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Bank Restructuring and Bank Stability in Latin America

In: Modern Bank Behaviour

Author

Listed:
  • Ngoc Vo
  • Jonathan Williams

Abstract

The objective of this chapter is to examine whether or not banking sector restructuring produces significant improvements in bank stability. Restructuring is targeted at distressed banks, and common resolution strategies include injecting liquidity and/or capital, sanitizing bank balance sheets, and consolidating troubled banks with healthier banks through a process of mergers and acquisitions (M&A). Restructuring is often accompanied by legal reforms to strengthen the competitive environment facing banks. Repeal of restrictions on foreign banks is one example. Withdrawing the influence of government in the banking sector through privatization is another. These reforms are expected to increase banking sector stability, because the performance of non-intervened banks should improve — otherwise market share can be lost to resolved incumbents and/or new foreign entrants. An assessment of the effectiveness of bank restructuring must evaluate the impact of legislative changes upon the banking sector per se as well as analysing the post-resolution performance of resolved banks.

Suggested Citation

  • Ngoc Vo & Jonathan Williams, 2013. "Bank Restructuring and Bank Stability in Latin America," Palgrave Macmillan Studies in Banking and Financial Institutions, in: José Manuel Pastor Monsálvez & Juan Fernández Guevara Radoselovics (ed.), Modern Bank Behaviour, chapter 3, pages 48-67, Palgrave Macmillan.
    • Handle: RePEc:pal:pmschp:978-1-137-00186-3_4
    DOI: 10.1057/9781137001863_4
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    Cited by:

    1. Yasir Khan & Taimoor Hassan & Cai Shukai & Hana Oubaih & Muhammad Nisar Khan & Jawed Kootwal & Ubaid Ur Rahman Rehimi, 2022. "The nexus between infrastructure development, economic growth, foreign direct investment, and trade: an empirical investigation from China’s regional trade data," SN Business & Economics, Springer, vol. 2(7), pages 1-31, July.

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