Article at a glance:

Pursuing best practice in bank turnarounds

Financial crises are inevitable, but bank closures are not. When a crisis strikes, careful attention to the liquidity of a bank—and, if necessary, the assistance of a central bank—can prevent it from failing. Whether the crisis was the result of poor management or of macroeconomic conditions, a successful turnaround depends on using well-known but frequently ignored management skills to restore confidence as conditions improve.

The take-away

The formula for a successful turnaround is straightforward and similar around the world: monitor liquidity, rein in bad lending practices, and find creative ways to add fresh capital.