Banking Crises and Restructuring Tools

Abstract

This chapter presents a brief history of banking crises and restructuring tools, with a particular focus on the recent global financial crisis (GFC). There always are questions about the causes of turmoil in the financial markets; therefore, the chapter explains how the current crisis is different from the previous ones. The conclusions from the research confirmed that the main causes remained the same all the time; however, the environment in which banks operate has been changing dynamically. A critical factor during the GFC was the contagion effect. In past crises, the most common restructuring tool, associated with government bailouts, was recapitalization (in addition to liquidity support), which allowed most banks to survive.