- International Monetary Fund
- Published Date:
- March 1991
Banking Crises: Cases and Issues
Edited by V. Sundararajan and
Tomás J.T. Baliño
© 1991 International Monetary Fund
Reprinted April 1998
Cover design by IMF Graphics Section
Library of Congress Cataloging-in-Publication Data
Banking crises : cases and issues / edited by V. Sundararajan and Tomás J. T. Baliño.
Includes bibliographical references.
ISBN 1-55775-187-0 (paper)
1. Banks and banking. 2. Banks and banking—Case studies. 3. Bank failures.
I. Sundararajan, Vasudevan. II. Baliño, J. T. Tomás.
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Over the past decade, the macroeconomic consequences of solvency and asset quality problems of banking institutions have attracted growing attention among both policymakers and the academic community. The worldwide trend toward deregulation of financial sectors, and the widespread banking problems of many countries have raised major questions relating to the linkages between deregulation, risks in the banking sector, and a banking crisis. Even if a crisis is avoided, the condition of bank portfolios strongly influences the design and effectiveness of stabilization policies, as was apparent in the recent experiences of many countries. Bank portfolio weaknesses constrain the flexibility in interest rate policy, limit the scope of reforms in the financial sector and in monetary management, distort credit allocation, and can compromise monetary and fiscal stability, particularly if central bank or fiscal assistance is needed to protect the integrity of deposit contracts.
This book considers some of these issues on the basis of the experience of several countries that have faced a banking crisis—defined as widespread insolvencies in the financial sector leading to significant government intervention. The interlinkages between macroeconomic performance and the financial structure of an economy become particularly transparent in times of financial crisis. These crises clearly highlight the importance of appropriate prudential regulations and of the institutional framework to deal with problem banks and problem borrowers in effectively pursuing stabilization goals. This book brings together work of economists in the Central Banking Department of the IMF who have been intimately involved in central banking and financial sector reforms in many developing countries.
It is my hope that the papers will stimulate the interest of policymakers—and their advisors—in attempts to enhance the effectiveness of macro-stabilization policies in the context of structural reforms in the financial sector.
Justin B. Zulu
Central Banking Department
The editors wish to thank the contributing authors for their papers, earlier versions of which were issued as IMF Working Papers. The views expressed are those of their respective authors and should not be interpreted as those of the IMF.
The editors are particularly grateful to Justin B. Zulu, Director, Central Banking Department, and Linda M. Koenig, Deputy Director of the same department when this project began, for initiating the project and for providing enthusiastic encouragement and making available the resources needed to complete it.
Also to be thanked are Alfredo Leone, who assisted in the editing of some of the papers, Pierluigi Balduzzi, who contributed to this project while he was a summer intern with the Fund, Dawit Makonnen for his research assistance, and Caroline Cox and Amelita R. Concepcion for their excellent secretarial assistance. Elin Knotter of the External Relations Department provided editorial assistance throughout the production of this book.
Finally, the editors wish to express their gratitude to the many staff members of the IMF Central Banking Department who provided guidance, encouragement, and support for this project.
- 1 Issues in Recent Banking Crises
- V. Sundararajan and Tomás J. T. Baliño
- 2 The Argentine Banking Crisis of 1980
- Tomás J.T. Baliño
- 3 Liberalization, Crisis, Intervention: The Chilean Financial System, 1975–85
- Andrés Velasco
- 4 Crisis in the Financial Sector and the Authorities’ Reaction: The Philippines
- Jean-Claude Nascimento
- 5 Distressed Financial Institutions in Thailand: Structural Weaknesses, Support Operations, and Economic Consequences
- R. Barry Johnston
- 6 Liberalization and Financial Crisis in Uruguay, 1974–87
- Juan Pérez-Campanero and Alfredo M. Leone
The following symbols have been used throughout this paper:
- … to indicate that data are not available;
- — to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist;
- – between years or months (e.g., 1990–91 or January-June) to indicate the years or months covered, including the beginning and ending years or months;
- / between years (e.g., 1990/91) to indicate a crop or fiscal (financial) year.
“Billion” means a thousand million.
Minor discrepancies between constituent figures and totals are due to rounding.
The term “country,” as used in this paper, does not in all cases refer to a territorial entity that is a state as understood by international law and practice; the term also covers some territorial entities that are not states, but for which statistical data are maintained and provided internationally on a separate and independent basis.