the various responsible government agencies comply with the conditions

The various responsible government agencies comply

This preview shows page 12 - 14 out of 21 pages.

the various responsible government agencies comply with the conditions contained in agreements with these organizations. Most banking crisis involve significant costs to the government that will have to be financed. Hence, the ministry of finance must be aware of the plans to restructure and recapitalize the banking sector. Because it will directly, or indirectly finance the nonperforming assets taken from the banking sector, the ministry will need to have projections on collections on these assets and their timing so as to develop an appropriate funding strategy. Where banks are recapitalized with government bonds the ministry must work together with the debt management agency, the central bank and the supervisory agency to assure that these bonds are liquid and have the characteristics necessary to improve the immediate earnings and cash flow position of the affected banks. All of these efforts require close coordination between the ministry of finance and the central bank, the deposit insurer, bank supervisor, and when appropriate a separate bank-restructuring agency. In addition, these actions need to be coordinates with the overall debt management policy of the government. The assignment of responsibilities is a critical first step in the development and implementation of a bank restructuring strategy. In some countries, such as the U.S., the Philippines, and Turkey, the deposit insurer has the statutory responsibility to handle the restructuring of that portion of the banking sector deemed to be insolvent. 8 In many other 8 In dealing with its savings and loan crisis, the United States, for political reasons, established a limited life agency, the Resolution Trust Corporation (RTC), to handle the restructuring of the thrift industry. However, the restructuring of the banking industry
Image of page 12

Subscribe to view the full document.

countries, the bank supervisor, if independent, or the central bank has the ability to encourage banks to merge and in other ways bring about a restructuring of the industry. However, in the absence of a clear long-standing legislation, governments must assign the responsibility to a specific organization. In some of the Asian crisis countries, either because of technical reasons and/or to gain political acceptance, a variety of new institutional structures were put in place. In Indonesia no institution was responsible for bank restructuring until the creation of the Indonesian Bank Restructuring Agency (IBRA). IBRA was given a broad range of powers to restructure institutions by forcing mergers or closing the institutions. It can use public funds to purchase nonperforming assets form banks or to recapitalize banks. In Korea, responsibility was given to a newly established Financial Supervisory Commission. The commission coordinated the work of the agencies responsible for addressing the crisis, including the asset management corporation (KAMCO) and the Korean Deposit Insurance Company (KDIC).
Image of page 13
Image of page 14
  • Winter '14

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Ask Expert Tutors You can ask 0 bonus questions You can ask 0 questions (0 expire soon) You can ask 0 questions (will expire )
Answers in as fast as 15 minutes