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Financial Crisis Response
http://www.worldbank.org/fpdcrisisresponse

The Financial and Private Sector Development Vice Presidency of the World Bank Group is actively engaged in assisting developing countries that are coping with the consequences of the global financial crisis. Our work on the crisis focuses on assistance to the financial sector in the following areas:

  • Crisis preparedness workshops and simulation exercises for client countries (PDF);
  • Technical assistance to financial sectors under stress in crisis-affected countries; and,
  • Policy leadership on financial sector development in the crisis through an ongoing series of policy notes.

Sign Up! to receive a copy of all new Crisis Response Policy Briefs as they are released.


Crisis Response Policy Briefs
»Banks in Crisis -- When Governments Take Temporary Ownership (PDF, 96KB)
In most of the developed countries affected by the financial crisis, governments initially improvised solutions that eventually led to substantial investments in systemically important banks. Lessons from earlier crises show that governments acting as temporary owners can minimize costs to taxpayers. Quickly developing the exit strategy is also important.
  
»Credit Rating Agencies -- No Easy Regulatory Solutions (PDF, 123KB)
In the U.S. and Europe faulty credit ratings and flawed rating processes are widely perceived as being among the key contributors to the financial crisis. That has brought them under intense scrutiny and ongoing debate on reforms will influence policy choices in emerging economies.
  
»Dynamic Provisioning: The Experience of Spain (PDF, 492KB)
Dynamic loan loss provisions can help deal with procyclicality in banking. By allowing earlier detection and coverage of credit losses in loan portfolios, they enable banks to build up a buffer in good times that can be used in bad times.

 

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»Macro-Prudential Regulation: Fixing Fundamental Market (and Regulatory) Failures (PDF)
This policy brief discusses why having more macro-prudential regulation that catches the systemic consequences of all institutions acting in a similar manner can make crises fewer and milder.
  
»Trust Less, Verify More: Financial Supervision in the Wake of the Crisis (PDF)
This policy brief reviews how financial supervision will need to change in response to the causes of the financial crisis and the regulatory proposals arising from it.
  
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Blanket Guarantees: Necessary during the Crisis, but What Next? (PDF)
This policy brief describes how the expansion of deposit insurance and introduction of debt guarantees and have played a crucial role in containing the crisis while giving governments time to develop suitable policy responses.

  
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Smaller but Safer? The Shape of Financial Systems to Come (PDF)
This policy brief describes how global trends taken for granted in recent decades may reverse over the foreseeable future. In addition, the structure of financial systems, particularly in developed countries, will likely become oriented less toward capital markets and more toward traditional (and simpler) banking activities. The impact on economic growth and overall welfare is likely to be negative -- perhaps the price we have to pay for living in a brave new (and presumably safer) financial world.

  
»The Reform Agenda: Charting the Future of Financial Regulation (PDF)
This policy brief reviews the crisis-induced shift toward a tighter and more macro-prudential approach to financial regulation. But the reform agenda still needs to address the role of supervisory (rather than regulatory) failures, while the institutional arrangements needed to implement the new framework remain to be worked out. For most emerging economies, the existing reform agenda -- developing institutional and legal underpinnings for the financial system and promoting financial access -- remains valid.
  
»Dealing with the Crisis: Taking Stock of the Global Policy Response (PDF)
The first in a new series of Crisis Response Policy Briefs, this paper provides an overview of the immediate financial sector policy responses to the financial crisis. While these immediate responses have succeeded in stemming widespread panic, the effort has generally been ad hoc and insufficient. Issues that remain include the resolution of problem assets, the restructuring of troubled, systemically important financial institutions, and the development of credible exit strategies.
  
»Banking and the Leverage Ratio (PDF)
There is now a growing consensus that the excessive leverage of banks has contributed to the global financial crisis. This paper discusses the benefits and limitations of a leverage ratio in reducing systemic risk in the financial sector.
  
»Tax Stimulus as Crisis Response
Many countries have contemplated stimulus packages as a response to the deepening economic crisis. This paper discusses the benefits of tax reform as a crisis-response measure, using Bulgaria as a case study.
 
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Bankruptcy Regimes During Financial Distress 
This paper describes what bankruptcy regimes aim to achieve (section 2), how they achieve their goals in normal times (section 3), and what options policy makers have resorted to in previous systemic crises (section 4).

  
»The International Financial Crisis: What Next for Emerging Markets? 
In a speech delivered at the Munich Finance Summit in November 2008, Michael Klein, Vice President of Financial and Private Sector Development, discusses the causes and consequences of the crisis. Four broad themes are covered: (1) the dimensions of the crisis; (2) the phase we may be in right now; (3) the broad impact on emerging markets; and, (4) the debates on the future of policy advice and the international financial architecture.
  
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The Unfolding Crisis: Implications for Financial Systems and Their Oversight 
This note identifies, classifies and briefly describes the main financial sector-related policy issues that arise from the financial crisis. The note is divided into three parts: crisis management, structure of financial systems, and financial sector policymaking.

 
Upcoming Crisis Response Policy Briefs
  
  • The Leverage Ratio
  • Corporate Insolvency Frameworks
  • Consumer Protection
  • State-Owned Financial Institutions and the Financial Crisis
  • Rethinking Market Discipline
  • Crisis Preparedness



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