Recapitalizing Banks with Public Funds Selected Issues
56 Pages Posted: 15 Feb 2006
Date Written: October 1999
Recapitalizing banks in a systemic crisis is a complex medium-term process that requires significant government intervention and careful management at both the strategic and individual bank levels. This paper highlights the range of operational and strategic issues to be addressed and the institutional arrangements needed to foster an effective banking system restructuring and maximize the returns on government investment. The approaches to recapitalization have varied, with countries choosing different mixes of direct capital injections and asset purchase and rehabilitation. The choice of an appropriate mix is critical, to minimize the expected present value of government outlays net of recoveries.
Keywords: asset management companies asset valuation bank restructuring agencies Tier 1 capital Tier 2 capital
JEL Classification: G1 G21 G32 H81 O16
Suggested Citation: Suggested Citation