Banks in Crisis

Abstract

The current financial crisis evolved quickly. In most of the developed countries affected, governments initially improvised solutions that eventually led to substantial investments in systemically important banks. Not all their actions are worth emulating, especially those that undermine normal governance arrangements and the ability of all shareholders to hold the banks' board and management accountable. Lessons from earlier crises show that governments acting as temporary owners can minimize costs to taxpayers by following sound commercial practices and good corporate governance principles. Quickly developing and making public the exit strategy is also important.