sold to foreign consortium in May 2002.
- Mongolia — Agricultural Bank — 2003, Tender: Government sold 100 percent to H.S. Securities (Japan).
- Morocco — Société Nationale d'Investissement — 1994, IPO (listed).
- Morocco — Banque Marocaine du Commerce Extérieur (BMCE) — 1995, IPO: State and state-owned institutions had acquired 50.1 percent. Sold 35 percent through IPO January 1995, and remaining 15 percent by secondary offering April 1996.
- Morocco — Crédit Eqdom — 1995, IPO: Government sold 18 percent through IPO June 1995, retained 82 percent.
- Mozambique — Banco Comercial de Moçambique SARL — 1996, Tender: Government sold 51 percent to a local consortium.
- Mozambique — Banco Popular de Desenvolvimento SA — 1997, Tender: Government sold 60 percent to a Malaysian-led consortium; bank (renamed Banco Austral) was intervened in 2000.
- Mozambique — Banco Austral — 2002, Tender: After intervention by central bank, government sold 80 percent to South African ABSA.
- Netherlands — NMB Postbank Groep (ING Bank) — 1989, IPO: Original 86 percent government share had been reduced to 49 percent by private share sales. Government sold 30 percent by IPO December 1989 to hold 19 percent, subsequently further reduced.
- Nigeria — multiple 1992–1993 tender listings (FSB International Bank, Afribank, Savannah Bank of Nigeria, Union Bank of Nigeria, United Bank for Africa, First Bank of Nigeria).
- Norway — Christiania Bank — 1993, IPO: Government Bank Investment Fund acquired 100 percent of bank due to the banking crisis, sold 26 percent by IPO and 5.1 percent by private placement December 1993 to hold 68.9 percent. Christiania Bank sold to Nordea Group in 2000.
- Norway — Den Norske Bank — 1994, IPO: Government Bank Investment Fund acquired 87.5 percent of bank due to the banking crisis, sold 16.5 percent by IPO May 1994, and 19.8 percent by secondary offering June 1996, to hold 52.15 percent.
- Norway — Fokus Bank — 1995, IPO: Government Insurance Fund became sole owner of bank due to banking crisis, sold 95.9 percent by IPO October 1995 to hold 4.1 percent.
- Pakistan — Allied Bank — 1991, Tender: Government sold 51 percent through management buyout in February 1991, retaining 49 percent ownership. Subsequent to restructuring in August 2004, government holding diluted through new share issue to 12 percent.
- Pakistan — Muslim Commercial Bank — 1991, Tender: Government sold 26 percent in April 1991 and a further 25 percent later in 2001, 25 percent by IPO in 1992, and 6.8 percent and 4.4 percent in secondary offerings in 2001, and 12.8 by secondary offering in October 2002.
- Pakistan — Banker’s Equity (DFI) — 1996, Tender: Government sold 51 percent in June 1996. Bank subsequently failed and was intervened by the State Bank of Pakistan in 1999, and placed in receivership in April 2001.
- Pakistan — Habib Credit and Exchange Bank (renamed Bank Alfalah Ltd.) — 1997, Tender: 70 percent sold to Sheikh Nahayan bin Mubarak Al Hahyan (UEA) in July 1997, remaining 30 percent by secondary offering December 2002.
- Pakistan — United Bank Limited — 2002, Tender: 51 percent sold to consortium of Abu Dhabi and Pakistani expatriate investors in October 2002.
- Pakistan — Habib Bank Limited — 2004, Tender: Government sold 51 percent in February 2004.
- Peru — Banco Popular — 1993, Tender: Government sold 100 percent.
- Peru — Interbank — 1994, Tender: Government sold 100 percent.
- Peru — Banco Continental — 1995, Tender: Government sold to BBVA (Spain) and a Peruvian partner.
- Philippines — Philippine National Bank — 1989, SEO: Government sold 10.8 percent by secondary offering May 1989, 10 percent by secondary offering December 1995, 35 percent in 1999 and remaining government holding in July 2000.
- Philippines — International Corporate Bank — 1993, Tender: Government sold 94 percent.
- Poland — Bank Rozwoju Eksportu — 1992, IPO: Government sold 47.5 percent by IPO, July 1992 to hold 52.5 percent.
- Poland — Bank Slaski — 1993, IPO: Government sold 40.9 percent by IPO, October 1993, 25.9 by private placement February 1994 to ING (Netherlands), to hold 33.2 percent. Later merged with Warsaw branch of ING to form ING Bank Slaski, 88 percent owned by ING.
- Poland — Wielkopoiski Bank Kredytowy Spolka Akeyjna — 1993, IPO: Government sold 55.72 percent by IPO, April 1993, 25.6 percent by secondary offering June 1994, 17.2 percent by secondary offering January 1996 to hold 5.1 percent.
- Poland — Bank Gdanski — 1995, IPO: Government sold 62.7 percent by IPO, December 1995 to hold 37.3 BIG, a domestic bank, subsequently acquired a controlling interest and merged the bank to form BIG Bank Gdanski.
- Poland — Bank Przemysolowo — 1995, IPO: Government sold 50.1 percent by IPO, January 1995 to hold 49.9. 37 percent sold by tender to Bayerische Hypo-und Verinsbank in 1988, which acquired a controlling interest in 1999.
- Poland — Bank Handlowy — 1997, IPO: Government sold 95 percent by IPO, June 30 1997 to hold 5 percent. Citibank acquired in 2000 88 percent through the purchase of shares from original core investors (Zurich Insurance, Sparebanken Sverige and JP Morgan) as well as widely held shares.
- Poland — Bank Kedytowty — 1997, IPO: Government sold 67 percent to hold 33 percent. Bank Austria acquired control in 2000, merging the bank with Bank Austria Creditanstalt Poland.
- Poland — Bank Pekao — 1999, Tender-IPO: Government sold 52 percent to foreign bank led consortium, 14 percent to employees. Secondary offerings in 2000 divested government holding to less than 5 percent, with UniCredito Italiano holding a controlling stake (53 percent).
- Poland — Bank Zachodni — 1999, Tender: Government negotiated sale of 80 percent to Allied International Bank (Ireland).
- Portugal — Banco Totta e Acores — 1989, IPO: Government sold 49 percent by IPO, July 1989, 31 percent by secondary offering July 1990, to hold 20 percent.
- Portugal — Banco Português do Atlântico (BPA) — 1990, IPO: Government sold 33 percent by IPO, October 1990, 25.8 percent by secondary offering April 1992, 17.5 percent by secondary offering July 1993, and 7.5 percent by secondary offering June 1994 to hold 16.2 percent.
- Portugal — Banco Espírito Santo e Comercial de Lisboa (Besci) — 1991, IPO: Government sold 40 percent by IPO, July 1991, 60 percent by secondary offering February 1992.
- Portugal — Banco Internacional do Funchal (Banif) — 1992, IPO: Government sold 68 percent by IPO, March 1992, 32 percent by secondary offering November 1992.
- Portugal — Crédito Predial Português — 1992, IPO: Government sold 100 percent by IPO, December 1992.
- Portugal — Banco Pinto & Sotto Mayor — 1994, IPO: Government sold 80 percent by IPO, November 1994, 20 percent by secondary offering April 1995.
- Portugal — Banco de Fomento e Exterior — 1995, IPO: Government sold 19.5 percent by IPO, January 1995 to hold 80.5 percent.
- Romania — Banca Romana Pentru Dezvoltare — 1998, Tender: Government sold 41 percent share.
- Romania — Banc Post — 1999, Tender: Government sold 42 percent share.
- Romania — Banca Agricola — 2001, Tender: Government sold 98 percent to a consortium including Raiffeisen Zentralbank (Austria).
- Romania — Romania Commercial Bank — 2004: Agreement to sell 25 percent to EBRD and IFC in 2003, interim step to full privatization.
- Senegal — Banque Senegalo-Tunisienne — 1999 (listed).
- Slovakia — Slovenska Sporitelna — 2000, Tender: Government sold 87 percent to Erste Bank (Austria).
- Slovakia — Vseobecna Uverova Bank — 2001, Tender: Government sold 94.5 percent to Banca Intesa (Italy).
- Spain — Argentaria — 1993, IPO: Government sold 24.9 percent by IPO March 1993, 24.2 percent by secondary offering November 1993.

*Source: IMF Working Paper appendix listing bank privatizations (excerpt).*

### 24.8 percent by secondary offering

### 24.8 percent by secondary offering

### Selected bank privatization entries and details
- Sri Lanka — National Development Bank — 1997 — IP O  
  - Government sold 97 percent by IPO.
- Sweden — Stadshypotek AB — 1994 — IPO  
  - Government sold 65.5 percent by IPO, October 1994, divesting the balance by 1998
- Sweden — Nordbanken — 1995 — IPO  
  - Government sold 34.5 percent by IPO, October 1995 and by 2004 held 18.5 percent in the Nordea Group (former Norbanken)
- Tanzania — CRBD (1996) Limited — 1996
- Tanzania — National Bank of Commerce (1997) — 2000
- Turkey — Bank Express — 2002 — Tender  
  - Bank taken over by SDIF in 1998 (deposit insurance agency) in crisis, sold to Teken Holding, June 30, 2002.
- Turkey — Demirbank — 2001 — Tender  
  - Bank taken over by SDIF in 2000 (deposit insurance agency) in crisis, sold to HSBC, September 20, 2001.
- Turkey — Sumerbank — 2001 — Tender  
  - Five banks taken over by SDIF 1999–2001, merged into Sumerbank, which was sold to OYAK Group August 9, 2001
- Turkey — Sitebank — 2001 — Tender  
  - Share transfer agreement with Novabank December 20, 2001
- Turkey — Tarisbank — 2002 — Tender  
  - Acquired by Denizbank October 21, 2002, merged with Denizbank December 27, 2002
- Ukraine — Bank Ukraina — 1993–94  
  - Shares distributed, mainly to employees, government continued to influence management
- Ukraine — Prominvetbank — 1993–94  
  - Shares distributed, mainly to employees, government continued to influence management
- Ukraine — Ukrsotsbank — 1993–94  
  - Shares distributed, mainly to employees, government continued to influence management
- Uganda — Uganda Commercial Bank — 1997 — Tender  
  - 49 percent sold to Westmont Land Asia
- Uganda — Cooperative Bank Limited — 1999
- Uganda — Uganda Commercial Bank — 2002 — Tender  
  - Majority sold to Stanbic (South Africa), after intervention by central bank following the failure of the first privatization attempt
- Venezuela — Banco de Venezuela — 1996  
  - Nationalized during 1994–95 crisis, sold to Santander (Spain)
- Venezuela — Banco Consolidado — 1996  
  - Nationalized during 1994–95 crisis, sold to a Chilean investment group
- Venezuela — Banco Tequendama — 1996  
  - Nationalized during 1994–95 crisis, sold to Peruvian investors
- Venezuela — Banco Popular — 1996  
  - Nationalized during 1994–95 crisis, merged with Banco Andido and sold to Banco Provincial
- Venezuela — Banco Andino — 1996  
  - Nationalized during 1994–95 crisis merged with Banco Popular and sold to Banco Provincial.
- Venezuela — Banco República — 1996  
  - Nationalized during 1994–95 crisis, sold to Colombian investors
- Zimbabwe — Commercial Bank of Zimbabwe — 1997 — IPO  
  - Government sold 80 percent by IPO September 1997

### Key statistics and dates (verbatim)
- "24.8 percent by secondary offering"
- "March 1996, remaining 26.7 percent by secondary offering 1998"
- "Government sold 97 percent by IPO."
- "Government sold 65.5 percent by IPO, October 1994, divesting the balance by 1998"
- "Government sold 34.5 percent by IPO, October 1995 and by 2004 held 18.5 percent in the Nordea Group (former Norbanken)"
- "Bank taken over by SDIF in 1998 (deposit insurance agency) in crisis, sold to Teken Holding, June 30, 2002."
- "Bank taken over by SDIF in 2000 (deposit insurance agency) in crisis, sold to HSBC, September 20, 2001."
- "Five banks taken over by SDIF 1999–2001, merged into Sumerbank, which was sold to OYAK Group August 9, 2001"
- "Share transfer agreement with Novabank December 20, 2001"
- "Acquired by Denizbank October 21, 2002, merged with Denizbank December 27, 2002"
- "Shares distributed, mainly to employees, government continued to influence management"
- "49 percent sold to Westmont Land Asia"
- "Majority sold to Stanbic (South Africa), after intervention by central bank following the failure of the first privatization attempt"
- "Nationalized during 1994–95 crisis, sold to Santander (Spain)"
- "Nationalized during 1994–95 crisis, sold to a Chilean investment group"
- "Nationalized during 1994–95 crisis, sold to Peruvian investors"
- "Nationalized during 1994–95 crisis, merged with Banco Andido and sold to Banco Provincial"
- "Nationalized during 1994–95 crisis merged with Banco Popular and sold to Banco Provincial."
- "Nationalized during 1994–95 crisis, sold to Colombian investors"
- "Government sold 80 percent by IPO September 1997"

### Notes on sources and data caveats (verbatim)
- "Sources: Information on privatizations has been complied from a review of the bank privatization literature, publicly available IMF Staff Country Reports and Financial Sector Stability Assessments, press reports, and various occasional papers. Details on privatizations are often not readily available, and various sources often provide conflicting details. The author would be especially grateful for information to complete or correct the cases noted, and for details of additional bank privatizations."

*Source: _wp0510 - 24.8 percent by secondary offering (PDF chapter/section)*

### Appendix II below presents bank privatization data from Appendix I juxtaposed against the

### Appendix II — Bank Privatization and Banking Crises (Mid-1970s – 2003)

### Data and methodology
- Total sample: 65 countries in Appendix I; 39 of these countries have experienced banking crises with specific dates as identified in the banking crisis literature.
- Sources combined to determine crisis dates:
  - Bell and Pain’s chronology of banking crisis (drawn from seven studies, excluding the Hardy and Pazarbasioglu cases of “distress”).
  - Caprio and Klingebiel (2003) data set (excluding borderline and nonsystemic crises).
  - De Nicolò and others (2003) for the determination of government intervention.
- Exclusions and reconciliation rules:
  - Crises lacking specific dates were excluded.
  - Where different sources provide different dates, a consensus date was adopted which generally encompassed the longest indicated period of crisis.
- Crisis definitions used:
  - “Crisis 1”: any crisis identified by specific dates in at least one of the studies.
  - “Crisis 2”: crisis must be identified by at least two of the studies (a more stringent requirement).
- Notes on De Nicolò and others (2003):
  - Their approach provides more certainty regarding the existence of a crisis because extraordinary government intervention is more readily observable than other indicators of systemic crisis.
  - Because the available De Nicolò and others data only identifies intervention within a period of years, in its current form it can only be used to confirm the existence of a crisis when specific dates are provided in other sources.

### Key findings and patterns
- Sample counts and effect of stringency:
  - Requiring identification by at least two studies (“Crisis 2”) reduces the number of identified crises by 10 relative to “Crisis 1”.
- Robust findings that persist under the stricter crisis definition:
  - Privatization preceding the onset of a crisis by five years or less is rare.
  - Privatizations are common concurrently with crises or within three years of the end of a crisis.
  - Divestiture of banks nationalized as part of crisis management accounts for only a small portion of post-crisis privatization.

### Bank-level observations (selected examples from the tabulation)
- Argentina:
  - Chaco — Year of Privatization: 1994; Crisis Dates 1: 1980–82; 1989–90; 1994–95; 2001–present; Crisis Dates 2: 1980–82; 1989–90; 1994–95; 2001–present
  - Entre Rios — Year of Privatization: 1994 (no crisis dates listed)
  - Formosa — Year of Privatization: 1995 (no crisis dates listed)
  - Multiple other provincial banks privatized between 1994 and 1998 (e.g., Misiones 1995; Rio Negro 1996; Salta 1996; Tucuman 1996; San Luis 1996; Santiago del Estero 1996; San Juan 1996; Mendoza 1996; Municipal de Tucuman 1997; Jujuy 1998; Santa Fe 1998; Santa Cruz 1998)
- Brazil:
  - Baneb — Year of Privatization: 1999; Crisis Dates 1: 1985, 1994–99; Crisis Dates 2: 1985, 1994–99
  - Credireal — Year of Privatization: 1997
  - Banestado — Year of Privatization: 2000
  - Bandepe — Year of Privatization: 1998
  - Banerj — Year of Privatization: 1997
  - Minas Gerais — Year of Privatization: 1998
- Cameroon:
  - Standard Chartered Bank — Year of Privatization: 1994; Crisis Dates 1: 1987–93; 1995–98; Crisis Dates 2: 1987–93; 1995–98
- Chile:
  - 19 banks — Year of Privatization: 1975; Crisis Dates 1: 1981–87; Crisis Dates 2: 1981–87
- Congo, Democratic Republic of:
  - Union Zairoise de Banques — Year of Privatization: 1995; Crisis Dates 1: 1991–92; 1994-present; Crisis Dates 2: 1991–92; 1994-present
- Côte d'Ivoire:
  - BIAO — Year of Privatization: 2000; Crisis Dates 1: 1988–91
  - BICICI — Year of Privatization: 2002
- Croatia:
  - Dubrovacka Bank — Year of Privatization: 1994; Crisis Dates 1: 1996
  - Dubrovacka Bank — Year of Privatization: 2002
  - Privedna Banka — Year of Privatization: 2000
  - Rijecka Banka — Year of Privatization: 2000
  - Splitska Banka — Year of Privatization: 2000
  - Zagrabacka Banka — Year of Privatization: 1996
- Denmark:
  - Girobank — Year of Privatization: 1993; Crisis Dates 1: 1987
- Finland:
  - Savings Bank of Finland — Year of Privatization: 1994; Crisis Dates 1: 1991–94; Crisis Dates 2: 1991–94
- Ghana:
  - Merchant Bank — Year of Privatization: 1995; Crisis Dates 1: 1982–89
  - Social Security Bank Limited — Year of Privatization: 1995
  - National Investment Bank — Year of Privatization: 2000
  - Ghana Commercial Bank — Year of Privatization: 1996
- Guyana:
  - National Bank of Industry and Commerce — Year of Privatization: 1997; Crisis Dates 1: 1993–95; Crisis Dates 2: 1993–95
- Hungary (multiple banks privatized, mid-1990s): Budapest Bank 1995; Foreign Trade Bank 1996; Magyar Hitel Bank 1995-96; National Savings and Commercial Bank (OTP) 1997; Kereskedelmi and Hitel Bank 1997; Postabank; Realbank
- Indonesia:
  - Bank Central Asia — Year of Privatization: 2001; Crisis Dates 1: 1992–94; 1997–03; Crisis Dates 2: 1992–94; 1997-03
  - Bank Niaga — Year of Privatization: 2002
  - Bank Danamon — Year of Privatization: 2003
- Israel:
  - Bank Hapoalim — Year of Privatization: 1993; Crisis Dates 1: 1983–84; Crisis Dates 2: 1983–84
- Italy:
  - Banca Commerciale Italiana — Year of Privatization: 1981; Crisis Dates 1: 1990–94; Crisis Dates 2: 1990–94
  - Mediobanca — Year of Privatization: 1988
  - Credito Italiano — Year of Privatization: 1991
  - Banca Commerciale Italiana — Year of Privatization: 1994
  - Istituto Mobilaire Italian spa — Year of Privatization: 1994
- Jamaica:
  - National Commercial Bank — Year of Privatization: 1986; Crisis Dates 1: 1994–00; Crisis Dates 2: 1994–00
- Kenya:
  - Kenya Commercial Bank Ltd — Year of Privatization: 1988; Crisis Dates 1: 1985–89; 1993–95; Crisis Dates 2: 1985–89; 1993–95
- Korea:
  - Citizens National Bank (Kookmin) — Year of Privatization: 1994; Crisis Dates 1: 1997–02; Crisis Dates 2: 1997–02
  - Korea First Bank — Year of Privatization: 1999
  - Cheju Bank — Year of Privatization: 2002
  - Seoul Bank — Year of Privatization: 2002
- Latvia:
  - Unibank — Year of Privatization: 1995; Crisis Dates 1: 1995–96; Crisis Dates 2: 1995–96
  - Savings Bank — Year of Privatization: 1997
- Lebanon:
  - Banque Nationale du Développement de l'Industrie et du Tourisme — Year of Privatization: 1994; Crisis Dates 1: 1988–90; Crisis Dates 2: 1988–90
  - Crédit Libanais — Year of Privatization: 1997
- Lithuania:
  - Development Bank — Year of Privatization: 2000; Crisis Dates 1: 1995–96; Crisis Dates 2: 1995–96
  - Savings Bank — Year of Privatization: 2001
  - Agricultural Bank — Year of Privatization: 2002
- Macedonia (former Yugoslav Republic of):
  - Stopanska Bank — Year of Privatization: 2000; Crisis Dates 1: 1993–94; Crisis Dates 2: 1993–94
- Madagascar:
  - BNI-Credit Lyonnais Madagascar — Year of Privatization: 1991; Crisis Dates 1: 1998
  - National Bank of Commerce (BFV) — Year of Privatization: 1998
  - Bank for Rural Development (BTM) — Year of Privatization: 1999
- Mexico (multiple banks privatized 1991–1992):
  - Banamex — Year of Privatization: 1991; Crisis Dates 1: 1982; 1994–97; Crisis Dates 2: 1982; 1994–97
  - Bancomer — Year of Privatization: 1991
  - Bancreser — Year of Privatization: 1991
  - Banorie — Year of Privatization: 1991
  - Banpais — Year of Privatization: 1991
  - BCII — Year of Privatization: 1991
  - Confia — Year of Privatization: 1991
  - Cremi — Year of Privatization: 1991
  - Mercantil — Year of Privatization: 1991
  - Atlantico — Year of Privatization: 1992
  - Bancen — Year of Privatization: 1992
  - Banoro — Year of Privatization: 1992
  - Banorte — Year of Privatization: 1992
  - Comermex — Year of Privatization: 1992
  - Internacional — Year of Privatization: 1992
  - Promex — Year of Privatization: 1992
  - Serfin — Year of Privatization: 1992
  - Somex — Year of Privatization: 1992
- Mozambique:
  - Banco Comercial de Moçambique SARL — Year of Privatization: 1996; Crisis Dates 1: 1987–95
  - Banco Popular de Desenvolvimento SA — Year of Privatization: 1997
  - Banco Austral — Year of Privatization: 2002
- Nigeria:
  - FSB International Bank — Year of Privatization: 1992; Crisis Dates 1: 1991–94; Crisis Dates 2: 1991–94
  - Afribank Nigeria — Year of Privatization: 1993
  - Savannah Bank of Nigeria — Year of Privatization: 1993
  - Union Bank of Nigeria — Year of Privatization: 1993
  - United Bank for Africa — Year of Privatization: 1993
  - First Bank of Nigeria — Year of Privatization: 1993
- Norway:
  - Christiania Bank — Year of Privatization: 1993; Crisis Dates 1: 1987–93; Crisis Dates 2: 1987–93
  - Den norske Bank — Year of Privatization: 1994
  - Fokus Bank — Year of Privatization: 1995
- Peru:
  - Banco Popular — Year of Privatization: 1993; Crisis Dates 1: 1983–90; Crisis Dates 2: 1983–90
  - Interbank — Year of Privatization: 1994
  - Banco Continental — Year of Privatization: 1995
- Philippines:
  - Philippine National Bank — Year of Privatization: 1989; Crisis Dates 1: 1981–87; Crisis Dates 2: 1981–87
- Portugal (multiple banks privatized 1989–1995): Banco Totta e Acores 1989 (Crisis Dates 1: 1986); Banco Português do Atlântico (BPA) 1990; Banco Espírito Santo e Comercial de Lisboa (Besci) 1991; Banco Internacional do Funchal (Banif) 1992; Crédito Predial Português 1992; Banco Pinto & Sotto Mayor 1994; Banco de Fomento e Exterior 1995
- Romania:
  - Romanian Bank of Development — Year of Privatization: 1999; Crisis Dates 1: 1990–02
  - Banc Post — Year of Privatization: 1999
  - Banca Agricola — Year of Privatization: 2001
  - Romania Commercial Bank — Year of Privatization: 2004
- Senegal:
  - Banque Senegalo-Tunisienne — Year of Privatization: 1999; Crisis Dates 1: 1983–91; Crisis Dates 2: 1983–91
- Spain:
  - Argentaria — Year of Privatization: 1993; Crisis Dates 1: 1977–85; Crisis Dates 2: 1977–85
- Sweden:
  - Stadshypotek AB — Year of Privatization: 1994; Crisis Dates 1: 1990–93; Crisis Dates 2: 1990–93
  - Nordbanken — Year of Privatization: 1995
- Tanzania:
  - CRBD (1996) Limited — Year of Privatization: 1996; Crisis Dates 1: 1988–96; Crisis Dates 2: 1988–96
  - National Bank of Commerce (1997) — Year of Privatization: 2000
- Turkey:
  - Bank Express — Year of Privatization: 2002; Crisis Dates 1: 1982, 1991, 1994, 2000-02; Crisis Dates 2: 1982, 1991, 1994, 2000-02
  - Demirbank — Year of Privatization: 2001
  - Sumerbank — Year of Privatization: 2001
  - Sitebank — Year of Privatization: 2001
  - Tarisbank — Year of Privatization: 2002
- Ukraine (multiple banks, early 1990s privatizations and crises noted):
  - Bank Ukraina — Year of Privatization: 1993–94; Crisis Dates 1: 1997–98
  - Prominvetbank — Year of Privatization: 1993–94
  - Ukrsotsbank — Year of Privatization: 1993–94
- Uganda:
  - Uganda Commercial Bank — Year of Privatization: 1997; Crisis Dates 1: 1990–02; Crisis Dates 2: 1990–02
  - Cooperative Bank Limited — Year of Privatization: 1999
  - Uganda Commercial Bank — Year of Privatization: 2002
- Venezuela (multiple banks privatized 1996):
  - Banco de Venezuela — Year of Privatization: 1996; Crisis Dates 1: 1993–96; Crisis Dates 2: 1993–96
  - Banco Consolidado — Year of Privatization: 1996
  - Banco Tequendama — Year of Privatization: 1996
  - Banco Popular — Year of Privatization: 1996
  - Banco Andino — Year of Privatization: 1996
  - Banco República — Year of Privatization: 1996

### Summary implications for privatization timing and crisis linkage
- The tabulated country- and bank-level data support three central patterns:
  - Pre-crisis privatizations within five years of crisis onset are uncommon.
  - Privatizations frequently occur at the same time as crises or within three years after crisis end.
  - Post-crisis privatization is rarely dominated by divestiture of banks that were nationalized as part of crisis management.

*Source: Appendix II — Bank Privatization and Banking Crises (Mid-1970s – 2003), extracted from the provided content.*

### REFERENCES

### REFERENCES

### Works on Bank Privatization
- Abarbanell, Jeffery S., and John P. Bonin, 1997, “Bank Privatization in Poland: The Case of Bank Śląski,” Journal of Comparative Economics, Vol. 25, pp. 31–61.  
- Abarbanell, Jeffery S., and Anna Meyendorff, 1997, “Bank Privatization in Post-Communist Russia: The Case of Zhilsotsbank,” Journal of Comparative Economics, Vol. 25, pp. 62–96.  
- Aiginger, Karl, and Peter Mooslechner, 1997, “Framework Conditions, Methods and Processes of Privatization: Lessons from the Trade Sale of an Austrian Bank,” Paper presented at the Eleventh Plenary Session of the OECD Advisory Group on Privatization: Banks and Privatization, Rome, September 18–19.  
- Baer, Werner, and Nader Nazmi, 2000, “Privatization and Restructuring of Banks in Brazil,” Quarterly Review of Economics and Finance, Vol. 40, pp. 3–24.  
- Barnes, Guillermo, 1994, “Lessons From Bank Privatization in Mexico,” in Building Sound Finance in Emerging Market Economies, ed. by Gerard Caprio, David Folkerts-Landau and Timothy D. Lane (Washington: International Monetary Fund).  
- Bonin, John, Iftekhar Hasan, and Paul Wachtel, 2003, “Privatization Matters: Bank Performance in Transition Economies” Paper presented at the World Bank Conference on Bank Privatization, Washington, November 20–21.  
- Bonin, John, and Paul Wachtel, 1999, “Lessons from Bank Privatization in Central Europe,” paper presented at the World Bank/Federal Reserve Bank of Dallas Conference on Banking Privatization, Washington, March 15–16.  
- Meyendorff, Anna, and Edward A. Snyder, 1997, “Transactional Structures of Bank Privatizations in Central Europe and Russia,” Journal of Comparative Economics, Vol. 25, pp. 5–30.  
- Makler, Harry M., 2000 “Bank Transformation and Privatization in Brazil: Financial Federalism and Some Lessons about Bank Privatization,” Quarterly Review of Economics and Finance, Vol. 40, pp. 45–69.  
- Megginson, William L, 2003, “The Economics of Bank Privatization,” Paper prepared for the World Bank Conference on Bank Privatization in Low and Middle Income Countries, Washington, November 20–21, 2003.  
- Megginson, William L, and Jeffry M. Netter, 2001, “From State to Market: A Survey of Empirical Studies on Privatization,” Journal of Economic Literature, June 2001.  
- Verbrugge, James A., William L. Megginson, and Wanda L. Owens, 1999, “State Ownership and the Financial Performance of Privatized Banks: An Empirical Analysis,” paper presented at the World Bank/Federal Reserve Bank of Dallas Conference on Banking Privatization, Washington, March 15–16.  
- Zines, Clifford, Yair Eilat, and Jeffrey Sachs, 2001, “The Gains from Privatization in Transition Economies: Is ‘Change of Ownership’ Enough?” IMF Staff Papers, Vol. 48, pp. 146–170.  

### Banking Crises, Restructuring, and Resolution
- Basel Committee on Banking Supervision, 2002, Supervisory Guidance on Dealing With Weak Banks: Report of the Task Force on Dealing with Weak Banks (Basel: Bank for International Settlements).  
- Bell, James, and Darren Pain, 2000, “Leading Indicator Models of Banking Crises—A Critical Review,” Financial Stability Review, Bank of England, December 2000, pp. 113–129.  
- Dziobek, Claudia, and Ceyla Pazarbasioglu, 1997a, “Lessons from Systemic Bank Restructuring: A Survey of 24 Countries,” IMF Working Paper 97/161 (Washington: International Monetary Fund).  
- Dziobek, Claudia, and Ceyla Pazarbasioglu, 1997b, “Lessons and Elements of Best Practices,” in Systemic Bank Restructuring and Macroeconomic Policy, ed. by William E. Alexander and others, (Washington: International Monetary Fund).  
- Enoch, Charles, Anne-Marie Gulde, and Daniel Hardy, 2002, “Banking Crises and Bank Resolution: Experiences in Some Transition Economies,” IMF Working Paper 02/56 (Washington: International Monetary Fund).  
- Hoelscher, David S., and Marc Quintyn, 2003, Managing Systemic Crises, IMF Occasional Paper No. 224 (Washington: International Monetary Fund).  
- Honohan, Patrick, and Daniela Klingebiel, 2002, “Controlling the Fiscal Costs of Banking Crises,” World Bank Discussion Paper No. 428 (Washington: World Bank).  
- Tang, Helena, Edda Zoli, and Irina Klytchnikova, 2000, “Banking Crises in Transition Countries: Fiscal Costs and Related Issues,” World Bank Working Paper No. 2484 (Washington: World Bank).  
- Velasco, Andrés, 1991, “Liberalization, Crisis, Intervention: The Chilean Financial System, 1975–85,” in V. Sundararajan and Tomás Baliño, eds., Banking Crises: Cases and Issues (Washington: International Monetary Fund).  
- Nyberg, Peter, and Vesa Vihriälä, 1994, “The Finnish Banking Crisis and Its Handling” Bank of Finland Discussion Paper 7/94 (Helsinki: Bank of Finland).  

### Regulation, Supervision, Governance, and Performance
- Aliber, Robert J., 1984, “International Banking: A Survey,” Journal of Money, Credit, and Banking, Vol. 16, pp. 661–78.  
- Andrews, Michael, 2002, “Addressing the Prudential and Antitrust Aspects of Financial Sector Mergers and Acquisitions,” in Building Strong Banks, ed. by Charles Enoch, David Marston, and Michael Taylor (Washington: International Monetary Fund).  
- Andrews, Michael, 2003, “Issuing Government Bonds to Finance Bank Recapitalization and Restructuring: Design Factors That Affect Banks’ Financial Performance,” IMF Policy Discussion Paper 03/4 (Washington: International Monetary Fund).  
- Bardth, James R., Gerard Caprio Jr., and Ross Levine, 2000, “Banking Systems Around the Globe: Do Regulation and Ownership Affect Performance and Stability?” World Bank Working Paper No. 2325 (Washington: World Bank).  
- Das, Udaibir S., Marc Quintyn, and Kena Chenard, 2004, “Does Regulatory Governance Matter for Financial System Stability? An Empirical Analysis,” IMF Working Paper 04/89 (Washington: International Monetary Fund).  
- De Nicolò, Gianni, Philip Bartholomew, Jahanara Zaman, and Mary Zephirin, 2003, “Bank Consolidation, Internationalization and Conglomeration: Trends and Implications for Financial Risk,” IMF Working Paper 03/158 (Washington: International Monetary Fund).  
- Hawkins, John, and Dubravko Mihaljek, 2001, “The Banking Industry in the Emerging Market Economies: Competition, Consolidation and Systemic Stability: An Overview,” BIS Papers No. 4 (Basel: Bank for International Settlements).  
- Porter, Michael E., 1998, On Competition (Boston: Harvard Business School Publishing).  
- Saunders, Anthony, and Andrea Sommariva, 1993, “Banking Sector Restructuring in Eastern Europe,” Journal of Banking and Finance, Vol. 17, pp. 931–957.  
- Zola, Edda, 2001, “Cost and Effectiveness in Banking Sector Restructuring in Transition Economies,” IMF Working Paper 01/157 (Washington: International Monetary Fund).  

### Political Economy, Access, and Market Effects
- Clark, George R.G., and Robert Cull, 1997, “The Political Economy of Privatization: An Empirical Analysis of Bank Privatization in Argentina,” World Bank Working Paper No. 1962 (Washington: World Bank).  
- Clark, George R.G., and Maria Soledad Martinez Peria, 2001, “Does Foreign Bank Penetration Reduce Access to Credit in Developing Countries?” World Bank Working No. Paper 2716 (Washington: World Bank).  
- Dinç, Serdar, 2002, “Politicians and Banks: Political Influences on Government-Owned Banks in Emerging Countries,” mimeo, University of Michigan Business School.  
- Gruben, William C, and Robert P. McComb, 2003, “Privatization, Competition and Supercompetition in the Mexican Commercial Banking System,” Journal of Banking and Finance, Vol. 27, pp. 229–249.  
- Gruben, William C, and Robert P. McComb, 1997, “Liberalization, Privatization And Crash: Mexico’s Banking System in the 1990s,” Federal Reserve Bank of Dallas Economic Review, First Quarter, pp. 21–30.  
- Classens, Stijn, Asli Demirgüç-Kunt, and Harry Huizinga, 2001, “How does foreign entry affect domestic banking markets?” Journal of Banking and Finance, Vol. 25, pp. 891–911.  
- Sapienza, Paola, 2002 “What Do State-Owned Firms Maximize? Evidence from Italian Banks,” mimeo, Northwestern University.  
- Otchere, Isaac, and Janus Chan, 2001, “Intra-Industry Effects of Bank Privatization: A Clinical Analysis of the Privatization of the Commonwealth Bank of Australia,” mimeo, University of Melbourne.  
- Rodrik, Dani, Arvind Subramanian, and Francesco Trebbi, 2002, “Institutions Rule: The Primacy of Institutions Over Geography in Economic Development,” NBER Working Paper No. 9305 Cambridge, Massachusetts: (National Bureau of Economic Research).  

### Regional and Country Case Studies, Reform Assessments
- Asian Development Bank, 2001, Special Evaluation Study on the Privatization of Public Sector Enterprises: Lessons for Developing Member Countries (Manila: Asian Development Bank).  
- Barnett, Steven, 2004, “Banking Sector Developments,” in China’s Growth and Integration into the World Economy, ed. by Eswar Prasad, IMF Occasional Paper 232 (Washington: International Monetary Fund).  
- Borish, Michael S., Wei Ding, and Michel Noël, 1997, “Restructuring the State-Owned Banking Sector: A Comparative Assessment of Approaches in Central Europe,” MOCT-MOST Economic Policy in Transitional Economies, Vol. 7, pp. 49–77.  
- Brownbridge, Martin, and Charles Harvey, 1998, Banking in Africa: The Impact of Financial Sector Reform Since Independence (Oxford: James Currey Limited).  
- Fries, Steven, and Anita Taci, 2002, “Banking Reform and Development in Transition Economies,” Working Paper No. 71 (London: European Bank for Reconstruction and Development).  
- Koeva, Petya, 2003, “The Performance of Indian Banks During Financial Liberalization,” IMF Working Paper 03/150 (Washington: International Monetary Fund).  
- Lachowski, Slawomir, 1997, “The Process of Privatizing Banks in Poland: Successes and Failures of a Multitrack Path,” paper presented at the Eleventh Plenary Session of the OECD Advisory Group on Privatization: Banks and Privatization, Rome, September 18–19.  
- McComb, Robert P., William C. Gruben, and John H. Welch, 1994, “Privatization and Performance in the Mexican Financial Services Industry,” Quarterly Review of Economics and Finance, Vol. 34, Special Issue, pp. 217–235.  
- Ness, Walter L. Jr., 2000, “Reducing Government Bank Presence in the Brazilian Financial System: Why and How,” Quarterly Review of Economics and Finance Vol. 40, pp. 71–84.  
- Raje, Pradeep, 2002, “Where Did India Miss a Turn in Banking Reform?” Center for the Advanced Study of India Working Paper (Philadelphia: University of Pennsylvania).  
- Reserve Bank of India, 1999, Report of the Working Group on Restructuring Weak Public Sector Banks (Mumbai: Reserve Bank of India).  
- Shirai, Sayuri, 2001, “Assessment of India’s Banking Sector Reforms from the Perspective of the Governance of the Banking System,” Paper Presented at the ESCAP-ADB Joint Workshop on Mobilizing Domestic Finance for Development, Bangkok, November 22–23.  

### Empirical Methods and Cross-Cutting Analyses
- Beyer, Han-Joachim, Claudia Dziobek, and John R. Garrett, 1999, “Economic and Legal Considerations of Optimal Privatization: Case Studies of Mortgage Firms (DePfa Group and Fannie Mae),” IMF Working Paper 99/69 (Washington: International Monetary Fund).  
- Clark, George R.G., and Maria Soledad Martinez Peria, 2000, “Avoiding Disaster: Policies to Reduce the Risk of Banking Crises,” paper presented at the conference on Monetary and Exchange Rate Policies: Options for Egypt, Cairo, November 19–21.  
- Kaminsky, Graciela L., and Carmen M. Reinhart, 1999, “The Twin Crises: The Causes of Banking and Balance-Of-Payments Problems,” The American Economic Review, Vol. 89, No. 3, pp 473–500.  
- Peek, Joe, and Eric Rosengren, 1997, “The International Transmission of Financial Shocks: The Case of Japan,” The American Economic Review, Vol. 87, pp. 495–505.  
- La Porta, Rafael, Florencio Lopez-de-Silanes, and Andrei Shleifer, 2002, “Government Ownership of Banks,” The Journal of Finance, Vol. 57, No. 1, pp. 265–301.  
- Lopez-de-Silanes, Florencio, 1997, “Determinants of Privatization Prices,” Quarterly Journal of Economics, Vol. 112, No. 4, pp. 965–1025.  

*Source: _wp0510 - REFERENCES (IMF PDF).*

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