Kiel Working Papers, Kiel Institute for World Economics
No 920:
Handling Banking Crises ; The Case of Russia
Claudia M. Buch and Ralph P. Heinrich
Abstract: Since August 1998, Russia has been suffering from a severe
banking crisis. In finding a solution, the substantial foreign liabilities
commercial banks and the failure of the government to service its
liabilities need to be taken into account. The paper discusses externality,
adverse selection, and moral hazard problems of bank recapitalization. We
suggest that banks should be offered to their foreign creditors for
recapitalization and that banks which cannot attract additional funds
should be closed. In order to facilitate the transfer of control to foreign
creditors and to limit asset stripping, the government should take over
control from the banks' old shareholders.
Keywords: Banking crisis, Russia, foreign debt restructuring; (follow links to similar papers)
JEL-Codes: F34; G3; P3; (follow links to similar papers)
40 pages, April 1999
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