The current financial crisis has triggered sizeable central bank liquidity support of banking systems and, in cases, official intervention in financial institutions. In managing and resolving banking crises, central banks and finance ministries seek to balance multiple objectives, among them the implications for economic activity and price stability, moral hazard and public expectations. Policy makers must assess the relative effectiveness of their stabilization tools in the short term and over the longer run, and manage potential conflicts and exit strategies. While a full assessment of the current crisis is premature, it is useful to understand how different countries have experienced and addressed financial sector pressures, and to discuss the issues, challenges, and potential areas of concern going forward.

Advance preparation
The following readings provide background on banking crisis resolution strategies in general, and an overview of measures taken in the current financial crisis and associated effects. They will serve as a point of departure for the group discussions. To prepare for the discussions, participants should read and understand the required readings below. Additionally, each participant must come prepared to discuss with the group the impact of the current financial crisis on their banking sector, policy measures implemented and associated effects to date, and potential lessons learned and issues of concern going forward.

Required readings

IMF, 2003, Managing Systemic Banking Crises , Chapters I-VI. 

BIS, July 2009, An Assessment of Financial Sector Rescue Programmes , BIS Papers No. 48, pp. 1-31.

Supplementary readings
IMF, October 2009, Chapter 3: Market Interventions During the Financial Crisis: How Effective and How to Disengage? , Global Financial Stability Report.