Issuing Government Bonds to Finance Bank Recapitalization and Restructuring

Download or read book Issuing Government Bonds to Finance Bank Recapitalization and Restructuring written by Mr.Michael Andrews and published by International Monetary Fund. This book was released on 2003-11-01 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bonds issued by the government or government agencies are often used to finance bank restructuring following a systemic crisis. Many conflicting considerations affect the design of the bonds used to pay for public sector investment in bank equity or the purchase of distressed assets from banks. Some bond features can leave restructured banks facing significant risks, laying the foundation for future banking sector problems. Sovereign default makes publicly financed bank restructuring more difficult, but it is still possible to carry out if banks receive sufficient interest income to provide a margin over their cost of funds.