Survival Guide for asian banks.pdf

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A Survival Guide for The experience of domestic banks in Sweden
and Mexico suggests four valuable lessons for
Asian Banks Asian banks facing a similar crisis today.
Separate the “Good Bank”
The Asian financial crisis is wreaking havoc with from the “Bad Bank”
the region’s fragile banking systems. The value
of local currencies has plummeted—more than As the number of nonperforming loans has sky-
70 percent in the case of the Indonesian rupiah. rocketed, BCG has seen many Asian banks
The percentage of nonperforming loans has assign their most talented executives to “work-
grown substantially; in Thailand, for instance, it out”—the activity of resolving bad loans. That is
is estimated that such loans will reach approxi- understandable, since effective loan recovery is
mately 45 percent of total GDP. And govern- extremely important in a crisis economy. Once
ments across the region—in Korea, Indonesia, bad loans have been reserved, any incremental
Malaysia, and Thailand—have forced many recovery goes directly to the bottom line.
banks either to merge or to close.
Assigning key executives to loan recovery,
National governments, together with the World however, e at the price of neglecting a
Bank and the International ary Fund, are bank’s underlying business. In the worst case,
devising policies to restore macr