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Tools for managing banking distress: historical experience and lessons for today

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Listed:
  • Frederic Boissay
  • Stijn Claessens
  • Alan Villegas

Abstract

We analyse the effectiveness of policy tools for large-scale banking distress and draw lessons for today. The depth of recessions following banking distress depends both on the speed with which tools were deployed and their type and on the macro-financial vulnerabilities. While, in general, swifter and broader-ranging policy actions mitigate such recessions, central banks' asset purchases and lending are particularly effective when banks have been underperforming or when distress follows abnormally large asset price movements, such as those triggered by the Covid19 crisis. Our analysis confirms that the recently employed policies have supported the real economy.

Suggested Citation

  • Frederic Boissay & Stijn Claessens & Alan Villegas, 2020. "Tools for managing banking distress: historical experience and lessons for today," BIS Quarterly Review, Bank for International Settlements, December.
    • Handle: RePEc:bis:bisqtr:2012d
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    References listed on IDEAS

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    Cited by:

    1. Feyen, Erik & Alonso Gispert, Tatiana & Kliatskova, Tatsiana & Mare, Davide S., 2021. "Financial Sector Policy Response to COVID-19 in Emerging Markets and Developing Economies," Journal of Banking & Finance, Elsevier, vol. 133(C).
    2. Konrad Adler & Frederic Boissay, 2020. "Dealing with bank distress: Insights from a comprehensive database," BIS Working Papers 909, Bank for International Settlements.

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    More about this item

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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