Large-scale corporate restructuring made necessary by a financial crisis is one of the most daunting challenges faced by economic policymakers. The government is forced to take a leading role, even if indirectly, because of the need to prioritize policy goals, address market failures, reform the legal and tax systems, and deal with the resistance of powerful interest groups. The objectives of large-scale corporate restructuring are in essence to restructure viable corporations and liquidate nonviable ones, restore the health of the financial sector, and create the conditions for long-term economic growth.
Examines the steps involved in restructuring the corporate sector. Large-scale corporate restructuring made necessary by a financial crisis is one of the most daunting challenges faced by economic policymakers. The government is forced to take a leading role, even if indirectly, because of the need to prioritize policy goals, address market failures, reform the legal and tax systems, and deal with the resistance of powerful interest groups.
This chapter examines recent experiences with banking crises in seven countries—Argentina, Chile, Malaysia, Philippines, Spain, Thailand, and Uruguay—focusing on the linkages between macroeconomic conditions, financial sector reforms and financial crisis, and the range and effectiveness of measures to deal with financial crises.1
In a generally healthy and well-regulated banking system, individual banks can and usually should be allowed to fail. Allowing market discipline and supervisory intervention to weed out weak institutions minimizes moral hazard. Where vulnerability is widespread, however, the potential negative externalities associated with widespread bank failures may call for intervention beyond what can be accomplished by the market or standard supervisory instruments.1 Systemic bank restructuring comprises a comprehensive program to rehabilitate a significant part of a banking system so as to provide vital banking services efficiently on a sustainable basis. Such restructuring programs have been undertaken by some 30 Fund member countries over the last fifteen years in a range of economic and political circumstances.
The papers in this volume illustrate the structural linkages among different components of financial sector reforms and the impact of these reforms on macroeconomic performance, based on country experiences. An underlying theme throughout the volume is that specific financial sector reforms should be properly sequenced and coordinated in order to complement and support macrostabilization objectives, and to reflect the technical linkages among various components of financial sector reform. An appropriate sequencing of financial sector reforms that supports stabilization can help to derive the full benefits of these reforms in terms of efficiency and growth. The book is therefore concerned with the elements that contribute to orderly liberalizations of financial systems, and with avoiding the pitfalls from inappropriately sequenced or insufficiently supported financial reforms.