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Full-Text Articles in Economic History
India: Yes Bank Moratorium, 2020, Salil Gupta
India: Yes Bank Moratorium, 2020, Salil Gupta
Journal of Financial Crises
By December 2019, Yes Bank’s capital levels had dropped below the Reserve Bank of India’s (RBI) mandated threshold, as the bank was facing a combination of deposit withdrawals, losses from extraordinary credit provisions, and overexposure to stressed sectors. On March 5, 2020, India’s Ministry of Finance (MoF) and the RBI placed Yes Bank under a 30-day moratorium that restricted most banking functions and limited deposit withdrawals to INR 50,000 per person (USD 663). The purpose of this moratorium was to allow the RBI time to design a plan of reconstruction or amalgamation for Yes Bank to allow depositors limited access …
Survey Of Bank Holidays And Fund Suspensions, Rosalind Z. Wiggins, Owen Heaphy, Anmol Makhija, Stella Schaefer-Brown, Greg Feldberg, Andrew Metrick
Survey Of Bank Holidays And Fund Suspensions, Rosalind Z. Wiggins, Owen Heaphy, Anmol Makhija, Stella Schaefer-Brown, Greg Feldberg, Andrew Metrick
Journal of Financial Crises
In this paper, we analyze seven case studies involving bank holidays and two involving mutual fund suspensions produced by the Yale Program on Financial Stability. Our main purpose is to assist policymakers who are considering utilizing a bank holiday in designing the most effective program as efficiently as possible. We find that a bank holiday may be most useful when designing and implementing a comprehensive remedy to an underlying problem distressing banks, particularly when an exogenous shock rather than balance sheet weaknesses is the cause of general distress to the system. A holiday is also useful to “ring-fence” one or …
United Kingdom: Northern Rock Emergency Liquidity Program, 2007, Bailey Decker, Jack French, Eming Shyu
United Kingdom: Northern Rock Emergency Liquidity Program, 2007, Bailey Decker, Jack French, Eming Shyu
Journal of Financial Crises
Northern Rock plc was a bank in the United Kingdom (UK) that experienced rapid growth from 1998 to 2007. The bank was a large issuer of UK residential mortgage-backed securities. Its funding was primarily wholesale as its retail deposit growth had not kept up with its asset growth. By August 2007, Northern Rock’s credit default swap spreads were widening and its share price falling as conditions deteriorated in the markets on which it relied for short-term funding. To meet the bank’s substantial liquidity needs, the Bank of England (BoE) announced on September 14, 2007, that it would extend an emergency …
Spain: Caja De Ahorros Castilla–La Mancha Emergency Liquidity Assistance, 2009, Vincient Arnold, Lakshimi Swaminathan
Spain: Caja De Ahorros Castilla–La Mancha Emergency Liquidity Assistance, 2009, Vincient Arnold, Lakshimi Swaminathan
Journal of Financial Crises
Following years of rapid credit expansion in the real estate sector and reliance on wholesale funding between 2000 and 2008, Caja de Ahorros de Castilla–La Mancha (CCM) found itself on the brink of insolvency in early 2009. Normally, a Eurosystem bank in CCM’s position would turn to the European Central Bank (ECB) to obtain liquidity through its standing financing facilities, but CCM lacked eligible collateral to tap them. Consequently, in February 2009, the Bank of Spain (BoS) provided emergency liquidity assistance (ELA) of EUR 900 million to CCM, secured against CCM assets, to help meet its liquidity needs. In March, …
Russia: Otkritie Bank Restructuring, 2017, Benjamin Hoffner
Russia: Otkritie Bank Restructuring, 2017, Benjamin Hoffner
Journal of Financial Crises
In July and August 2017, Otkritie Bank, Russia’s largest privately owned bank, experienced a deposit run related to concerns over Otkritie’s recent acquisitions. The run prompted Otkritie’s shareholders to approach the Central Bank of Russia (CBR) for assistance. On August 29, 2017, the CBR announced a rescue plan for Otkritie. In it, the CBR pledged to become Otkritie’s main investor using a newly created resolution mechanism wherein the CBR would take at least a 75% equity stake using funds from the Fund for Banking Sector Consolidation, a subdivision of the CBR. The CBR simultaneously appointed a provisional administration, composed of …
Spain: Caja De Ahorros Castilla–La Mancha Capital Injection, 2009, Lakshimi Swaminathan, Vincient Arnold
Spain: Caja De Ahorros Castilla–La Mancha Capital Injection, 2009, Lakshimi Swaminathan, Vincient Arnold
Journal of Financial Crises
Caja de Ahorros Castilla–La Mancha (CCM) was a small Spanish savings bank with just 1% market share in deposits and loans. Following years of rapid credit expansion in the real estate sector and reliance on wholesale funding markets to carry out its operations between 2000 and 2008, CCM found itself on the brink of insolvency in early 2009, with a Tier 1 capital ratio of just 1.3%, compared with the 8% regulators required. The authorities placed the bank under administration in 2009. Consequently, the Spanish Savings Bank Deposit Guarantee Fund (Fondo de Garantía de Depósitos de Ahorros, or FGD) agreed …
Latvia: Parex Bank Capital Injection, 2008, Bailey Decker
Latvia: Parex Bank Capital Injection, 2008, Bailey Decker
Journal of Financial Crises
Heading into the Global Financial Crisis, JSC Parex banka was Latvia’s second-largest bank in terms of assets, comprising 13.8% of total assets in the Latvian banking sector. In autumn 2008, Parex faced a capital shortfall owing to massive credit and market losses in addition to increasing liquidity problems and deposit runs of 240 million Latvian lats (LVL; USD 428.6 million). Parex’s capital adequacy ratio fell below the regulatory minimum of 8% on October 28, 2008. Parex had two senior syndicated loans maturing in February and June 2009, totaling EUR 775 million (USD 992 million). Latvian authorities doubted that Parex would …
Iceland: Arion Bank, Islandsbanki, And Landsbankinn Capital Injections, 2008, Ayodeji George
Iceland: Arion Bank, Islandsbanki, And Landsbankinn Capital Injections, 2008, Ayodeji George
Journal of Financial Crises
Iceland’s three largest banks—Glitnir, Kaupthing, and Landsbanki—grew rapidly in the 2000s and failed amid depositor runs when they lost access to foreign funding markets at the onset of the Global Financial Crisis (GFC). On October 6, 2008, the Icelandic Parliament passed the Emergency Act, and authorities quickly used their new powers to nationalize the three banks. The Ministry of Finance created and capitalized Arion Bank (for Kaupthing), Islandsbanki (for Glitnir), and Landsbankinn (for Landsbanki), to hold the old banks’ performing domestic assets and all insured domestic deposits, and the prime minister assured all domestic depositors that they would be protected. …
Lessons Learned: Paul Boothe, Mary Anne Chute Lynch
Lessons Learned: Paul Boothe, Mary Anne Chute Lynch
Journal of Financial Crises
Paul Boothe served as Canada’s senior associate deputy minister of industry during the Global Financial Crisis (GFC) of 2007–2009. Boothe led the Canadian federal government’s negotiation team during the restructuring talks with Chrysler and General Motors (GM). He also negotiated with the Canadian Auto Workers (CAW), a union that included Tier 1 auto parts suppliers for all the major auto manufacturers worldwide. Canada aligned with the United States government to rescue the auto manufacturers and provided 20% of the funding to rescue the corporations and suppliers. From 2004 to 2005, Boothe served as the associate deputy minister of finance and …
India: Yes Bank Restructuring, 2020, Salil Gupta
India: Yes Bank Restructuring, 2020, Salil Gupta
Journal of Financial Crises
Yes Bank was suffering from liquidity outflows in the second half of 2019 owing to a combination of deposit withdrawals, invocation of pledged shares, losses from extraordinary credit provisions, and overexposure to stressed sectors like power and infrastructure. In December 2019, Yes Bank reported a Common Equity Tier 1 capital ratio at 0.6%, far below the Reserve Bank of India (RBI) mandated levels, and a quarterly loss of 185 billion Indian rupees (INR; USD 2.5 billion). In early March 2020, the RBI and the Ministry of Finance announced a restructuring plan for India’s fourth-largest private bank, Yes Bank, to prevent …
Lessons Learned: Harry Wilson, Mary Anne Chute Lynch
Lessons Learned: Harry Wilson, Mary Anne Chute Lynch
Journal of Financial Crises
Harry Wilson was one of four senior advisers to the US Department of the Treasury during the Obama administration and served on the President’s Task Force on the Auto Industry, which was established in 2009 and charged with providing aid to General Motors and Chrysler, and later to other entities, to avoid their disorderly failure and the loss of a million or more jobs. The Auto Task Force worked intensively throughout 2009 to swiftly negotiate with the corporate leadership, unions, investors, and other stakeholders of the two manufacturers to design an orderly restructuring that would put the companies on a …
Lessons Learned: Steven Rattner, Mary Anne Chute Lynch
Lessons Learned: Steven Rattner, Mary Anne Chute Lynch
Journal of Financial Crises
Steven Rattner, an investment banker and private equity professional, joined the Obama administration as counselor to the Secretary of the Treasury and head of the Obama administration’s Task Force on the Auto Industry, which was charged with providing aid to Chrysler and General Motors, and later to other entities, to avoid their disorderly failure and the loss of a million or more jobs. The Auto Task Force worked intensely throughout 2009 to swiftly negotiate with the corporate leadership, unions, investors, and other stakeholders of the two manufacturers to design an orderly restructuring that would put the companies on a path …
Lessons Learned: Mara Mcneill, Mary Anne Chute Lynch
Lessons Learned: Mara Mcneill, Mary Anne Chute Lynch
Journal of Financial Crises
Mara McNeill was senior counsel to the US Department of the Treasury on the Obama administration’s Automotive Investment Financing Program (AIFP) during the Global Financial Crisis (GFC) of 2007–09. As senior counsel, McNeill was responsible for the department’s $80 billon financing of General Motors, Chrysler, Ally Financial, and Chrysler Financial. She worked with the Auto Team Task Force, the Troubled Assets Relief Program (TARP) legal team, and the Department of Treasury. The bipartisan AIFP team was charged with overseeing the government’s efforts to assist the companies toward a “new lease on life,” while exercising strong financial principles to protect the …
Lessons Learned: Sadiq Malik, Mary Anne Chute Lynch
Lessons Learned: Sadiq Malik, Mary Anne Chute Lynch
Journal of Financial Crises
Sadiq Malik was a member of the Obama administration’s Task Force on the Auto Industry, which was established in 2009 and charged with providing aid to Chrysler and General Motors, and later to other entities, to avoid their disorderly failure and the loss of a million or more jobs. The Auto Task Force worked intensively throughout 2009 to swiftly negotiate with the corporate leadership, unions, investors, and other stakeholders of the two manufacturers, to design an orderly restructuring that would put the companies on a path to stability. Malik, working for the Auto Task Force, helped take General Motors through …
Lessons Learned: Matthew Feldman, Mary Anne Chute Lynch
Lessons Learned: Matthew Feldman, Mary Anne Chute Lynch
Journal of Financial Crises
Matthew Feldman was the chief legal advisor to the Department of the Treasury on the Obama administration’s Task Force on the Auto Industry, which was established in 2009 and charged with providing aid to Chrysler and General Motors (GM), and later other entities, to avoid their disorderly failure and the loss of a million or more jobs. The Auto Task Force worked intensively throughout 2009 to swiftly negotiate with corporate leadership, unions, investors, and other stakeholders of the two manufacturers to design an orderly restructuring that would put the companies on a path to stability. Treasury Secretary Timothy Geithner recognized …
Lessons Learned: Ron Bloom, Mary Anne Chute Lynch
Lessons Learned: Ron Bloom, Mary Anne Chute Lynch
Journal of Financial Crises
Ron Bloom served as senior adviser to Secretary of the Treasury Timothy Geithner on President Barack Obama’s Task Force on the Automotive Industry and as assistant to the president for manufacturing policy (2009–2011). As senior adviser on the Auto Task Force team, Bloom helped lead the restructuring of General Motors and Chrysler LLC. Subsequently, he advised the Obama administration with policy development and strategic planning to revitalize the manufacturing sector. Bloom brought to Treasury his unique experience working with organized labor (including the United Steelworkers Union, United Auto Workers, the Teamsters, the Air Line Pilots Association), and in the investment …
The Rescue Of The Us Auto Industry, Module Z:Overview, Rosalind Z. Wiggins, Greg Feldberg, Alexander Nye, Andrew Metrick
The Rescue Of The Us Auto Industry, Module Z:Overview, Rosalind Z. Wiggins, Greg Feldberg, Alexander Nye, Andrew Metrick
Journal of Financial Crises
In the fall of 2008, credit markets tightened amid a broader economic downturn that severely impacted the US auto industry, especially the three largest domestic manufacturers, General Motors (GM), Ford Motors, and Chrysler. The companies requested assistance from the government in a bid to stay afloat, but Congress declined to authorize funding. The Bush administration, however, provided bridge loans to GM and Chrysler under the Auto Industry Finance Program (AIFP), funded through the Troubled Assets Relief Program (TARP), to sustain them until the Obama administration was in place. Within months, the Obama administration decided that a speedy bankruptcy would be …
The Rescue Of The Us Auto Industry, Module B: Restructuring General Motors Through Bankruptcy, Kaleb B. Nygaard
The Rescue Of The Us Auto Industry, Module B: Restructuring General Motors Through Bankruptcy, Kaleb B. Nygaard
Journal of Financial Crises
As the Global Financial Crisis worsened in 2008, credit markets tightened and a broader economic downturn developed, hitting the auto industry particularly hard. The crisis intensified a decade-long decline of the largest US auto manufacturers. Because of its size and importance to the economy, the US government decided to provide assistance to General Motors (GM) to sustain it while it developed plans for its long-term viability. Congress declined to authorize funding for the auto manufacturers, but in December 2008, Treasury provided a bridge loan to GM under the Troubled Assets Relief Program (TARP) to sustain the company until the Obama …
Restructuring And Forgiveness In Financial Crises C: The Swedish Banking Crisis Of 1990-94, Christian M. Mcnamara, Dr. Lars Thunell, Andrew Metrick
Restructuring And Forgiveness In Financial Crises C: The Swedish Banking Crisis Of 1990-94, Christian M. Mcnamara, Dr. Lars Thunell, Andrew Metrick
Journal of Financial Crises
In the Spring of 1992, the Swedish government faced a dilemma. The country was in the midst of an economic downturn stemming from the collapse of asset prices (especially in real estate) that had spiked as a result of a credit boom that followed the deregulation of the Swedish banking system in the mid-1980s. Initially the impact of the downturn on the country’s banks had seemed to be limited to a small number of specific firms that the government moved to assist on an ad hoc basis in 1991. However, evidence was mounting that the banking crisis was reaching a …