Sovereign debt restructuring and bank capital

Yoram Landskroner, Jacob Paroush

Research output: Contribution to journalArticlepeer-review


The focus of this paper is on the interaction between a bail-out loan decision of a bank to a sovereign borrower and the adequacy of the bank's capital. The new loan is granted on two conditions: First, it must improve the likelihood of repayment of the outstanding loan; second the bank should have adequate capital.We find that in general a positive relationship exists between capital and the bail out loan and between existing debt and the new loan. However, under certain circumstances a negative relationship exists between the bank's capital and the new loan. Empirical results support the main implications of the theoretical model.

Original languageEnglish
Pages (from-to)197-207
Number of pages11
JournalInternational Journal of Phytoremediation
Issue number1
StatePublished - 1999


  • Bail-out loans
  • Capital adequacy
  • Sovereign debt


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