Issuing Government Bonds to Finance Bank Recapitalization and Restructuring: Design Factors that Affect Banks' Financial Performance

November 1, 2003

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Michael Andrews. Issuing Government Bonds to Finance Bank Recapitalization and Restructuring: Design Factors that Affect Banks' Financial Performance, (USA: International Monetary Fund, 2003) accessed November 21, 2024

Disclaimer: This Policy Dicussion Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Bonds issued by the government or government agencies are often used to finance bank restructuring following a systemic crisis. Many conflicting considerations affect the design of the bonds used to pay for public sector investment in bank equity or the purchase of distressed assets from banks. Some bond features can leave restructured banks facing significant risks, laying the foundation for future banking sector problems. Sovereign default makes publicly financed bank restructuring more difficult, but it is still possible to carry out if banks receive sufficient interest income to provide a margin over their cost of funds.

Subject: Bank resolution, Banking, Bond ratings, Bonds, Financial crises, Financial institutions, Public debt, Sovereign bonds

Keywords: Bank, Bank privatization, Bank recapitalization, Bank recapitalization program, Bank resolution, Bank restructuring, Banking crisis, Bond issue, Bond market, Bond market interest rates, Bond ratings, Bonds, Government bonds, Government debt management, Interest rate, Interest rate fluctuation, PDP, Public funds, Recapitalization, Recapitalization bond, Sovereign bonds, Systemic crisis, Zero coupon bond

Publication Details

Pages:

31
Volume:

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DOI:

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Issue:

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Series:

Policy Discussion Paper No. 2003/004
Stock No:

PPIEA0042003
ISBN:

9781451973662
ISSN:

1564-5193

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