What Happens After Supervisory Intervention? Considering Bank Closure Options

Author/Editor:

Mats A Josefsson ; Michael Andrews

Publication Date:

January 1, 2003

Electronic Access:

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

Summary:

Closures have been used to resolve problem banks in many countries in a wide range of economic circumstances, yet banking supervisors frequently defer intervention and closure. Avoiding the costs of disruption is the principal argument in favor of extraordinary measures, such as the use of public funds for recapitalization or forbearance, as alternatives to closing insolvent banks. Well-planned and implemented closure options can preserve essential functions performed by failing banks, mitigating disruption. Extraordinary measures to avoid closure should generally be avoided, but may be used in a systemic crisis to preserve some portion of a widely insolvent banking sector.

Series:

Working Paper No. 03/17

Subject:

English

Publication Date:

January 1, 2003

ISBN/ISSN:

9781451843552/1018-5941

Stock No:

WPIEA0172003

Format:

Paper

Pages:

25

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