Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/210871
Authors: 
Segura, Anatoli
Suárez, Javier
Year of Publication: 
2019
Series/Report no.: 
ESRB Working Paper Series 96
Abstract: 
We characterize policy interventions directed to minimize the cost to the deposit guarantee scheme and the taxpayers of banks with legacy problems. Non-performing loans (NPLs) with low and risky returns create a debt overhang that induces bank owners to forego profitable lending opportunities. NPL disposal requirements can restore the incentives to undertake new lending but, as they force bank owners to absorb losses, can also make them prefer the bank being resolved. For severe legacy problems, combining NPL disposal requirements with positive transfers is optimal and involves no confl ict between minimizing the cost to the authority and maximizing overall surplus.
Subjects: 
non performing loans
deposit insurance
debt overhang
optimal intervention
state aid
JEL: 
G01
G20
G28
Persistent Identifier of the first edition: 
ISBN: 
978-92-9472-083-2
Document Type: 
Working Paper

Files in This Item:
File
Size
482.78 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.