The Workout of Banking Crises: A Macroeconomic Perspective

22 Pages Posted: 12 Jun 2003

See all articles by Hans Gersbach

Hans Gersbach

ETH Zurich - CER-ETH -Center of Economic Reseaarch; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Jan Wenzelburger

Bielefeld University - Department of Business Administration and Economics

Date Written: May 2003

Abstract

This paper provides a macroeconomic perspective for government interventions in banking crises. Such crises occur when a large number of banks fail to meet capital requirements or are insolvent. Using a macroeconomic model with financial intermediation, our analysis suggests that strict enforcement of capital-adequate rules suffices in prosperous periods. Capital requirements serve as an indicator for crises interventions in critical states which may require interest rate controls and restructuring of the banking industry. These policies can be reinforced by random bail-outs and temporary financial relief, with a large percentage of the costs being covered by current and future owners of banks. banking crises, deposit insurance, banking regulation

Keywords: Financial intermediation, macroeconomic risks,

JEL Classification: D41, E4, G2

Suggested Citation

Gersbach, Hans and Wenzelburger, Jan, The Workout of Banking Crises: A Macroeconomic Perspective (May 2003). Available at SSRN: https://ssrn.com/abstract=408380 or http://dx.doi.org/10.2139/ssrn.408380

Hans Gersbach (Contact Author)

ETH Zurich - CER-ETH -Center of Economic Reseaarch ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland
+41 44 632 82 80 (Phone)
+41 44 632 18 30 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Jan Wenzelburger

Bielefeld University - Department of Business Administration and Economics ( email )

P.O. Box 100131
D-33501 Bielefeld, NRW 33501
Germany
+49 521 106 4835 (Phone)
+49 521 106 6018 (Fax)

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