though these do not represent a mutually exclusive typology. That is, a combination of some of the methods described below can be implemented in a sequence or in tandem to address problems at a given failing bank. For instance, a failing bank may first have a radical restructuring and receive open bank assistance, then undergo a merger, and still end up failing and go through a P&A.<sup>25</sup> This paper focuses largely on the GB-BB method, a variety of P&A transaction, as it argues it is suitable according to the selection criteria specified. However, this does not imply that the GBBB method is always the most convenient, nor feasible, especially considering that its implementation needs certain pre-requirements (see Section IV). In fact, the decision to implement a given method is not trivial, often based on aspects not fully under the control of the authorities. This includes: the size of the bank involved, the overarching political situation, the availability of funds at the DIA, prior experience, and other considerations. Also, sometimes an alternative is chosen and it fails, leading to a second alternative that may ultimately work, or instead, it may make the resolution even costlier.

- _Bank closure and deposit payout._ This is the method whereby the failing bank is closed and liquidated, thereby exiting the system. Deposits should be paid to the fullest extent possible and in accordance with their seniority and priority of claims from the resources of the bank and, when applicable, from the DIA. Based on advantages and disadvantages illustrated (see table) . A 2005 IADI survey found that this resolution method was the second most used, but it was generally applied to small banks that had typically small systemic implications (although there are exceptions). Jamaica is a case in point, where several banks were closed and deposits paid out, while the government kept non-performing assets under an asset management company (AMC) that was in charge of recovering as much as possible. The crisis involved the bulk of the domestic financial system (i.e. systemic), which limited the feasibility of alternative choices.<sup>26</sup>

- _Radical restructuring._ The supervisor intervenes in certain key areas of the unviable bank, which may involve different degrees and types of intervention. The most common interventions include: replacing management for supervisory officials, curtailing the powers of shareholders, implementing operational and organizational changes, writing off certain assets, using debt to equity swaps, and considering certain instruments as capital. In general, however, solving the problem requires more than recapitalization as this does not address the institutional and incentives problems that led the bank to cross the “point of no return”, requiring also changes to management, incentives, organizational structure, governance and, possibly, clients and ownership (Neyens and Hanson forthcoming). This method is most suitable for large banks that cannot be merged, closed or sold. However, it has also been used for the handling of weak state-owned banks, which are either too large (such as the case of

> 25  The alternative of using a mutually exclusive typology, such as classifying the alternatives into open and closed bank resolution was not as illustrative of the listing of the specific alternatives involved within each type. Moreover, even the alternatives that may be considered as pure closed bank types, such as the “bank closure and deposits payout” and “P&A” can be interpreted differently.  Arguably, the latter (P&A) does keep most of the employees and most of the business, thus potentially mimicking an open bank resolution.

> 26 Experience with AMCs has been mixed at best (Claessens, et al, 2001), although in the case of Jamaica (a systemic crisis), the overall return at about 20 percent was well above the typical average. Notwithstanding, the total fiscal cost was about 40 percent of GDP in 2001.

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