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What Happens After Supervisory Intervention? Considering Bank Closure Options

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  • Mr. Mats A Josefsson
  • Mr. Michael Andrews

Abstract

Closures have been used to resolve problem banks in many countries in a wide range of economic circumstances, yet banking supervisors frequently defer intervention and closure. Avoiding the costs of disruption is the principal argument in favor of extraordinary measures, such as the use of public funds for recapitalization or forbearance, as alternatives to closing insolvent banks. Well-planned and implemented closure options can preserve essential functions performed by failing banks, mitigating disruption. Extraordinary measures to avoid closure should generally be avoided, but may be used in a systemic crisis to preserve some portion of a widely insolvent banking sector.

Suggested Citation

  • Mr. Mats A Josefsson & Mr. Michael Andrews, 2003. "What Happens After Supervisory Intervention? Considering Bank Closure Options," IMF Working Papers 2003/017, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2003/017
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=16222
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    References listed on IDEAS

    as
    1. Gerard Caprio & Patrick Honohan, 2008. "Banking Crises," Center for Development Economics 2008-09, Department of Economics, Williams College.
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    4. Mr. Edward J Frydl, 1999. "The Length and Cost of Banking Crises," IMF Working Papers 1999/030, International Monetary Fund.
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    6. Ms. G. G. Garcia, 1999. "Deposit Insurance: A Survey of Actual and Best Practices," IMF Working Papers 1999/054, International Monetary Fund.
    7. Mr. Tamim Bayoumi & Mr. Paul R Masson, 1998. "Market-Based Policy Instruments for Systemic Bank Restructuring," IMF Working Papers 1998/113, International Monetary Fund.
    8. Mr. Dong He, 2000. "Emergency Liquidity Support Facilities," IMF Working Papers 2000/079, International Monetary Fund.
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    Cited by:

    1. Harrison, Ian & Anderson, Steve & Twaddle, James, 2007. "Pre-positioning for effective resolution of bank failures," Journal of Financial Stability, Elsevier, vol. 3(4), pages 324-341, December.

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