Argentina’s 1980-1982 Banking Crisis

In Argentina’s crisis of 1980’s financial institutions were forced to rely heavily on Central Bank financial assistance when they encountered deposit withdrawals. The largest investment bank and the second largest commercial bank failed. More than 70 institutions had to be liquidated or placed in intervention between 1980 and 1982. Bank Runs: After Mexican Peso Crisis, foreign investors’ feared Argentina with a weakening economy would devalue its currency, initiated a capital flight. As a result, lower wages, lower salaries, and high unemployment rates began to rise. Widespread fear of a financial meltdown triggered Bank Runs. Suspension of Payments: Banks, suspended payments denying the ability to withdraw funds. Debt for Deposit Swap: The government offered government bonds swap for deposits with few takers. Deposit Insurance: The Central Bank established a deposit-insurance program to rebuild confidence. Bank Nationalization and Restructuring: The Central Bank closed some banks, and nationalized others.

The 1982-86 Banking Crisis in Chile
Reaction Phase
Toxic Assets Removal: Banks were assessed for their long-term viability. Viable banks sold ‘bad loans’ to the Central Bank, with a repurchase agreement. Most banks used this facility to the tune of $5 billion.
Liquidity Enhancement Central Bank’s Secured and subsidized Loans on Collateral: Government provided secured loans (using bank assets as collateral) to troubled institutions to allow them to recapitalize. These "repos" had conditions attached, including a provision that the shareholders could not take profits out of the company until the loan was repaid.
Eliminate Weak Banks: Non-viable banks were intervened and liquidated. The government intervened directly in two banks, wiping out shareholders, removing management and