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Issuing Government Bonds to Finance Bank Recapitalization and Restructuring: Design Factors that Affect Banks' Financial Performance

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  • Mr. Michael Andrews

Abstract

Bonds issued by the government or government agencies are often used to finance bank restructuring following a systemic crisis. Many conflicting considerations affect the design of the bonds used to pay for public sector investment in bank equity or the purchase of distressed assets from banks. Some bond features can leave restructured banks facing significant risks, laying the foundation for future banking sector problems. Sovereign default makes publicly financed bank restructuring more difficult, but it is still possible to carry out if banks receive sufficient interest income to provide a margin over their cost of funds.

Suggested Citation

  • Mr. Michael Andrews, 2003. "Issuing Government Bonds to Finance Bank Recapitalization and Restructuring: Design Factors that Affect Banks' Financial Performance," IMF Policy Discussion Papers 2003/004, International Monetary Fund.
    • Handle: RePEc:imf:imfpdp:2003/004
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=16847
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    Cited by:

    1. Tanja Markovic-Hribernik & Matej Tomec, 2015. "Bad Bank And Other Possible Banks’ Rescuing Models – The Case Of Slovenia," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 1, pages 128-141, January.

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