Resolving Bank Failures in Argentina : Recent Developments and Issues
Policies and procedures to resolve bank failures have evolved significantly in Argentina since the introduction of currency convertibility in 1991, and particularly in reaction to the 1995 tequila crisis, which exposed the inadequacy of the bank ex...
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| Format: | Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2015
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| Online Access: | http://documents.worldbank.org/curated/en/2000/03/438161/resolving-bank-failures-argentina-recent-developments-issues http://hdl.handle.net/10986/22333 |
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okr-10986-223332021-04-23T14:04:07Z Resolving Bank Failures in Argentina : Recent Developments and Issues de la Torre, Augusto ACCOUNTING PRINCIPLES ASSET VALUE ASSETS BALANCE SHEET BANK CAPITALIZATION BANK CLOSURES BANK DEPOSITS BANK FAILURE BANK FAILURE RESOLUTION BANK FAILURES BANK LIABILITIES BANK LIQUIDITY BANK MERGERS BANK PRIVATIZATION BANK REFORM BANK SUPERVISION BANKING ASSOCIATIONS BANKING CRISES BANKING INDUSTRY BANKING LAW BANKING SECTOR BANKING SYSTEM BANKS BONDS BOOK VALUE CAPITAL REQUIREMENTS CENTRAL BANK CENTRAL BANK LIQUIDITY CONSOLIDATION CONTAGION DEPOSIT INSURANCE DEPOSITORS DEPOSITS DISCLOSURE ECONOMIC RESEARCH EXIT FRAMEWORK FACE VALUE FINANCIAL ENGINEERING FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL MARKETS FINANCIAL SECTOR FISCAL YEAR FOREIGN CAPITAL GOING CONCERN VALUE INFLATION INSOLVENCY INSURED DEPOSITS INTEREST RATE INTEREST RATES INTERNATIONAL RESERVES JUDICIAL LIQUIDATION LEGAL FRAMEWORK LEGAL PROTECTION LEGISLATION LIMITED DEPOSIT INSURANCE LIQUIDATION MORAL HAZARD PAYOUT PRIVATE BANKS PROBABILITY OF DEFAULT PROPERTY RIGHTS PROVINCIAL BANKS SECURITIZATION SHAREHOLDERS SOLVENCY SUBORDINATED DEBT SUPERVISORY AUTHORITIES TRUST FUND TRUSTS Policies and procedures to resolve bank failures have evolved significantly in Argentina since the introduction of currency convertibility in 1991, and particularly in reaction to the 1995 tequila crisis, which exposed the inadequacy of the bank exit framework in place then. The author reviews the institutional changes introduced in Argentina in 1995 to handle bank failures more effectively, particularly the creation of the deposit guarantee scheme and the procedural framework for resolving bank failures, embedded in Article 35 of the Financial Institutions Law. This framework enables the Central Bank to carve out the assets and privileged liabilities of the failing bank and transfer them to sound banks, thereby sending only a residual balance sheet to judicial liquidation. Subsequent refinements in the application of Article 35 procedures eventually led to current Argentine practice. The author examines this practice in detail by considering the handling of the recent failure of Banco Almafuerte. The author assesses a number of issues that arise from the Argentine model of bank failure resolution, taking into account both country-specific circumstances and more general concepts and concerns. He emphasizes the potential tradeoffs between reducing contagion risk, limiting moral hazard, and avoiding unnecessary destruction of asset value; the implications of priority-of-claims rules and least-cost criteria; the pros and cons of alternative organizational and institutional arrangements; and the need for legal security. Finally, he outlines two prototypical approaches to striking a balance between rules and discretion, an issue underlying much of the ongoing policy discussion on alternative bank exit frameworks. 2015-07-29T15:27:23Z 2015-07-29T15:27:23Z 2000-03 Working Paper http://documents.worldbank.org/curated/en/2000/03/438161/resolving-bank-failures-argentina-recent-developments-issues http://hdl.handle.net/10986/22333 English en_US Policy Research Working Paper;No. 2295 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper Latin America & Caribbean South America Argentina |
| 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 PRINCIPLES ASSET VALUE ASSETS BALANCE SHEET BANK CAPITALIZATION BANK CLOSURES BANK DEPOSITS BANK FAILURE BANK FAILURE RESOLUTION BANK FAILURES BANK LIABILITIES BANK LIQUIDITY BANK MERGERS BANK PRIVATIZATION BANK REFORM BANK SUPERVISION BANKING ASSOCIATIONS BANKING CRISES BANKING INDUSTRY BANKING LAW BANKING SECTOR BANKING SYSTEM BANKS BONDS BOOK VALUE CAPITAL REQUIREMENTS CENTRAL BANK CENTRAL BANK LIQUIDITY CONSOLIDATION CONTAGION DEPOSIT INSURANCE DEPOSITORS DEPOSITS DISCLOSURE ECONOMIC RESEARCH EXIT FRAMEWORK FACE VALUE FINANCIAL ENGINEERING FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL MARKETS FINANCIAL SECTOR FISCAL YEAR FOREIGN CAPITAL GOING CONCERN VALUE INFLATION INSOLVENCY INSURED DEPOSITS INTEREST RATE INTEREST RATES INTERNATIONAL RESERVES JUDICIAL LIQUIDATION LEGAL FRAMEWORK LEGAL PROTECTION LEGISLATION LIMITED DEPOSIT INSURANCE LIQUIDATION MORAL HAZARD PAYOUT PRIVATE BANKS PROBABILITY OF DEFAULT PROPERTY RIGHTS PROVINCIAL BANKS SECURITIZATION SHAREHOLDERS SOLVENCY SUBORDINATED DEBT SUPERVISORY AUTHORITIES TRUST FUND TRUSTS |
| spellingShingle |
ACCOUNTING PRINCIPLES ASSET VALUE ASSETS BALANCE SHEET BANK CAPITALIZATION BANK CLOSURES BANK DEPOSITS BANK FAILURE BANK FAILURE RESOLUTION BANK FAILURES BANK LIABILITIES BANK LIQUIDITY BANK MERGERS BANK PRIVATIZATION BANK REFORM BANK SUPERVISION BANKING ASSOCIATIONS BANKING CRISES BANKING INDUSTRY BANKING LAW BANKING SECTOR BANKING SYSTEM BANKS BONDS BOOK VALUE CAPITAL REQUIREMENTS CENTRAL BANK CENTRAL BANK LIQUIDITY CONSOLIDATION CONTAGION DEPOSIT INSURANCE DEPOSITORS DEPOSITS DISCLOSURE ECONOMIC RESEARCH EXIT FRAMEWORK FACE VALUE FINANCIAL ENGINEERING FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL MARKETS FINANCIAL SECTOR FISCAL YEAR FOREIGN CAPITAL GOING CONCERN VALUE INFLATION INSOLVENCY INSURED DEPOSITS INTEREST RATE INTEREST RATES INTERNATIONAL RESERVES JUDICIAL LIQUIDATION LEGAL FRAMEWORK LEGAL PROTECTION LEGISLATION LIMITED DEPOSIT INSURANCE LIQUIDATION MORAL HAZARD PAYOUT PRIVATE BANKS PROBABILITY OF DEFAULT PROPERTY RIGHTS PROVINCIAL BANKS SECURITIZATION SHAREHOLDERS SOLVENCY SUBORDINATED DEBT SUPERVISORY AUTHORITIES TRUST FUND TRUSTS de la Torre, Augusto Resolving Bank Failures in Argentina : Recent Developments and Issues |
| geographic_facet |
Latin America & Caribbean South America Argentina |
| relation |
Policy Research Working Paper;No. 2295 |
| description |
Policies and procedures to resolve bank
failures have evolved significantly in Argentina since the
introduction of currency convertibility in 1991, and
particularly in reaction to the 1995 tequila crisis, which
exposed the inadequacy of the bank exit framework in place
then. The author reviews the institutional changes
introduced in Argentina in 1995 to handle bank failures more
effectively, particularly the creation of the deposit
guarantee scheme and the procedural framework for resolving
bank failures, embedded in Article 35 of the Financial
Institutions Law. This framework enables the Central Bank to
carve out the assets and privileged liabilities of the
failing bank and transfer them to sound banks, thereby
sending only a residual balance sheet to judicial
liquidation. Subsequent refinements in the application of
Article 35 procedures eventually led to current Argentine
practice. The author examines this practice in detail by
considering the handling of the recent failure of Banco
Almafuerte. The author assesses a number of issues that
arise from the Argentine model of bank failure resolution,
taking into account both country-specific circumstances and
more general concepts and concerns. He emphasizes the
potential tradeoffs between reducing contagion risk,
limiting moral hazard, and avoiding unnecessary destruction
of asset value; the implications of priority-of-claims
rules and least-cost criteria; the pros and cons of
alternative organizational and institutional arrangements;
and the need for legal security. Finally, he outlines two
prototypical approaches to striking a balance between rules
and discretion, an issue underlying much of the ongoing
policy discussion on alternative bank exit frameworks. |
| format |
Working Paper |
| author |
de la Torre, Augusto |
| author_facet |
de la Torre, Augusto |
| author_sort |
de la Torre, Augusto |
| title |
Resolving Bank Failures in Argentina : Recent Developments and Issues |
| title_short |
Resolving Bank Failures in Argentina : Recent Developments and Issues |
| title_full |
Resolving Bank Failures in Argentina : Recent Developments and Issues |
| title_fullStr |
Resolving Bank Failures in Argentina : Recent Developments and Issues |
| title_full_unstemmed |
Resolving Bank Failures in Argentina : Recent Developments and Issues |
| title_sort |
resolving bank failures in argentina : recent developments and issues |
| publisher |
World Bank, Washington, DC |
| publishDate |
2015 |
| url |
http://documents.worldbank.org/curated/en/2000/03/438161/resolving-bank-failures-argentina-recent-developments-issues http://hdl.handle.net/10986/22333 |
| _version_ |
1764450617309265920 |