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Practical guidelines for effective bank resolution

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  • Bolzico, Javier
  • Mascaro, Yira
  • Granata, Paola
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    Abstract

    This study adopts a practical approach in developing a set of guidelines on designing a bank resolution framework and implementing efficient bank resolution methods in Latin America. It identifies six pillars that are useful for establishing a bank resolution framework. The study aims to guide policymakers choose from a set of bank resolution methods, by outlining their advantages and disadvantages and establishing efficiency requirements. The focus is on the good-bank/bad-bank approach, which is a type of purchase and assumption mechanism that has increasingly become part of the newer legal frameworks in Latin America. The good-bank/bad-bank approach is an effective bank resolution method because it can be very successful in meeting certain efficiency criteria, including the minimization of contagion costs and preservation of business.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4389.

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    Date of creation: 01 Nov 2007
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    Handle: RePEc:wbk:wbrwps:4389

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    Related research

    Keywords: Banks&Banking Reform; Access to Finance; Debt Markets; Bankruptcy and Resolution of Financial Distress;

    References

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    1. Asli Demirguc-Kunt & Enrica Detragiache, 2000. "Does Deposit Insurance Increase Banking System Stability? An Empirical Investigation," Econometric Society World Congress 2000 Contributed Papers 1751, Econometric Society.
    2. Edward J. Kane & Asli Demirguc-Kunt, 2001. "Deposit Insurance Around the Globe: Where Does it Work?," NBER Working Papers 8493, National Bureau of Economic Research, Inc.
    3. De la Torre, Augusto, 2000. "Resolving bank failures in Argentina - recent developments and issues," Policy Research Working Paper Series 2295, The World Bank.
    4. Leslie Teo & Charles Enoch & Carl-Johan Lindgren & Tomás J. T. Baliño & Anne Marie Gulde & Marc Quintyn, 2000. "Financial Sector Crisis and Restructuring," IMF Occasional Papers 188, International Monetary Fund.
    5. Armen Hovakimian & Edward J. Kane & Luc Laeven, 2002. "How Country and Safety-Net Characteristics Affect Bank Risk-Shifting," NBER Working Papers 9322, National Bureau of Economic Research, Inc.
    6. Asli Demirgüç-Kunt & Edward J. Kane, 2004. "Deposit Insurance: Handle with Care," Central Banking, Analysis, and Economic Policies Book Series, in: Luis Antonio Ahumada & J. Rodrigo Fuentes & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.), Banking Market Structure and Monetary Policy, edition 1, volume 7, chapter 12, pages 345-358 Central Bank of Chile.
    7. Stephanou, Constantinos & Mendoza, Juan Carlos, 2005. "Credit risk measurement under Basel II : an overview and implementation issues for developing countries," Policy Research Working Paper Series 3556, The World Bank.
    8. Glenn Hoggarth & Jack Reidhill & Peter Sinclair, 2004. "On the resolution of banking crises: theory and evidence," Bank of England working papers 229, Bank of England.
    9. Beck, T.H.L., 2004. "The incentive-compatible design of deposit insurance and bank failure resolution: Concepts and country studies," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3508405, Tilburg University.
    10. Stijn Claessens & Daniela Klingebiel & Luc Laeven, 2001. "Financial Restructuring in Banking and Corporate Sector Crises: What Policies to Pursue?," NBER Working Papers 8386, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Thorsten Beck & Samuel Munzele Maimbo & Issa Faye & Thouraya Triki, 2011. "Financing Africa : Through the Crisis and Beyond," World Bank Publications, The World Bank, number 2355, October.

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