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Selective Approaches and Experiences with Problematic Assets in Banking Sector

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  • Miroslav Kollár
  • Luboš Komárek

Abstract

This paper analyses various approaches to dealing with problematic assets of the banking sector. These approaches include the establishment of an asset management company, capital injection and sale of the bank, purchase and assumption transactions, liquidation or bridge bank. All these approaches are evaluated with respect to Czech transformation experience and with respect to experience of other foreign countries. The paper concludes that the establishment of Czech Consolidation Agency (Czech Consolidation Bank, respectively) was the least suitable approach to dealing with problematic assets in the Czech banking sector during the period of the transformation. The paper furthermore suggests that other methods, such as the liquidation accompanied with deposit insurance payments, publicly assisted mergers and acquisitions, or finally privately or publicly assisted purchase and assumption transactions should have been used instead. The knowledge of these alternative approaches to weak-bank restructuring is supposed to guarantee that Czech authorities will not step up to establish a similar inefficient asset management company, should banking-sector problems emerge once again.

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Bibliographic Info

Article provided by University of Economics, Prague in its journal Politická ekonomie.

Volume (Year): 2009 (2009)
Issue (Month): 5 ()
Pages: 601-621

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Handle: RePEc:prg:jnlpol:v:2009:y:2009:i:5:id:700:p:601-621

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Related research

Keywords: problematic assets; Czech Consolidation Agency; banking;

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References

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  1. William R. White, 2004. "Are changes in financial structure extending safety nets?," BIS Working Papers 145, Bank for International Settlements.
  2. International Monetary Fund, 1999. "Recapitalizing Banks with Public Funds," IMF Working Papers 99/139, International Monetary Fund.
  3. Ewa Balcerowicz & Andrzej Bratkowski, 2001. "Restructuring and Development of the Banking Sector in Poland. Lessons to be Learnt by Less Advanced Transition Countries," CASE Network Reports 0044, CASE-Center for Social and Economic Research.
  4. Calomiris, Charles W & Klingebiel, Daniela & Laeven, Luc, 2004. "A taxonomy of financial crisis resolution mechanisms : cross-country experience," Policy Research Working Paper Series 3379, The World Bank.
  5. Akiko Terada-Hagiwara & Gloria Pasadilla, 2004. "Experience of Asian Asset Management Companies (AMCs): Do they Increase Moral Hazard? - Evidence from Thailand," Finance 0410001, EconWPA.
  6. Nakamura, Richard, 2002. "The Big Cleanse: The Japanese Response To The Financial Crisis Of 1990'S Seen From A Nordic Perspective," EIJS Working Paper Series 149, The European Institute of Japanese Studies.
  7. D. Woo, 2000. "Two Approaches to Resolving Nonperforming Assets During Financial Crises," IMF Working Papers 00/33, International Monetary Fund.
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