i will not dwell on it here ). anyway, despite all of this, the banks have also had to change gear and become heavily involved in loan recovery and the associated task of balance sheet restructuring of many of their distressed corporate ( and individual ) customers. but can one improve on having the banks as the engineers of restructuring? this question was widely discussed around the turn of the millennium, as researchers and practitioners tried to draw lessons applicable to the east asia crisis ( which hit half a dozen rapidly growing countries in 1997 – 8 and left a debris of corporate insolvencies ), and from the earlier experience of banking crises in japan, scandinavia and the united states, as well as some other developing countries cases. the broad conclusion from this debate 3 was that centralised asset management companies, as in sweden and with the us resolution trust corporation, can work well where what needs to be restructured is mainly a class of property companies. this is because the main assets of the companies are relatively easily transferred and do not depend on a specialised production chain, patents, firm - specific know how and so on. to overstate somewhat, the value of real estate may, especially in a downturn, be pretty much independent of who manages it. in a rising market, the swedes managed to do well in realizing their property portfolio over time. the international literature also warns, however, that large state - owned amcs can become vulnerable to improper political pressure, especially where large and prominent firms have become bankrupt. fortunately there is no evidence of such pressure occurring in respect of nama in the current irish crisis, and indeed the legislation setting up nama has built in protections against such pressures. on the other hand, non - property related distress may ( according to the international research ) best be managed by the banks themselves. specific company know - how can help in devising the best solutions for maximising the value of the firm ’ s assets – provided that the restructuring process can be insulated from the denial and over - optimism that may have contributed to poor loan underwriting in the first place. the banks in turn need to be provided with sufficient capital to allow them to fearlessly accept and crystallise the unavoidable loan - losses, sufficient liquidity to be able to provide further financing to set the restructured firm back onto a healthy growth path, and eventually move it out of the limbo of financial distress. as against all of this, it has to be acknowledged that few bank staff start

indeed, especially in the current crisis which is driven by balance sheet problems more than operating account problems, delaying the financial restructuring is likely to threaten jobs in the distressed company itself, as well as imposing indirect costs on those dependent on other companies. owners will resist restructuring, especially when it means that they stand to lose control over some or all of the business. they have of course a large financial, and not seldom emotional, interest in retaining their position and may also think that only they have the expertise to make the most of the assets of the company. in some instances, creditors will agree with this proposition. in his book, 2 professor cahill suggests that the lending banks ( most of them foreign ) may have found it a “ bitter pill ” to retain the ceo of goodman international in executive control and with a sizeable equity stake in the restructured company. other high - profile cases saw the more conventional presumption that the old shareholders and top management will go. that has been the basic modus operandi of the government in the current banking crisis as far as the banks are concerned. in the case of nama, dealing as they are with a huge number of property - owners and developers, the modus operandi to date appears to reflect a kind of extended triage of their borrowers, with some being kept on, and others eventually not. in refreshing my memory on these cases, i have found edward cahill ’ s corporate financial crisis in ireland ( dublin : gill and macmillan, 1997 ) of great assistance. bis central bankers ’ speeches asset management companies or in - house operation of the banks? some may find irony in the fact the banks are among the main actors in driving restructuring. after all, they themselves have experienced some of the most far - reaching balance sheet restructuring, with their shareholders wiped - out and subordinated debt - holders also nursing losses, and central bank lending filling the hole left by other departing creditors. that job losses in the banking sector have not to date been as bad as the economy on average reflects the government ’ s decision to step in and keep the operations of the banks going because of the services they provided. ( incurring by far the biggest ever costs seen in corporate restructuring, the government also tried to avoid a wider financial instability as well as the loss of credit standing that would have accompanied losses hitting depositors and other creditors, but that story, which began exactly four years ago today, has been the main theme on many other occasions and so