The Economics of Bank Restructuring: Understanding the Options
IMF Staff Position Notes, June 5, 2009
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- The Economics of Bank Restructuring: Understanding the Options
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Bibliographic details
- Authors: Kenichi Ueda
- Published: June 5, 2009
- Series: IMF Staff Position Notes
- DOI: https://doi.org/10.5089/9781462337422.004
Summary
- Based on a simple framework, this note clarifies the economics behind bank restructuring and evaluates various restructuring options for systemically important banks.
- The note assumes that the government aims to reduce the probability of a bank’s default and keep the burden on taxpayers at a minimum.
- The note acknowledges that the design of any restructuring needs to take into consideration the payoffs and incentives for the various key stakeholders (i.e., shareholders, debt holders, and government).
Key assumptions and focus
- Government objective: reduce the probability of a bank’s default and keep the burden on taxpayers at a minimum.
- Framework emphasis: payoffs and incentives for key stakeholders—shareholders, debt holders, and government.
Restructuring options and concepts evaluated
- Asset guarantee
- Asset management
- Asset sale
- Asset valuation and asset quality considerations
- Debt-for-equity swap
- Preferred shares
- Securities, including SPN
- Approaches to handling distressed assets and bank assets
Stakeholders and incentives
- Shareholders (equity holder): considerations regarding dilution, retention, or removal of equity value.
- Debt holders: treatment options, including exchanges and guarantees.
- Government: balancing default-risk reduction with minimizing taxpayer burden.
Content in this bundle
- _spn0912 — Executive Summary