ABSTRACT
The basic argument is that the short-term effects of financial stabilization and economic deregulation programs may exacerbate problems of insolvency in banking systems and that governments may have to respond by strengthening bank regulatory procedures. The concept to underscore, based on experiences of both success and failure, is that bank insolvency is a financial system disease requiring careful diagnosis and prescription. The role of banks as a part of the payment system and as one of the basic pillars in resource mobilization and allocation makes stability of the financial system a necessity. Macro and microeconomic policies should be applied together in order to avoid the cost of permanent subsidization and to secure the benefits of a sound financial system. Mergers and acquisitions are excellent ways to replace former management and ownership when the new units can be strong both financially and managerially, but merging banks simply for the sake of merging leads nowhere.
