Operational as Well as Financial Restructuring
Bank restructuring must aim at addressing the causes, not just the symptoms, of bank insolvency. The new owners and directors of the bank must eliminate nonprofitable branches, must lay off redundant staff members, and must refocus the bank’s business operations on profitable activities. Moreover, they must ensure that the bank complies with sound financial and prudential ratios. Thus, any restructuring scheme that allows an insolvent bank to survive as a separate entity should ensure that the bank is restored not only to solvency, but also and more important, to profitability so that it can operate on a sound basis over the medium and long term.