Regulating, Supervising, and Handling Distress in Public Banks

Abstract

Ukraine, the United Kingdom, and the United States for helpful suggestions. The authoring team is also grateful to Tobias Adrian, Aditya Narain, and Miguel Savastano for providing intellectual direction, and to Thais Ferreira and Mireille Nsanzimana for excellent support to the project.The Departmental Paper Series presents research by IMF staff on issues of broad regional or crosscountry interest. The views expressed in this pape are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Determinants of Zombie Banks in Emerging Markets and Developing Economies

“…State-owned banks are typically plagued by numerous inefficiencies, resulting in lower profitability, higher risk, less capital, and higher NPLs (Berger et al 2005;Cornett et al 2010;Levy Yeyati et al 2004). In addition, it is well documented that state-owned banks can be challenging to supervise due to legal shortcomings, practical autonomy, business structure, and risk management (Adams et al 2022). Thus, our results support the theory that state-owned banks have less of an incentive to maintain a strong capital position and may be propped up by the government when needed.…”

“…Instead, we focus on the measurable factors in our empirical investigation. We also do not attempt to analyze the issues surrounding the problematic resolution of failed banks, including state-owned banks, as these have already been widely investigated elsewhere (e.g., Adams et al 2022;Dell'Ariccia et al 2018;Dobler et al 2020). Some policy implications emerge from this empirical paper.…”