Description

Prepared for the Conference “The Financial Sector Post-Crisis: Challenges and Vulnerabilities”
at the Brookings Institution, Washington, DC, April 26-27, 2005.

This paper reviews the post-crisis experience of recent countries and examines policy approaches to the post-crisis environment designed to ensure that financial service provision resumes vigorously, but safely. In the immediate aftermath of the containment phase, each of the major elements of financial intermediaries’ balance sheets needs attention: for example, how to ensure adequate capitalization by solid foreign or domestic entities; how best to transform the asset side from the postcrisis
morass of bankrupt corporates, how to minimize risks of creeping dollarization. Looking further into the rebuilding phase, the paper addresses medium-term issues such as the role of Basel II and market discipline in helping or hindering future performance. On some issues, there is widespread agreement on the appropriate policy stance, but on others differences are significant.