This book was first published in 2005. Faced with a systemic financial sector crisis, policymakers need to make difficult choices under pressure. Based on the experience of many countries in recent years, few have been able to achieve a speedy, lasting and low-cost resolution. This volume considers the strengths and weaknesses of the various policy options, covering both microeconomic (including recapitalization of banks, bank closures, subsidies for distressed borrowers, capital adequacy rules and corporate governance and bankruptcy law requirements) and macroeconomic (including monetary and fiscal policy) dimensions. The contributors explore the important but little understood trade-offs that are involved, such as between policies which take effect quickly, those which minimize long-term fiscal and economic costs, and those which create favorable incentives for future stability. Successfully implementing crisis management and crisis resolution policy required attention to detail and a good flow of information.
• Hot topic, chapters cover Europe, US, Africa, Asia and Latin America • Database of over 20 pages summarizes international findings and is highly accessible • Contributors well known, essays link institutions, reforms and government policies to crises
Foreword Gerard Caprio; Part I. Introduction: 1. Introduction and overview Patrick Honohan and Luc Laeven; Part II. Containment and Resolution: 2. Financial crisis policies and resolution mechanisms: a taxonomy from cross-country experience Charles Calomiris, Daniela Klingebiel and Luc Laeven; 3. Pitfalls in managing closures of financial institutions Carl-Johan Lindgren; 4. Bank recapitalization: fiscal, monetary and incentive implications Patrick Honohan; Part III. Models and Econometric Evidence: 5. Policies for banking crises: a theoretical framework Rafael Repullo; 6. Crisis resolution, policies, and institutions: empirical evidence Stijn Claessens, Daniela Klingebiel and Luc Laeven; Part IV. Structural Reforms: 7. Financial crises and the presence of foreign banks Adrian Tschoegl; 8. Maximizing the value of distressed assets: bankruptcy law and the efficient reorganization of firms David Smith and Per Strömberg; 9. Crisis resolution and credit allocation: the case of Japan Joe Peek and Eric Rosengren.