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The resolution of a systemic financial crisis involves many policy choices ranging from macroeconomic (including monetary and fiscal policy) to microeconomic (including recapitalization of financial institutions, closure, capital adequacy rules and corporate governance requirements), with reforms varying in depth. These choices involve tradeoffs, including the amount of government resources needed to resolve the crisis, the speed of recovery, and the recovery’s sustainability. Despite considerable analysis, these tradeoffs are not well known—an oversight that leads to conflicting policy advice and larger than necessary economic costs. Even less is known about the political economy factors that make governments choose certain policies. Policies enacted during crises importantly shape the financial sector and have important long-term impact on financial sector development.
The objective of this conference on “Systemic Financial Distress: Containment and Resolution” is to discuss and add to existing knowledge about the tradeoffs involved in policies related to systemic financial restructuring and to review how policies have been used. The conference complements the World Bank’s Global Bank Insolvency Initiative where the focus is more on the legal and institutional aspects of bank insolvency, not necessarily being of systemic importance. The conference proceedings will be published in a book. |
