Language:
English
Pages:
Online-Ressource (1 online resource (40 p.))
Edition:
Online-Ausg. World Bank E-Library Archive
Parallel Title:
Honohan, Patrick Controlling the Fiscal Costs of Banking Crises
Keywords:
Bank
;
Banking
;
Banking Crises
;
Banking System
;
Banking Systems
;
Banks
;
Banks and Banking Reform
;
Central Banks
;
Currencies and Exchange Rates
;
Debt Markets
;
Deposit Guarantees
;
Economic Theory and Research
;
Emerging Markets
;
Finance and Financial Sector Development
;
Financial Crisis Management and Restructuring
;
Financial Institutions
;
Financial Literacy
;
Financial Systems
;
Gambling
;
Governments
;
Inflation
;
Liquidation
;
Loans
;
Macroeconomics and Economic Growth
;
Private Sector Development
;
Public Sector Corruption and Anticorruption Measures
;
Real Sector
;
Regulatory Forbearance
;
Strategies
;
Systemic Banking Crises
;
Taxation
;
Bank
;
Banking
;
Banking Crises
;
Banking System
;
Banking Systems
;
Banks
;
Banks and Banking Reform
;
Central Banks
;
Currencies and Exchange Rates
;
Debt Markets
;
Deposit Guarantees
;
Economic Theory and Research
;
Emerging Markets
;
Finance and Financial Sector Development
;
Financial Crisis Management and Restructuring
;
Financial Institutions
;
Financial Literacy
;
Financial Systems
;
Gambling
;
Governments
;
Inflation
;
Liquidation
;
Loans
;
Macroeconomics and Economic Growth
;
Private Sector Development
;
Public Sector Corruption and Anticorruption Measures
;
Real Sector
;
Regulatory Forbearance
;
Strategies
;
Systemic Banking Crises
;
Taxation
;
Bank
;
Banking
;
Banking Crises
;
Banking System
;
Banking Systems
;
Banks
;
Banks and Banking Reform
;
Central Banks
;
Currencies and Exchange Rates
;
Debt Markets
;
Deposit Guarantees
;
Economic Theory and Research
;
Emerging Markets
;
Finance and Financial Sector Development
;
Financial Crisis Management and Restructuring
;
Financial Institutions
;
Financial Literacy
;
Financial Systems
;
Gambling
;
Governments
;
Inflation
;
Liquidation
;
Loans
;
Macroeconomics and Economic Growth
;
Private Sector Development
;
Public Sector Corruption and Anticorruption Measures
;
Real Sector
;
Regulatory Forbearance
;
Strategies
;
Systemic Banking Crises
;
Taxation
Abstract:
September 2000 - Certain measures add greatly to the fiscal cost of banking crises: unlimited deposit guarantees, open-ended liquidity support, repeated recapitalization, debtor bail-outs, and regulatory forbearance. The findings in this paper tilt the balance in favor of a strict rather than an accommodating approach to crisis resolution. In recent decades, a majority of countries have experienced a systemic banking crisis requiring a major-and expensive-overhaul of their banking system. Not only do banking crises hit the budget with outlays that must be absorbed by higher taxes (or spending cuts), but they are costly in terms of forgone economic output. Many different policy recommendations have been made for limiting the cost of crises, but there has been little systematic effort to see which recommendations work in practice. Honohan and Klingebiel try to quantify the extent to which fiscal outlays incurred in resolving banking distress can be attributed to crisis management measures of a particular kind adopted by the government in the early years of the crisis. They find evidence that certain crisis management strategies appear to add greatly to fiscal costs: unlimited deposit guarantees, open-ended liquidity support, repeated recapitalization, debtor bail-outs, and regulatory forbearance. Their findings clearly tilt the balance in favor of a strict rather than an accommodating approach to crisis resolution. At the very least, regulatory authorities who choose an accommodating or gradualist approach to an emerging crisis must be sure they have some other way to control risk-taking. This paper-a product of Finance, Development Research Group, and Financial Sector Strategy and Policy Department-is part of a larger effort in the Bank to examine the effects of financial sector regulation. The authors may be contacted at phonohanworldbank.org or dklingebiel@worldbank.org
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