IBA 2008 special report

Author: | Published: 17 Nov 2008

Learn from South America on bank failures

History repeated itself at the International Bar Association conference as delegates from Argentina compared notes with Chile on the restructuring methods that solved their various banking crises, in the nineties and now.

Roberto Silva of Marval O'Farrell & Mairal in Argentina and Cristobal Eyzaguirre of Claro & Cia in Chile told the packed room about sucessful government intervention in financial systems. "I'm not saying this will work for every nation but it did work for us," Silva said.

Argentina's method included reorganising assets into good and bad loans, then forming a so-called white knight to take on the good assets, placing them in an untouchable trust that the white knight could not access.

After that the government allowed bad creditors unassociated with the white knight to fail, with a lot of shareholders receiving little value on stocks. "There is not enough gold to pay everyone,"...