Uploaded on
The December 2023 issue, the second part of the banking restructuring analysis, examined why reform remained blocked as the cabinet reconvened on a banking resolution bill drafted by the Banking Control Commission and the central bank. The authors expected the stalemate to last at least two more years, citing a caretaker government with limited will, overriding political and security priorities, no consensus on legislative sessions and dependence on new institutions before any renegotiation with the IMF.
The issue surveyed stakeholder positions: the banking association's resistance to court rulings and its media influence on public discourse, depositors' groups divided between local and IMF-led solutions, parliamentary frustration with banks and the central bank, and a government favouring audits and recapitalisation by those who had benefited from past profits. It concluded that depositors' interests were consistently lost amid these contests.
The authors also addressed two persistent questions: why no capital control law had been passed, and why the multiple exchange rates had not been unified, noting the progress made once central bank financing of the government stopped.
Key findings
- Losses of approximately $75 billion, equivalent to about 400% of GDP, could not be borne by the state and banks without false promises burdening future generations.
- In December 2023, eleven banks demanded $16.67 billion from the central bank and asked the government to repay $41 billion of central bank financing.
- The authors estimated that the central bank had paid banks around $30 billion in interest on their deposits over 20 years, at rates well above the market.
- The draft capital control law was opposed for differentiating pre- and post-crisis deposits and for creating a de facto amnesty for banks.
- The IMF's stance stressed protection of small depositors, banking secrecy reform and limits on the use of public resources.
Archive: written in Dec 2023; figures and assessments reflect conditions at the time of writing.Summary of the paper; the full analysis is in the PDF.