Bank Resolution Costs, Depositor Preference, and Asset Encumbrance PDF Download

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Bank Resolution Costs, Depositor Preference, and Asset Encumbrance

Bank Resolution Costs, Depositor Preference, and Asset Encumbrance PDF Author: Mr.Daniel C. Hardy
Publisher: International Monetary Fund
ISBN: 1484354109
Category : Business & Economics
Languages : en
Pages : 30

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Book Description
Depositor preference and collateralization of borrowing may reduce the cost of settling the conflicts among creditors that arises in case of resolution or bankruptcy. This net benefit, which may be capitalized into the value of the bank rather than affect creditors’ expected returns, should result in lower overall funding costs and thus a lower probability of distress despite increasing encumbrance of the bank’s balance sheet. The benefit is maximized when resolution is initiated early enough for preferred depositors to remain fully protected.