Overstating Moral Hazard: Lessons from Two Decades of Banking Crises

Event: ADB-ECB Workshop on NPL Resolution in Asia and Europe

Overstating Moral Hazard: Lessons from Two Decades of Banking Crises

10 February 2020
Author / Speaker: 
Douglas Arner, University of Hong Kong - Other materials by the author

View Slides

This paper surveyed approaches to the resolution of nonperforming loans in the context of major banking crises over the past two decades. It also explored particular country experiences and responses in-depth, including the effect of the Asian financial crisis on the banking sectors of the Republic of Korea, Indonesia, Malaysia and Thailand; the role of asset management companies in NPL resolution in the People’s Republic of China; measures taken to respond to systemic banking crises in Switzerland, the United Kingdom, and the United States following the global financial crisis; and the effects of the European sovereign debt crisis on the banking sectors of Greece, Ireland, Italy, and Spain. Based on historical and contemporary experiences, the paper assessed the effectiveness of tools for NPL resolution—including asset management companies, the restructuring of the balance sheets of major systemic banks, and large-scale bailouts in response to major crises—and drew lessons on the effective and efficient prudential regulation measures required to tackle NPLs during a banking crisis.

Geographical Focus: 
Regional - Asia
Type of Content: 
Learning Event


The views expressed on this website are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent. ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. By making any designation of or reference to a particular territory or geographic area, or by using the term “country” in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area.