Financial Restructuring in East Asia : Halfway There?

Resolving systemic banking and corporate distress is no easy task. This paper reviews bank and corporate restructuring efforts in the four East Asian crisis countries. Indonesia, Republic of Korea, Malaysia, Thailand, and identifies remaining priorities for reform. The analysis indicates that two years into the process, much has been done,but much remains to be accomplished. Although governments have spent substantial resources to clean up the balance sheets of financial intermediaries, restructuring is incomplete, much new capital is still needed, and for most intervened financial institutions new private owners have yet to be found. Progress on corporate restructuring is less advanced, and many corporations remain overindebted. Durable economic recovery depends on further progress in both areas. In particular, decisive improvements in the allocation of investible funds will require better-capitalized banking systems and deeper institutional reforms in financial regulation and supervision, corporate governance, and bankruptcy procedures