Rescue or liquidate? On the bailout of problem banks in the context of crisis

Abstract

This article discusses the current situation in the banking sector that is considered a systemic banking crisis, and the rehabilitation programmes to revive bank lending or at least prevent the complete failure of some banks, as their bankruptcy will be more unprofitable to the economy than the rescue. A crisis often suggests elimination of ineffective banks in the system. However, this is not the case nowadays, and it is alerting that governments support the banks that showed poor financial performance at year-end 2015. The article also studies the issues that inhibit effective policy of financial recovery of banks in Russia.