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Bankers are administrators of other people´s money, and they are responsible both to their depositors and to other stakeholders. Human nature being what it is, however, they sometimes fall prey to overweening ambition, coming to see themselves as the rightful beneficiaries of the moneys entrusted to them. This can lead them to make poor lending decisions and engage in risky practices, eventually moving on to cosmetic accounting and the concealment of problems, speculation and even outright fraud.

Supervisors are there to prevent such behaviour, of course. They are responsible to government and the general public alike for the stability of the financial system, the proper allocation of financial resources by the banks and the protection of depositors and creditors. Their responsibility is, then, subsidiary to that of the bankers themselves.

Where supervision is lax and ineffective, however, it encourages bad management by bankers, creating a vicious circle that eventually leads to financial crises, which has most often to be cured using tax-payers´ money. Of course, it also hurts the broader economy. That is why the inseparable trio of regulation, supervision and resolution must exist.

In this collection of his writings over a period of some 50 years, Aristóbulo de Juan describes the causes, characteristics and consequences of financial crises based on his own experience as a central banker, world bank expert and consultant spanning a career of more than 55 years.

In a nutshell, the papers brought together in this book recount circumstances that have always plagued banking, and that are only too likely to recur in the future.

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FOREWORD by Fernando González Urbaneja

PROLOGUE by the Author

CHAPTER 1 FROM GOOD BANKERS TO BAD BANKERS

CHAPTER 2 THE SPANISH BANKING CRISIS OF THE 1970s AND 1980s

CHAPTER 3 THE MICROECONOMIC ROOTS OF THE BANKING CRISIS

CHAPTER 4 BANK REFORM IN EASTERN EUROPE

CHAPTER 5 ´FALSE FRIENDS´ AND BANKING REFORM

CHAPTER 6 THE DYNAMICS OF UNDISCLOSED INSOLVENCY

CHAPTER 7 OBSTACLES IN THE WAY OF CRISIS RESOLUTION EXCERPTS FROM THE PAPER DESPEJAR EL TERRENO (CLEARING THE DECKS)

CHAPTER 8 THE FINANCIAL SYSTEMS AND THE ETHICS OF RESTRUCTURING

CHAPTER 9 LIQUIDITY AND EUPHORIA

CHAPTER 10 THE RECOMMENDED OPTION

CHAPTER 11 THE PROBLEMS OF THE EUROPEAN BANKING UNION

CHAPTER 12 STABILITY AND ITS RISKS

CHAPTER 13 PRACTICAL LESSONS FOR DEALING WITH PROBLEM BANKS

CHAPTER 14 NON PERFORMING LOANS - NPLs

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Aristóbulo de Juan has dedicated more than fifty years of his life to banking, thirteen of them as a senior executive in retail banking and some forty more as a front line supervisor and consultant dealing with bank reform and financial crises on four continents. After his time in the private sector, he spent nine years in the orbit of the Bank of Spain, initially as the CEO of Fondo de Garantía de Depósitos, the Spanish deposit guarantee scheme, and then as Director General of Supervision at the central bank itself. In these positions he played a key role in the treatment and resolution of the Spanish banking crisis of the 1980s and in the modernization of Spain´s supervisory mechanisms. He then went on to spend three years as a Financial Advisor to the World Bank in Washington, where he dealt with financial reform and crisis management in emerging economies. In 1989 he set up his own consultancy firm specializing in problem banks and bank supervision. In addition to his advisory work, he has spoken at conferences and seminars in countless different forums, including the University of Oxford, Harvard, Yale and the Wharton Business School, and at the Federal Reserve, the Bank of England, the Bank of Russia, the People´s Bank of China and the Reserve Bank of India. He is a member of the Advisory Board of the Spanish financial daily Expansión, and he has written numerous articles on the financial crisis of 2007. He also co-authored a book on the subject with Francisco Uría and Ö¤igo de Barrón, which was published in 2003 under the title Anatomía de una crisis.

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