Systemic Financial Crises: Resolving Large Bank Insolvencies
Douglas Darrell Evanoff, George G. Kaufman
World Scientific, 2005 - Business & Economics - 461 pages
Bank failures, like illness and taxes, are almost a certainty at some time in the future. What is less certain is their cost to and adverse implications for macroeconomies. Past failures have frequently been resolved at very high cost to society. However, the cost could be reduced through having a well-developed, credible and widely publicized plan ready to put into action by policymakers. If no such plan is ready when a large bank approaches insolvency, political pressures are likely to influence the response of regulators.Minimizing immediate, short-run costs are likely to outweigh minimizing further out, longer-run and longer-lasting costs, even if these delayed costs promise to be substantially greater. Stated differently, today will win out over tomorrow and politics will trump economics. How best to prevent such unfavorable outcomes is the major theme of this volume. The articles presented review past insolvency resolutions, draw lessons from these resolutions, discuss impediments to efficient resolutions — including cross-country, cross-regulator, and institutional challenges — and recommend how to move forward.
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afﬁliates Argentina assessment assets bailouts bank failure bank insolvency Bank of England bank resolution bank’s banking crisis banking supervision banking system bankruptcy Basel Basel II BCCI beneﬁts branches capital central bank conﬁdence conﬂict corporate costs counterparties creditors crises crisis management cross-border deﬁned deposit insurance depositors difﬁcult economic effective efﬁcient Enron entity European example FDIC Federal Reserve Bank ﬁnancial crisis ﬁnancial institutions ﬁnancial markets ﬁnancial sector ﬁnancial stability ﬁnancial system ﬁrms ﬁrst ﬁscal foreign banks framework FSAP FSSA functions guarantee haircut home and host home country incentives Ingves insolvency proceedings International Monetary Fund jurisdiction large bank LCFI liabilities liquidity loans Long-Term Capital Management losses LTCM moral hazard Nordea Ofﬁce ofﬁcials operations paper payment percent policymakers potential problems recapitalization regulators regulatory relevant reorganization resolving responsibility restructuring settlement shareholders signiﬁcant solvency speciﬁc structure subsidiaries sufﬁcient supervisory authorities systemic banking systemic risk systemically important too-big-to-fail Uruguay