Banking Crises in Transition Economies : Fiscal Costs and Related Issues
The authors look at strategies for dealing with banking crises in 12 transition economies -- five from Central and Eastern Europe (CEE): Bulgaria, the Czech Republic, Hungary, Macedonia, and Poland; the three Baltic states: Estonia, Latvia, and Lit...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2000/11/717460/banking-crises-transition-economies-fiscal-costs-related-issues http://hdl.handle.net/10986/19751 |
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okr-10986-19751 |
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| recordtype |
oai_dc |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
ACCOUNTING BAD DEBT BAD DEBTS BANK ASSETS BANK CRISES BANK FAILURE BANK LIQUIDATION BANK RESTRUCTURING BANK RUNS BANK SOLVENCY BANKING CRISES BANKING CRISIS BANKING DISTRESS BANKING SECTOR BANKING SECTOR DEVELOPMENT BANKING SYSTEM BANKING SYSTEMS BANKRUPTCY BANKRUPTCY LAWS BANKS CAUSES OF BANKING CRISES CENTRAL BANK CENTRAL BANKS COLLATERAL COMMERCIAL BANKS CONSOLIDATION CURRENCY DEPOSITORS DEPOSITS DEVALUATION DISTRESSED BANKS ECONOMIC GROWTH FINANCIAL CRISIS FINANCIAL DEEPENING FINANCIAL DISTRESS FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIATION FINANCIAL RESTRUCTURING FISCAL COST FISCAL COSTS FOREIGN BANKS FOREIGN EXCHANGE HARD BUDGET CONSTRAINTS HARD CURRENCY INCOME INFLATION INSOLVENCY LIQUIDATION OF BANKS LIQUIDITY MACROECONOMIC CONDITIONS MERGERS MONETARY POLICY MORAL HAZARD OUTPUT PAYMENTS UNION PORTFOLIOS PRIVATE BANKS PRIVATIZATION PROFITABILITY RECAPITALIZATION RESOLVING BANKING CRISES SAVINGS SHAREHOLDERS SMALL BANKS SOLVENCY SPECIALIZED BANKS STABILIZATION STATE BANKS STATE OWNERSHIP TRADING TRANSITION ECONOMIES |
| spellingShingle |
ACCOUNTING BAD DEBT BAD DEBTS BANK ASSETS BANK CRISES BANK FAILURE BANK LIQUIDATION BANK RESTRUCTURING BANK RUNS BANK SOLVENCY BANKING CRISES BANKING CRISIS BANKING DISTRESS BANKING SECTOR BANKING SECTOR DEVELOPMENT BANKING SYSTEM BANKING SYSTEMS BANKRUPTCY BANKRUPTCY LAWS BANKS CAUSES OF BANKING CRISES CENTRAL BANK CENTRAL BANKS COLLATERAL COMMERCIAL BANKS CONSOLIDATION CURRENCY DEPOSITORS DEPOSITS DEVALUATION DISTRESSED BANKS ECONOMIC GROWTH FINANCIAL CRISIS FINANCIAL DEEPENING FINANCIAL DISTRESS FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIATION FINANCIAL RESTRUCTURING FISCAL COST FISCAL COSTS FOREIGN BANKS FOREIGN EXCHANGE HARD BUDGET CONSTRAINTS HARD CURRENCY INCOME INFLATION INSOLVENCY LIQUIDATION OF BANKS LIQUIDITY MACROECONOMIC CONDITIONS MERGERS MONETARY POLICY MORAL HAZARD OUTPUT PAYMENTS UNION PORTFOLIOS PRIVATE BANKS PRIVATIZATION PROFITABILITY RECAPITALIZATION RESOLVING BANKING CRISES SAVINGS SHAREHOLDERS SMALL BANKS SOLVENCY SPECIALIZED BANKS STABILIZATION STATE BANKS STATE OWNERSHIP TRADING TRANSITION ECONOMIES Tang, Helena Zoli, Edda Klytchnikova, Irina Banking Crises in Transition Economies : Fiscal Costs and Related Issues |
| geographic_facet |
Europe and Central Asia Eastern Europe |
| relation |
Policy Research Working Paper;No. 2484 |
| description |
The authors look at strategies for
dealing with banking crises in 12 transition economies --
five from Central and Eastern Europe (CEE): Bulgaria, the
Czech Republic, Hungary, Macedonia, and Poland; the three
Baltic states: Estonia, Latvia, and Lithuania; and four
countries from the Commonwealth of Independent States (CIS):
Georgia, Kazakhstan, the Kyrgyz Republic, and Ukraine. Three
types of strategies were used to deal with the crises. The
CEE countries generally pursued extensive restructuring and
recapitalizing of banks; most CIS countries pursued
large-scale liquidation; and the Baltic states generally
pursued a combination of liquidation and restructuring. The
strategy pursued reflected macroeconomic conditions and the
level of development in a country's banking sector.
There were more new banks in the former Soviet Union
(FSU-the CIS and Baltic states), but they tended to be
small, undercapitalized, and not deeply engaged in financial
intermediation. The CEE countries generally incurred higher
fiscal costs than the FSU countries but ended up with
sounder, more efficient banking systems, with many of the
recapitalized banks being privatized to strategic foreign
investors. The CIS countries pursued a less fiscally costly
approach but have been left with weak banking systems and
low levels of intermediation. The Baltic states appear to
have struck a good balance, incurring modest fiscal costs
while making their systems sounder and more efficient. The
findings suggest the following: a) Operational, financial,
and institutional restructuring should be undertaken in
parallel. b) Financial restructuring should involve adequate
recapitalization to deter moral hazard and repeated
recapitalization. c) Operational restructuring should entail
privatization to core investors (particularly to reputable
foreign banks). d) The enterprise problems underlying
banking problems must also be addressed. e) Fiscal costs
were reduced when governments dealt only with bad debt
inherited from the socialist period; when small banks that
held few deposits were allowed to fail, where the social
costs of such failure were low; and when only banks that got
into trouble because of external shocks were rescued while
those suffering from poor management were liquidated. f) The
government, not the central bank, should undertake bank
restructuring. Central bank refinancing is not transparent
and could lead to hyperinflation. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Tang, Helena Zoli, Edda Klytchnikova, Irina |
| author_facet |
Tang, Helena Zoli, Edda Klytchnikova, Irina |
| author_sort |
Tang, Helena |
| title |
Banking Crises in Transition Economies : Fiscal Costs and Related Issues |
| title_short |
Banking Crises in Transition Economies : Fiscal Costs and Related Issues |
| title_full |
Banking Crises in Transition Economies : Fiscal Costs and Related Issues |
| title_fullStr |
Banking Crises in Transition Economies : Fiscal Costs and Related Issues |
| title_full_unstemmed |
Banking Crises in Transition Economies : Fiscal Costs and Related Issues |
| title_sort |
banking crises in transition economies : fiscal costs and related issues |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2000/11/717460/banking-crises-transition-economies-fiscal-costs-related-issues http://hdl.handle.net/10986/19751 |
| _version_ |
1764440541939892224 |
| spelling |
okr-10986-197512021-04-23T14:03:44Z Banking Crises in Transition Economies : Fiscal Costs and Related Issues Tang, Helena Zoli, Edda Klytchnikova, Irina ACCOUNTING BAD DEBT BAD DEBTS BANK ASSETS BANK CRISES BANK FAILURE BANK LIQUIDATION BANK RESTRUCTURING BANK RUNS BANK SOLVENCY BANKING CRISES BANKING CRISIS BANKING DISTRESS BANKING SECTOR BANKING SECTOR DEVELOPMENT BANKING SYSTEM BANKING SYSTEMS BANKRUPTCY BANKRUPTCY LAWS BANKS CAUSES OF BANKING CRISES CENTRAL BANK CENTRAL BANKS COLLATERAL COMMERCIAL BANKS CONSOLIDATION CURRENCY DEPOSITORS DEPOSITS DEVALUATION DISTRESSED BANKS ECONOMIC GROWTH FINANCIAL CRISIS FINANCIAL DEEPENING FINANCIAL DISTRESS FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIATION FINANCIAL RESTRUCTURING FISCAL COST FISCAL COSTS FOREIGN BANKS FOREIGN EXCHANGE HARD BUDGET CONSTRAINTS HARD CURRENCY INCOME INFLATION INSOLVENCY LIQUIDATION OF BANKS LIQUIDITY MACROECONOMIC CONDITIONS MERGERS MONETARY POLICY MORAL HAZARD OUTPUT PAYMENTS UNION PORTFOLIOS PRIVATE BANKS PRIVATIZATION PROFITABILITY RECAPITALIZATION RESOLVING BANKING CRISES SAVINGS SHAREHOLDERS SMALL BANKS SOLVENCY SPECIALIZED BANKS STABILIZATION STATE BANKS STATE OWNERSHIP TRADING TRANSITION ECONOMIES The authors look at strategies for dealing with banking crises in 12 transition economies -- five from Central and Eastern Europe (CEE): Bulgaria, the Czech Republic, Hungary, Macedonia, and Poland; the three Baltic states: Estonia, Latvia, and Lithuania; and four countries from the Commonwealth of Independent States (CIS): Georgia, Kazakhstan, the Kyrgyz Republic, and Ukraine. Three types of strategies were used to deal with the crises. The CEE countries generally pursued extensive restructuring and recapitalizing of banks; most CIS countries pursued large-scale liquidation; and the Baltic states generally pursued a combination of liquidation and restructuring. The strategy pursued reflected macroeconomic conditions and the level of development in a country's banking sector. There were more new banks in the former Soviet Union (FSU-the CIS and Baltic states), but they tended to be small, undercapitalized, and not deeply engaged in financial intermediation. The CEE countries generally incurred higher fiscal costs than the FSU countries but ended up with sounder, more efficient banking systems, with many of the recapitalized banks being privatized to strategic foreign investors. The CIS countries pursued a less fiscally costly approach but have been left with weak banking systems and low levels of intermediation. The Baltic states appear to have struck a good balance, incurring modest fiscal costs while making their systems sounder and more efficient. The findings suggest the following: a) Operational, financial, and institutional restructuring should be undertaken in parallel. b) Financial restructuring should involve adequate recapitalization to deter moral hazard and repeated recapitalization. c) Operational restructuring should entail privatization to core investors (particularly to reputable foreign banks). d) The enterprise problems underlying banking problems must also be addressed. e) Fiscal costs were reduced when governments dealt only with bad debt inherited from the socialist period; when small banks that held few deposits were allowed to fail, where the social costs of such failure were low; and when only banks that got into trouble because of external shocks were rescued while those suffering from poor management were liquidated. f) The government, not the central bank, should undertake bank restructuring. Central bank refinancing is not transparent and could lead to hyperinflation. 2014-08-27T16:51:52Z 2014-08-27T16:51:52Z 2000-11 http://documents.worldbank.org/curated/en/2000/11/717460/banking-crises-transition-economies-fiscal-costs-related-issues http://hdl.handle.net/10986/19751 English en_US Policy Research Working Paper;No. 2484 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Europe and Central Asia Eastern Europe |