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Recapitalization of Failed Banks: Some Lessons from the I rish Experience
Author(s) -
Honohan Patrick
Publication year - 2013
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/manc.12019
Subject(s) - recapitalization , insolvency , creditor , financial system , loan , economics , recession , debt , shareholder , financial crisis , contingent liability , business , finance , monetary economics , corporate governance , macroeconomics
Several countries have faced difficult bank recapitalisation challenges during the crisis. Textbook advice has not always proved easy to implement. That advice has been to recognise losses early and ensure prompt recapitalisation, ideally from the market. Where a bank has lost all of its capital it needs to be resolved, with shareholders losing their investment and debt-holders (apart from insured depositors) also assuming losses as necessary following the normal priority of claims. Where uncertainty continues to prevail, for example in a systemic crisis, over-capitalisation of banks which have lost the confidence of the market should be arranged.