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What Happens After Supervisory Intervention? Considering Bank Closure Options

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  • Mats Josefsson
  • Michael Andrews
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    Abstract

    Closures have been used to resolve problem banks in many countries in a wide range of economic circumstances, yet banking supervisors frequently defer intervention and closure. Avoiding the costs of disruption is the principal argument in favor of extraordinary measures, such as the use of public funds for recapitalization or forbearance, as alternatives to closing insolvent banks. Well-planned and implemented closure options can preserve essential functions performed by failing banks, mitigating disruption. Extraordinary measures to avoid closure should generally be avoided, but may be used in a systemic crisis to preserve some portion of a widely insolvent banking sector.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 03/17.

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    Length: 25
    Date of creation: 01 Jan 2003
    Date of revision:
    Handle: RePEc:imf:imfwpa:03/17

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    Postal: International Monetary Fund, Washington, DC USA
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    Related research

    Keywords: Bank supervision; Bank restructuring; Deposit insurance; banking; bank closures; systemic crisis; recapitalization; banking system; banking crises; systemic bank restructuring; problem bank; bank failures; bank closure; capital adequacy; bank runs; banking supervision; banking crisis; bank failure; insolvent banks; deposit insurance scheme; banking supervisor; banking supervisors; closed banks; federal deposit insurance; asset management company; debt restructuring; asset management; foreign exchange; bank for international settlements; banking services; banking sector; bank assistance; contagion; bank depositors; prudential supervision; bank problems; bank soundness; crisis resolution; banking regulation; bank assets; accounting standards; loan classification; failure resolution; small bank; banking practices; banking system assets; bank accounts; crisis recovery; bank reports; post-crisis period; purchase and assumption transaction; bank losses; private bank; deposit protection; bank management; macroeconomic policies; divestitures; currency flight; banking markets; banking deposits; distressed bank; holding company; equity investment; bank intervention; bank services; regulatory forbearance; going concern value; financial sector crisis; banking industry; banking laws; closure of banks;

    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Gerard Caprio & Patrick Honohan, 2008. "Banking Crises," Department of Economics Working Papers, Department of Economics, Williams College 2008-07, Department of Economics, Williams College.
    2. Edward J. Frydl, 1999. "The Length and Cost of Banking Crises," IMF Working Papers, International Monetary Fund 99/30, International Monetary Fund.
    3. Paul Hoffman & Anthony M. Santomero, 1998. "Problem Bank Resolution: Evaluating the Options," Center for Financial Institutions Working Papers, Wharton School Center for Financial Institutions, University of Pennsylvania 98-05, Wharton School Center for Financial Institutions, University of Pennsylvania.
    4. Dong He, 2000. "Emergency Liquidity Support Facilities," IMF Working Papers, International Monetary Fund 00/79, International Monetary Fund.
    5. Tamim Bayoumi & Paul R. Masson, 1998. "Market-Based Policy Instruments for Systemic Bank Restructuring," IMF Working Papers, International Monetary Fund 98/113, International Monetary Fund.
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    Cited by:
    1. Harrison, Ian & Anderson, Steve & Twaddle, James, 2007. "Pre-positioning for effective resolution of bank failures," Journal of Financial Stability, Elsevier, Elsevier, vol. 3(4), pages 324-341, December.

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