A systemic crisis sets in when bad assets reach. Solving the problem of "toxic" assets of banks in the context of overcoming the crisis V.S.Beloshapka
The banking system crisis implies the inability of most banks to fulfill their obligations to counterparties - primarily depositors and creditors. The banking crisis is characterized by a decrease in the value of banks' assets, a significant increase in the share of bad and doubtful debts in their loan portfolios.
Crisis of the banking system of the Russian Federation
Crises in the banking system of the Russian Federation have happened more than once. Sometimes they (as in 1998 and 2008) became the consequences of world crises, in other cases they were provoked exclusively by internal factors. The most famous crisis of the Russian banking system this kind happened in 2004, when several leading credit institutions RF limited the issuance of funds to clients. The reason for this situation was the crisis in the interbank lending market caused by the bankruptcy of Sodbiznesbank.
We will dwell in more detail below on the specifics of the two deep systemic banking crises in Russia.
Banking crisis in Russia in 1998
The crisis in the Russian banking system was caused by a number of factors, including the deterioration financial situation on the world, and purely internal reasons:
- the critical state of the domestic economy; growth of the budget deficit, external and internal debt of the Russian Federation; negative trade balance
- the government's suspension of payments on loans from foreign investors for a period of 3 months, as a result of which the Russian Federation began to look bankrupt in the eyes of the world community and Russians.
- monopoly performance by the Central Bank of the functions of managing the banking system, etc.
Economists also believe that one of the reasons for the banking crisis in Russia is the unfair behavior of financial credit institutions, masking the lack of real capital in the reporting, which in turn prevented the regulator from recognizing the "alarming symptoms" in time.
Banking crisis entailed the withdrawal of savings by depositors, which led to the bankruptcy of several dozen financial institutions. As a result of the banking crisis in Russia, the economic situation in the country has worsened, and, consequently, financial position, not only credit organizations, but also their debtors. Against this background, the volume of overdue and bad debt in front of financial institutions.
During the crisis of the Russian banking system, as a result of the actions of depositors and inaction of borrowers, banks lost liquidity, their capital base (excluding the RF Security Council) decreased by 60%. Generally, banking crisis in Russia affected the overwhelming majority of domestic financial institutions and had a pronounced systemic character.
Crisis of the Russian banking system in 2008
Six years ago, a domestic banking system experienced another deep crisis. Foreign economists use several criteria to define the systemic crisis of the banking system. The first criterion is a high proportion of overdue loans, the second is a large amount of funds aimed at supporting the stability of the banking sector, the third is the active process of nationalization and merger of financial and credit institutions, the fourth is the outflow of funds from accounts, as a manifestation of panic among the population. A banking crisis in Russia or in another country is systemic if at least 2 conditions out of 4 are met - and in 2008 at least two criteria were met.
The main manifestation of the banking system crisis was the massive withdrawal of retail deposits. As a result, the crisis in the banking system of Russia suffered the most medium-sized financial institutions in terms of assets, focused on rapid development and relying on funds from individuals attracted by them.
The crisis in the Russian banking system also led to numerous mergers and acquisitions in the financial sector, some of which were carried out at the initiative of the Deposit Insurance Agency (DIA). Until the DIA developed a mechanism for the rehabilitation of credit institutions with the involvement of a third financial institution, the state was engaged in the "rescue" of banks. The government allocated $ 4 trillion for anti-crisis measures and stabilization of the banking system. rub. (taking into account tax incentives- 6 trillion. rub.).
The forms of manifestation of a systemic banking crisis, in accordance with their characteristics, can be considered at two levels - a deeper and a superficial one.
In the first case, these forms are not always obvious (not visible to the "naked eye") and for their identification it is necessary to a certain extent to be able to analyze the situation in banking... Such forms of manifestation of a crisis situation in this area can be considered the above points, which are usually called circumstances, or factors that make the crisis a reality (nine such points were highlighted, but apparently more can be named). As a rule, they refer to the initial phase of the crisis, when it is just unfolding, almost imperceptibly, secretly gaining strength.
Superficial forms of manifestation of a systemic crisis are usually obvious to everyone who is interested in this issue. These include, for example, the following:
- a sharp decrease in the volume of activities or the actual termination of a large number of banks of basic operations (significant delays or complete suspension of customer payments, "freezing" of credit operations, non-refund of customers of their deposits and deposits, etc.) or any operations in general.
- an unusually large number of reviews from license banks the central bank;
- almost instantaneous disappearance of the interbank market (it then has to be re-created);
- the emergence of a relatively large number of proposals from banks about their readiness to conduct transactions on terms that clearly differ from the average market;
- widespread panic in society in relation to all banks and in general all kinds of financial institutions;
- activation of procedures for liquidation of non-viable KOs.
Superficial forms of manifestation of systemic shock are characteristic of the "summit" phase of the crisis and, to a lesser extent, for the final phase.
The main consequences of the systemic crisis
The consequences of a systemic banking crisis are quite diverse, but they are different for one or another party related to banking.
For society as a whole the onset of a systemic banking crisis and its overcoming means:
- decrease in total social capital, the size of national wealth, decline in production, decrease in gross domestic product(hereinafter - GDP);
- fiscal destabilization, high inflation and demonetization of the economy;
- general deterioration of the situation in the economy, assessments of this situation (including from the side of foreign business circles) and prospects for its improvement;
- aggravation in the sphere of social relations and the need to quickly relieve the tension that has arisen;
- the need to develop new approaches to the organization and management of not only the banking sector, but the entire economy and the implementation of a set of practical measures based on such approaches;
- the need to incur more or less significant unforeseen expenses.
For bank customers the same process would mean:
- the loss of more or less of the money they entrusted to banks that could not survive the crisis;
- deterioration of business conditions (for enterprises, organizations, individual entrepreneurs), conditions banking services individuals;
- undermining the financial position of borrowers due to the deterioration economic situation in the country, the growth of their overdue and bad debts to banks;
- the need to search for other (reliable) banks, if the previous ones have failed;
- perhaps the need to revise relations with banks that managed to survive the wave of the crisis and maintain their efficiency.
For the banking community as a whole the consequences can be as follows:
- decrease in total bank capital;
- decline in the value of banking sector assets;
- withdrawal of their funds by some clients even from reliable banks (reduction of the resource base of the banking system);
- deterioration in the quality of banks' loan portfolios;
- the emergence or strengthening of the discrepancy between the liabilities and assets of banks in terms of volumes and terms;
- more or less complete loss of solvency and liquidity by banks;
- falling confidence in banks in general;
- decrease in the volume of transactions and profits;
- redistribution of clientele between banks that remained "afloat";
- the need to clarify the nature of customer relationships;
- the emergence of tension in relations with society, bodies regulating the banking sector, in general with the authorities, with auxiliary organizations;
- network reduction banking institutions(geographically remote divisions of banks).
- the emergence of negative trends in the labor market of banking specialists;
- the need at least to adjust the development strategy, policy in relation to different areas of activity and all the processes of organizing management in banks;
- the need to participate, including with your finances, in activities designed to improve the situation.
Moreover, each of the listed points allows and even suggests a more detailed decoding.
Thus, banking crises are more than undesirable phenomena, leading to severe general economic and social implications... Among all the possible immediate consequences of a systemic banking crisis, none can be found that could be interpreted as positive or beneficial. Only the more distant consequences of the crisis, more precisely, not the crisis itself, but the lessons that society will learn from it, the implementation of those adequate, correct decisions that will be made on the basis of a sober analysis of the causes and pictures of the course of the crisis, can turn out to be positive.
Practice questions
In 2011, the ratio of banking sector assets to GDP increased from 74.8% to 76.3%. In fig. 1.1 in the form of a diagram, comparative data of this indicator in Russia with the BRICS countries and the European Union are presented.
Rice. 1.1.
In 2011, the ratio of the banking sector's capital to GDP amounted to 9.6%, having decreased by 0.9 percentage points over the year. The main source of the formation of the resource base of commercial entities at the end of 2011 (as in the last previous years) were deposits of individuals: the ratio of their volume to GDP did not change and amounted to 21.7%. The ratio of deposits of non-financial organizations to GDP increased by 2% and amounted to 15.3%. The ratio of the total volume of issued loans to GDP increased by 3.6% and amounted to 52.6%, while their share in the total assets of the banking sector increased by 3.4% and amounted to 68.9%. The ratio of loans to non-financial organizations and individuals to GDP increased by 2.4% and amounted to 42.6%.
In 2011, the number of operating KOs decreased by 34 units - to 978 organizations. During 2011, licenses were revoked from 22 KOs; excluded from the Book due to reorganization in the form of affiliation state registration 18 KO; obtained a license to carry out banking operations five new KOs. Thus, in 2011, the trend continued recent years reducing the number of operating KOs (Fig. 1.2).
Rice. 1.2.
Table 1.1 presents data on the number of liquidated credit institutions for 2007–2011. (For comparison, data on the number of banks liquidated in the United States over these years are indicated).
Table 1.1. Number of liquidated KOs
Liquidated CRs in the Russian Federation |
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Liquidated banks in the USA |
In 2011, the reduction in the number of operating KOs was typical for the majority Russian regions: the number of regional banks decreased from 487 to 466. The growth rates of assets of regional banks (7.8%) in 2011 were lower than the growth rates of assets of the banking sector as a whole (23.1%). As a result, the share of assets of regional banks in total assets at the end of the year decreased from 13.7% to 12%. The capital of regional banks for the year increased by 5.5%, or by 33.4 billion rubles. (capital of the banking sector - by 10.8%, or 509.8 billion rubles).
- Report of the Central Bank of the Russian Federation on the development of the banking sector and banking supervision in 2011. M .: Publishing house of the Bank of Russia. 2012.
- Data from the Central Bank of the Russian Federation and the Federal Deposit Insurance Corporation (FDIC).
A systemic banking crisis has begun in Russia, and in the coming year it is highly likely to worsen, RBC writes with reference to experts from the Center for Macroeconomic Analysis and Short-Term Forecasting (CMASP) in its report. They believe that soon the share of bad assets in the assets of the banking system will exceed 10%, and at least one of the systemically important banks will need additional capitalization at the expense of the state.
CMASF experts described the high risk of a systemic banking crisis until September 2015 in a review published on Wednesday, October 15. According to the authors of the report, the likelihood of a banking crisis in Russia already exceeds the critical threshold.
CMASF experts call a systemic banking crisis a situation in which at least one of three conditions is realized: first, withdrawal of a significant portion of funds from accounts and deposits by clients; second, the share of bad assets in the total assets of the banking system exceeds 10%; third, reorganization or nationalization of a significant part (more than 10 banks or large-scale (in the amount of more than 2% of GDP) one-time recapitalization of banks by the state) is being carried out.The third measure is forced: its purpose is to smooth out the consequences of the outflow of client funds from banks and the growth of problem banking assets
One of these conditions was met in the first quarter of 2014, according to experts of CMASF: funds of all categories banking clients on accounts and deposits decreased by 1.4%, including funds of individuals - by 3.9%. “Formally, from this moment we can talk about the ongoing systemic crisis banking sector ", - stated in the review.
Experts expect that in the near future the share of bad assets of the banking system will exceed 10% (now it is just over 8%). In addition, the CMASF report notes that at least one of the systemically important banks will lose stability and will need government support. “This conclusion is based on an analysis of the dynamics of overdue loans and capital adequacy indicators of Russian banks,” the document says.
However, experts do not consider the situation to be catastrophic and are confident that three factors can help to get out of the banking crisis. First, the decline in the real effective exchange rate of the ruble has an indirect positive effect on the banking system. The review indicates that while the decline is not a landslide, it is helping to restore the profitability of enterprises that compete with imports and exporters. In addition, the growth in unemployment has stalled, which reduces the risk of an increase in the number of insolvent borrowers - individuals. Also, CMASF experts note that the share of loans to enterprises and the population in GDP is important: “The growth of this indicator has stopped due to the cooling of the retail lending market. This creates the preconditions for stabilizing the level of debt burden ”.
08.02.2018
Developments. The Central Bank has adjusted the dictionary. New concepts have appeared in the policy document of the Bank of Russia. Yesterday, the Bank of Russia issued a policy document describing plans for the development and application of new technologies in financial market for the coming years. The main ideas, concepts and projects have already been announced by the regulator in one way or another. At the same time, the Central Bank introduces and discloses new terms, in particular, RegTech, SupTech and “end-to-end identifier”. Experts note that these areas have been successfully developing in Europe for a long time.
08.02.2018
Developments. The State Duma has issued a permit for capital to enter Russia. It was decided to repeat the one-time business amnesty. The State Duma of Russia adopted on Wednesday in the first, and a few hours later - in the second reading, initiated by Vladimir Putin, a package of bills on the renewal of the capital amnesty. The new act of “forgiveness” was announced as the second phase of the 2016 campaign, which was then filed as a one-off and was virtually ignored by the business. Since the attractiveness of the Russian jurisdiction and the trust in its law enforcement officers have not increased over the past two years, now the stake is placed on the thesis that capital should be returned to the country because it is worse for them abroad than in Russia.
07.02.2018
Developments. Control and supervision are adjusted to the figure. Business and government have compared their approaches to reform. The results and prospects of the reform of control and supervisory activities were discussed yesterday by representatives of the business community and regulators as part of the "Week of Russian Business" under the auspices of the Russian Union of Industrialists and Entrepreneurs. Despite the decrease in the number of scheduled inspections by 30%, business complains about the administrative burden and calls on the authorities to respond more quickly to the proposals of entrepreneurs. The government, in turn, plans to tackle the revision of mandatory requirements, reform of the Administrative Code, digitalization and acceptance of reporting in the "one window" mode.
07.02.2018
Developments. Transparency will be added to issuers. But investors are waiting for additions on shareholders' meetings. The Moscow Exchange is preparing amendments to the listing rules for issuers whose shares are on the top quotation lists. In particular, companies will be obliged to create on their websites special sections for shareholders and investors, the maintenance of which will be controlled by the exchange. Large issuers already meet these requirements, but investors consider it important to enshrine these obligations in the document. In addition, in their opinion, the exchange should pay attention to the disclosure of information for shareholders' meetings, which is the most painful issue in the relationship between issuers and investors.
07.02.2018
Developments. The Central Bank of Russia will get a grasp of advertising. The financial regulator has found a new field of supervision. The integrity of financial advertising will soon begin to be assessed not only by the Federal antimonopoly service, but also the Central Bank. Starting this year, within the framework of behavioral supervision, the Bank of Russia will identify advertisements financial companies and banks, containing signs of violations, and report this to the FAS. If banks receive not only fines from the FAS, but also recommendations from the Central Bank, this may change the situation with advertising in the financial market, experts say, but the procedure for applying the Central Bank's supervisory measures in the new area has not yet been described.
06.02.2018
Developments. Not by accent, but by passport. Foreign investments under the control of Russians will be left without international protection in the spring. Government bill that deprives investments controlled by Russians foreign companies and persons with dual citizenship protection of the law on foreign investment, in particular, guarantees of freedom of withdrawal of profits, will be adopted by the State Duma of Russia in early March. The document does not recognize foreign investments either through trusts and other trust institutions. The Russian-controlled structures that invest in strategic assets in the Russian Federation, the White House is still ready to consider foreign investors - but for them, as before, this only means the need to coordinate transactions with the foreign investment commission.
06.02.2018
Developments. Banks are not given to government agencies. FAS Russia intends to limit the expansion of the public sector in the financial market. Federal Antimonopoly Service has developed proposals to restrict purchases of banks government agencies... FAS plans to amend the law "On banks and banking"And is now working on them with the Central Bank (CB). An exception may be bank reorganization, ensuring accessibility banking services on the territories in need of this, as well as the security issues of the country. The head of the Central Bank Elvira Nabiullina has already supported this initiative.
06.02.2018
Developments. Online audit was given a chance. IIDF is ready to support remote checks. Online audit, which until now was a sideline of this business, which was mainly carried out by unscrupulous companies, received support from state level... The Internet Initiatives Development Fund invested 2.5 million rubles in AuditOnline, thus recognizing the prospects of this direction. However, market participants are confident that online audit does not have a legitimate future - remote audits contradict international standards audit.
05.02.2018
Developments. It is recommended to refrain from legal transactions. The Central Bank of Russia considered “hidden trust management"Unethical. The Bank of Russia warns professional participants against using some popular, but not entirely ethical practices in relation to clients. stock market... The schemes described in the letter of the regulator lie in the legal plane, so the Central Bank limited itself to recommendations. But in fact, the regulator is testing the application of reasoned judgment, the right to use which has not yet been legally approved.
05.02.2018
Developments. Absorption will be less entertaining. The Central Bank of Russia encourages banks to cut lending to M&A deals. The idea of the Central Bank to stimulate banks to lend not to M&A deals, but to the development of production takes on specific features. The first step may be to instruct banks to create increased loan provisions for M&A transactions. According to experts, this will reduce such lending, but in order for bank resources to go to the development of production, additional stimulating measures will be required.
The emergence of crisis situations in modern world business is an inevitable fact. As a result of the global financial crisis 2008 MICEX index, which includes 30 of the most liquid Russian shares, decreased for 4 months of 2008 by 75%; decreased gold reserves by $ 150 billion, or 25%; decreased by 10% for the first time in many years bank deposits population. At the moment, the Russian banking system is in a recession. The Greek crisis caused the fall of the Cyprus banking system. Huge investments are coming to Russia through Cyprus, a group of companies of the Bank of Cyprus has been created in Russia, funds from some large Russian organizations were placed in accounts with Cypriot banks. Crisis processes in some states contribute to the deterioration of the economic condition of other regions. One of the possible scenarios for the further development of the domestic economy is a crisis. In this situation, it is necessary to know what the reasons are, and what consequences the crisis has for the bank. Currently, no universal method of crisis prevention has been developed. The study of this problem is necessary for the development of anti-crisis programs.
Banking crises appeared a long time ago and recur periodically. In the 19th and early 20th centuries, the usual manifestation of crises, especially characteristic of the United States, was panic among depositors and raids on banks. More than 10 crises that covered the entire banking system took place in this period and in 80% of cases there was a massive suspension of refunds of deposits by banks.
Scientists began to closely study the crises of the banking system since the late 19th century. K. Marx saw the reasons for banking crises in: lack of Money; the growth of speculative banking operations; economic crises(decline in production, decrease in the solvency of borrowers, impairment valuable papers, the emergence of bad loans, assets). IA Trakhtenberg considered crises in the sphere of credit and the sphere of circulation. Soviet economists introduced the concept of "banking crisis" in 1979 and highlighted the following consequences of the crisis: massive withdrawal of deposits, reduction in lending, an increase in financial bankruptcies, and an increase in interest rates.
In order to get out of the banking crisis, it is necessary to take a set of measures to eliminate the causes and neutralize the main consequences of banking crises.
In the early periods of crises, government agencies temporarily closed banks to prevent massive withdrawals of customer funds from accounts and implemented banking sector reforms. This is how the crisis in the USA in 1933 was regulated for 10 days. In Germany, in 1931, at first banks were closed for several days, then only part of the operations were carried out for 20 days.
In the modern period, in the foreign experience of combating banking crises, there are four directions of measures to overcome banking crises:
1) governmental support banks;
2) institutional measures (restructuring of banking systems, reforming banking supervisors);
3) mergers and acquisitions of banks;
4) regulation of the crisis by the bank: transition to other types of services, products, increase in profitability, staff reduction, change organizational structure etc.
5) revocation of the license. Applies to banks that could lead to a systemic banking crisis due to financial problems... The practice of a number of countries has found that artificially extending the life of unstable and poorly regulated credit institutions only exacerbates probable problems and financial losses in future. Reorganization and financial recovery plans, which are considered for a long time, are sent for revision, as a result, they can lead to the fact that when a bank's license is revoked, it lacks not only assets, but also management.
Government support to banks includes
Granting loans to selected banks central bank to restore the liquidity of banks during the period of acute shortage of funds. The most painful manifestation of banking crises is liquidity interruptions, however, they are not of a long-term nature.
Restoring the capital of banks, i.e. recapitalization government bodies capital lost by banks. The central bank (or budget) buyout of bad assets is one of the most popular methods. Recapitalization can be performed multiple times. For example, in 1991-1994. In Hungary, it was carried out four times. In Japan, about $ 30 trillion was spent in order to increase banks and guarantee deposits. yen (about 250 billion dollars) of public funds. Approximately the same amount was spent by the US government to fight the savings and loan institutions crisis. There are two methods of redemption by the state of distressed assets: centralized and decentralized. In a centralized way, the state creates a specialized corporation to buy and manage the problem of assets. Most often, there is an exchange for debentures corporations (Mexico), governments (Hungary). Purchases are made with a special relationship between banks and the state. The decentralized way is to establish an appropriate structure within or outside of a small number of test subjects. financial difficulties banks.
Institutional measures include the creation of a deposit insurance system. The system allows you to quickly liquidate bankrupt credit institutions and protect small deposits from losses of bankruptcies that have occurred.
Mergers and acquisitions are carried out in order to improve the financial position of a bank in an unstable state. Supervisors must prevent the emergence of a problem bank, it is necessary to create one sustainable bank.
Restoring confidence in banks, solving the problem of bad assets and the efficient functioning of the lending process are the main tasks of the state during a banking crisis. Government different countries solved these problems by various methods. Consider the experience and models of consistent actions of states during the banking crisis (Tables 1, 2).
Best practices in overcoming banking crises include:
1) an instant assessment of possible future losses using negative development scenarios
2) stimulating banks to quickly get rid of bad assets and recapitalization
3) an increase in government guarantees and the introduction of debt restructuring programs for borrowers
The sooner the state starts assisting banks, the cheaper the bank support programs will be. Rollover Bad Assets Leads to Paralysis financial system and future losses. It is more efficient to quickly recognize bad debts and clear the balance of them.
Consider five types of crisis management by states
- Scandinavian countries
- Chile and Korea
- Mexico, Indonesia, Japan, Argentina
- UK and USA
- Greece and Cyprus
The plan for overcoming the crisis in Sweden and Norway consisted in the nationalization of the banks of the largest banks. This has proven to be effective. We managed to get out of the crisis quickly and at low costs. Bad assets companies were established in Sweden and guarantees were introduced on bank liabilities... Sweden's programs are often remembered, especially highlighting the success of the creation of a "bad" bank and nationalization. However, it should be remembered that all government assistance went to save the two largest nationalized banks. In Norway, they did without creating a "bad" bank, reducing the cost of overcoming the crisis. The way out of the crisis of the Scandinavian countries was the most effective, thanks to a timely and realistic assessment of losses. Confidence in the banking system was quickly restored.
In the remaining countries, the problem of bad assets was more acute than the Scandinavian ones. However, Chile and Korea need to be treated separately. In Chile, banks were not nationalized, credit institutions remained solvent, and incentives were created to identify bad assets that were repurchased at par. This mechanism did not require debt valuation; the amount of securing the IOU on the balance sheet decreased, ensuring the bank's solvency; due to the obligation to repurchase the asset, there were incentives to effectively manage debt. The cost of overcoming the crisis in Chile was high due to debt buybacks and delays in debt assessment, sponsoring debt restructuring.
An asset management company was established in Korea. She bought bad assets much lower book value... A private market for bad assets emerged. Recapitalization was carried out by the state. The assessment of losses was accepted more quickly than in Chile, and overcoming the crisis turned out to be faster and more efficient.
The policy of overcoming the crisis in Mexico, Indonesia, Japan, Argentina turned out to be unsuccessful. Countries neglected the principles of quick assessment of possible losses and work on bad assets. Effective tools for getting rid of bad debts were not found or introduced too late. The banking sector remained unstable, with economic growth driven by external changes.
The way out of the crisis in Great Britain and the United States turned out to be the most expensive in history. Banks had to be nationalized in Great Britain. The large volume of illiquid high-risk assets was the reason for recapitalization, liquidity provision, asset protection programs. In the United States, it was necessary to introduce a program for the purchase of distressed assets, issue guarantees on bank assets, and recapitalize banks.
The peculiarity of the way out of the crisis in Greece and Cyprus is that the rescue of these countries is not dealt with by the government of these countries, but by the European Union. During the period of anti-crisis measures, there was a clash between the interests of the countries and the union. The European Committee had no experience in crisis management. The losses from austerity budget were underestimated, the ability of politicians to implement their programs was optimistically assessed. The Greek authorities delayed structural reforms, which led to the need for unnecessary aid and painful cuts for citizens. Cyprus President Nikos Anastasiades recently asked EU leaders to renegotiate the € 10bn aid package, noting that the island is likely to fail the necessary conditions within the framework of the accepted agreement. The emphasis is on the fact that the losses to the Cyprus economy and the country's banking system turned out to be greater than initially expected. As an example, the situation with the restructuring of the country's largest banks (Bank of Cyprus, Laiki bank) is given, which, as Anastasiadis's letter says, was carried out “without the necessary careful preparation”, as a result of which many Cypriot companies were left without capital (the money was written off as losses from bank accounts or frozen), and the measures taken to control capital outflows ended up suffocating the economy. If the story with the revision of the package of measures to help Athens now begins to gain momentum, then this may well be a signal for a new phase of the European debt crisis.
Tab. 1 Comparison of crises and state strategies
Norway, 1991 |
Sweden, 1991 |
Mexico, 1994 |
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Bad Debt Peak |
36% (of all loans) |
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Assessment of bank losses |
With delay |
With great delay |
||
Foreign exchange policy |
Devaluation (50% in two years) |
Switching to a floating rate |
Switching to a floating rate |
Devaluation (more than 50% in one year) |
Banking sector support |
||||
Nationalization |
3 largest banks- 80% of the funds spent (2.2% of GDP) |
2 largest banks - 90% of all assets of the banking system, 98% of funds spent (3.5% of GDP) |
||
Dealing with bad assets |
Temporary redemption of assets for an IOU with an obligation to repurchase and retention of management rights |
Creation of state "bad" banks for two nationalized |
Temporary redemption of assets without buyback obligations, retaining the right of management |
|
Liquidation of banks |
8 out of 43 banks closed (11% of bank capital) |
|||
Programs for support borrowers |
Granting a preferential rate, debt restructuring, de-dollarization |
Restructuring loans in indexed by CPI, help in debt restructuring |
||
Solving the problem of bad debts, improving foreign economic |
Rapid loss assessment and nationalization |
Lack of incentives for banks to get rid of bad debts |
||
Results of the crisis |
||||
Fall of GDP |
||||
Fiscal costs% of GDP |
42.9% (16.8% - net costs) |
|||
Average GDP growth |
4.3% (within 3 years after recovery) |
Tab. 2 Comparison of crises and state strategies
Japan, 1997 |
Korea, 1997 |
Indonesia, 1997 |
Turkey, 2000 |
Argentina, 2001 |
|
Bad Debt Peak |
|||||
Assessment of bank losses |
With great delay |
With great delay |
with delay |
With great delay |
|
Foreign exchange policy |
Switching to a floating rate |
Devaluation and Floating |
Switching to a floating rate |
Switching to a floating rate |
|
Banking sector support |
|||||
Nationalization |
2 large commercial |
12 banks (20% of system assets) |
|||
Dealing with bad assets |
Buying assets below par, creating a private market |
||||
Liquidation of banks |
5 banks closed (7% of bank assets) |
Closed 64 banks |
|||
Programs for support borrowers |
Clause on increasing lending in agreements on bank recapitalization |
The restructuring program of the 5 largest chaebols, a scheme for solving the problems of small and medium-sized businesses |
restructuring |
Pesoization - the exchange of loans and deposits in dollars for pesos. |
|
Key role in overcoming crisis / error |
Delay in assessing losses and making decisions |
Solving the problem of bad debts |
Corrupt system device |
Successful restructuring |
Improvement of external economic what conditions |
Results of the crisis |
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Fall of GDP |
|||||
Fiscal costs% of GDP |
|||||
Average GDP growth |
The most effective option the way out of the crisis is considered to be an experience that is not accompanied by a drop in GDP during the crisis. This was the way out of the crisis in Norway. Norway's fiscal costs were minimal.
Many scholars have noted a tendency for the Government to play an increasing role in overcoming banking crises, for example, by creating anti-crisis management programs. Programs should be developed in advance. The efficiency of overcoming the crisis depends on the speed and correctness of decisions made during a crisis.