IMF Staff Position Notes

The Economics of Bank Restructuring: Understanding the Options

Author/Editor:

Augustin Landier ; Kenichi Ueda

Publication Date:

June 5, 2009

Electronic Access:

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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 also 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).

Series:

Staff Position Note No. 2009/012

Subject:

Asset and liability management Asset management Asset valuation Banking Distressed assets Financial institutions Financial sector policy and analysis Securities Stocks