Slide 16 of 22 Banking systems' non-performing loans have skyrocketed and are at unprecedented high levels. Non-performing loans range between approximately 30 percent of GDP for Korea and Malaysia to 70 percent of GDP for Thailand. Nonperforming loans may continue to grow as further problems are revealed and weak firms capitalize interest. Recent restructuring agreements have often not been successful in achieving fundamental improvements in profitability. Bank restructuring is necessary because a poorly capitalized banking sector creates continued systemic risks and growing fiscal liabilities for governments.
Healthy banks are also best positioned to enforce claims and to pursue corporate restructuring.