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This work explores the legal issues inherent in resolving troubled banking sectors in transitional economies. Bank failures are a recurrent phenomenon in both developed and developing countries, as shown by the crises in the last 10 years in the USA, Japan, Scandinavian countries, the Baltic countries, Bulgaria, South East Asia and Latin America.
Banks in transitional economies face additional challenges as they become intermediaries in lending the publics's savings, rather than mere conduits for the central financing plan. They have to ensure repayment of loans when they no longer receive subsidies to compensate their losses to the same degree as before. As a result of these challenges, almost all these countries have suffered numerous bank failures in the past eight years, with negative consequences for bank owners, managers, depositors and other creditors.
The absence, in many situations, of appropriate crisis management procedures and bank insolvency laws hinders the success or pace of the transition process.