What Happens After Supervisory Intervention? Considering Bank Closure Options
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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- Paul Hoffman & Anthony M. Santomero, 1998. "Problem Bank Resolution: Evaluating the Options," Center for Financial Institutions Working Papers 98-05, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Gerard Caprio, Jr. and Patrick Honohan, 2008.
The Institute for International Integration Studies Discussion Paper Series
- Tamim Bayoumi & Paul R. Masson, 1998. "Market-Based Policy Instruments for Systemic Bank Restructuring," IMF Working Papers 98/113, International Monetary Fund.
- Dong He, 2000. "Emergency Liquidity Support Facilities," IMF Working Papers 00/79, International Monetary Fund.
- Edward J. Frydl, 1999. "The Length and Cost of Banking Crises," IMF Working Papers 99/30, International Monetary Fund.
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