Fiscal Aspects of Bank Restructuring

James Daniel

No 1997/052, IMF Working Papers from International Monetary Fund

Abstract: Governments frequently assist troubled banks. This paper examines the fiscal aspects of such assistance: rationale, design criteria, methods, and macroeconomic implications. It concludes that (1) banks should be assisted only when there is a clear systemic risk; (2) assistance should be tied to a comprehensive restructuring program, minimize fiscal cost, be equitable and transparent, prevent recurrence, and facilitate a sound macroeconomic environment; (3) debt-based assistance will worsen public sector debt sustainability and will probably increase aggregate demand; and (4) assistance may require a substantial fiscal response (especially given the possible need for a looser monetary stance), which should feed iteratively into the choice of restructuring strategy.

Keywords: WP; bank assistance strategy; restructuring program; bank restructuring; bank behavior; banking system; defaulted debtor; Fiscal; Banks; Expenditure; Rescues; Restructuring; assistance strategy; assistance method; insolvent development bank; bank rescue; troubled bank; assistance operations; bank assistance operations; bank assistance measure; bank shareholder; Bank solvency; Commercial banks; Fiscal stance; Bank resolution (search for similar items in EconPapers)
Pages: 33
Date: 1997-04-01
References: Add references at CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=2176 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:1997/052

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().