The Political Economy of Distress in East Asian Financial Institutions
The Political Economy of Distress in East Asian Financial Institutions:

In the East Asian crisis, connections - with industrial groups or influential families - increased the probability of distress for financial institutions. Connections also made closure more, not less, likely, suggesting that the closure processes themselves were transparent. But larger institutions,...

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Bibliographische Detailangaben
1. Verfasser: Ferri, Giovanni 1957- (VerfasserIn)
Format: Elektronisch E-Book
Sprache:English
Veröffentlicht: Washington, D.C The World Bank 2000
Schlagworte:
Balance Sheet
Banking System
Banks and Banking Reform
Currencies and Exchange Rates
Debt Markets
E-Business
Economic Policy, Institutions and Governance
Emerging Markets
Finance
Finance and Financial Sector Development
Financial Crisis
Financial Distress
Financial Institutions
Financial Intermediation
Financial Literacy
Financial Risks
Good
Interest
Interest Income
Investors
Loan
Loans
Loss Of Confidence
Macroeconomics and Economic Growth
Non Bank Financial Institutions
Political Economy
Portfolio
Private Sector Development
Prudential Regulations
Public Institution Analysis and Assessment
Public Sector Development
Reserves
Return
Return On Assets
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Volltext
Zusammenfassung:In the East Asian crisis, connections - with industrial groups or influential families - increased the probability of distress for financial institutions. Connections also made closure more, not less, likely, suggesting that the closure processes themselves were transparent. But larger institutions, although more likely to be distressed, were less likely to be closed, suggesting a too big to fail policy. - Politics and regulatory capture can play an important role in financial institutions' distress. East Asia's financial crisis featured many distressed and closed financial intermediaries in an environment with many links between government, politicians, supervisors, and financial institutions. This makes the East Asian financial crisis a good event for studying how such connections affect the resolution of financial institutions' distress. Bongini, Claessens, and Ferri investigate distress and closure decisions for 186 banks and 97 nonbank financial institutions in Indonesia, the Republic of Korea, Malaysia, the Philippines, and Thailand. They find that after July 1997, 42 percent of the institutions experienced distress (were closed, merged, or recapitalized, or had their operations temporarily suspended). By July 1999, 13 percent of all institutions in existence in July 1997 had been closed.
[Fortsetzung 1. Abstract] Using financial data for 1996, the authors find that: · Traditional CAMEL-type variables - returns on assets, loan growth, and the ratio of loan loss reserves to capital, of net interest income to total income, and of loans to borrowings - help predict subsequent distress and closure. · None of the foreign-controlled institutions was closed, and foreign portfolio ownership lowered an institution's probability of distress. · Connections - with industrial groups or influential families - increased the probability of distress, suggesting that supervisors had granted forbearance from regulations. Connections also made closure more, not less, likely - suggesting that the closure processes themselves were transparent. · But larger institutions, although more likely to be distressed, were less likely to be closed, while (smaller) nonbank financial institutions were more likely to be closed. This suggests a too big to fail policy. · These policies, together with the fact that resolution processes were late and not necessarily comprehensive, may have added to the overall uncertainty and loss of confidence in the East Asian countries, aggravating the financial crisis. This paper - a product of the Financial Sector Strategy and Policy Group, Financial Sector Vice Presidency - is part of a larger effort in the group to study the causes and resolution of financial distress. The authors may be contacted at pbongini@mi.unicatt.it, cclaessens@worldbank.org, or gferri@worldbank.org
Beschreibung:Weitere Ausgabe: Ferri, Giovanni : The Political Economy of Distress in East Asian Financial Institutions
Beschreibung:1 Online-Ressource (1 online resource (28 p.))

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