Divestiture of Banks’ Surplus Assets: Integrating Mechanism Design and Structured Finance Approach

The divestiture of banks’ surplus assets is one of the most critical issues in the country’s banking system, holding significant importance for resolving the imbalances within this sector of the economy. Various methods such as auctions and negotiations are commonly employed for the divestiture of banks’ surplus assets. These methods, however, can be enhanced and complemented by employing new capital market instruments such as call options, put options, real estate investment funds, project funds, and public joint-stock project companies. To ensure the effective utilization of these instruments, it is necessary to apply methods that uncover the price preferences of asset divestors (banks) and buyers (individual and institutional investors). To achieve this objective, this paper elaborates on how mechanism design methods can be employed. Furthermore, to harmonize the information between buyers and sellers regarding the actual return of the assets being divested, Monte Carlo simulation based on stochastic differential equations will be utilized.