Policies to Address Banking Sector Weakness: Evolution of Financial Markets and Institutional Indicators

By Ivan S Guerra, R. B. Johnston, Karim Youssef, Andre O Santos

October 7, 2009

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Ivan S Guerra, R. B. Johnston, Karim Youssef, and Andre O Santos. Policies to Address Banking Sector Weakness: Evolution of Financial Markets and Institutional Indicators, (USA: International Monetary Fund, 2009) accessed December 22, 2024

Summary

This paper reviews the impact of policies to address banking sector weaknesses through the first months of 2009. At the time of this assessment, central bank intervention had successfully addressed pressures on bank liquidity, but the underlying financial position of financial institutions, particularly the large complex financial institutions (LCFIs), remained precarious. Although Tier 1 ratios had been boosted through the capital injections, tangible common equity (TCE) remained at a critical level for most institutions. Asset quality was weakening, and credit spreads for LCFIs remained wide. Measures had not stemmed the market-driven deleveraging process, and lending surveys pointed to various levels of credit tightening in the United States, Europe, Switzerland, and the United Kingdom. The success of government support measures can be assessed by their impact on bank soundness indicators. Government support measures should have a positive effect on bank soundness by improving bank liquidity, profitability, capital adequacy, and asset quality.

Subject: Asset and liability management, Banking, Commercial banks, Credit, Financial institutions, Liquidity, Loans, Money, Securities

Keywords: Asset, Asset quality, Bank, Central bank, Commercial banks, Commercial paper, Commercial paper issuance, Credit, Europe, Global, Liquidity, Liquidity facility, Loans, Market, Market confidence, Market participant, Preferred shares, Securities, SPN, Tax assets

Publication Details

Pages:

26
Volume:

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DOI:

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Issue:

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Series:

Staff Position Note No. 2009/024
Stock No:

SPNEA2009024
ISBN:

9781455292585
ISSN:

2617-6742

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