Recapitalizing Banks with Public Funds

Recapitalizing banks in a systemic crisis is a complex medium-term process that requires significant government intervention and careful management at both the strategic and individual bank levels. This paper examines the range of operational and strategic issues involved and the institutional arran...

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Bibliographic Details
Published in:IMF staff papers 2001-01, Vol.48 (1), p.58-110
Main Authors: Charles Enoch, Garcia, Gillian, Sundararajan, V.
Format: Article
Language:English
Subjects:
Accountability
Asset management
Bank assets
Bank capital
Bank loans
Bank ownership
Banking crises
Banking industry
Central banks
Chief executive officers
Corporate reorganization
Government agencies
Loan workouts
Loans
Monetary theory
Public capital
Public finance
Recapitalization
Regulation of financial institutions
Studies
Transition economies
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Summary:Recapitalizing banks in a systemic crisis is a complex medium-term process that requires significant government intervention and careful management at both the strategic and individual bank levels. This paper examines the range of operational and strategic issues involved and the institutional arrangements needed to foster an effective banking system restructuring, as well as maximize the returns on government investment. Recapitalization approaches have varied in the different mixes of direct capital injections and asset purchases and rehabilitation that countries choose. The choice of an appropriate mix is critical to minimizing the expected present value of government outlays net of recoveries.
ISSN:1020-7635
2041-4161
1564-5150
2041-417X
DOI:10.2307/4621660