Why Do Banks Need Recapitalization?

Recapitalization is the restructuring of a company's debt and equity ratio. The purpose of recapitalization is to stabilize a company's capital structure.

Why do banks recapitalize?

Bank recapitalization is a method to infuse new and fresh capital into banks to strengthen their balance sheet. To help with the credit flow, the government as well as private institutions use equity and debt instruments to recapitalize the banks. It is very important to ensure the credit growth of the economy.

What is a bank recapitalization?

Bank recapitalization is the act of beefing up the long-term capital of a bank to the level at least required by the monetary authorities and to ensure the security of shareholders fund (equity plus reserve). ... Some of the banks merged and some were completely taken over by the stronger banks.