What Happens After Supervisory Intervention? Considering Bank Closure Options

January 1, 2003

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Format: Chicago

Mats A Josefsson, and Michael Andrews. What Happens After Supervisory Intervention? Considering Bank Closure Options, (USA: International Monetary Fund, 2003) accessed December 22, 2024

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.

Subject: Bank resolution, Bank solvency, Banking, Commercial banks, Deposit insurance, Distressed institutions, Financial crises, Financial institutions, Financial sector policy and analysis, Systemic crises

Keywords: Baltics, Bank assets, Bank closure, Bank depositor, Bank resolution, Bank restructuring, Bank solvency, Bank supervision, Closure option, Commercial banks, Deposit insurance, Distressed institutions, Eastern Europe, Insolvent bank, Intervened bank, Loss-making bank, Problem bank, Systemic crises, Systemic crisis, Weak banks, WP

Publication Details

Pages:

25
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2003/017
Stock No:

WPIEA0172003
ISBN:

9781451843552
ISSN:

1018-5941

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