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Bank Resolution Costs, Depositor Preference, and Asset Encumbrance
Author:
Mr. Daniel C Hardy
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https://orcid.org/0000-0002-2893-3801
Series:
IMF Working Papers
Volume/Issue:
Volume 2013: Issue 172
Language:
English
Publication Date:
18 Jul 2013
DOI:
https://doi.org/10.5089/9781484354100.001
ISBN:
9781484354100
ISSN:
1018-5941
Pages:
30
Keywords:
WP; interest rate; Bankruptcy costs; bank resolution; depositor preference; asset encumbrance; bankruptcy cost; bank resolution procedure; borrowing bank; rate of return; net payoff; conflict cost; Collateral; Legal support in revenue administration; Deposit insurance; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Depositor preference and collateralization of borrowing may reduce the cost of settling the conflicts among creditors that arises in case of resolution or bankruptcy. This net benefit, which may be capitalized into the value of the bank rather than affect creditors’ expected returns, should result in lower overall funding costs and thus a lower probability of distress despite increasing encumbrance of the bank’s balance sheet. The benefit is maximized when resolution is initiated early enough for preferred depositors to remain fully protected.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund