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Have public bailouts made banks' loan books safer?

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  • Michael Brei
  • Blaise Gadanecz

Abstract

In response to the financial crisis, the authorities in a number of countries used public funds to recapitalise their banks. Did a reduction of risk in banks' lending follow these rescue operations? To help answer this question, we analyse the balance sheets and syndicated loan signings of 87 large internationally active banks. As loan signing volumes started diminishing across the board in 2009, our evidence shows that rescued banks did not reduce the risk of their new lending significantly more than non-rescued banks. Our results are relevant for the ongoing assessment of public bank rescue programmes.

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Bibliographic Info

Article provided by Bank for International Settlements in its journal BIS Quarterly Review.

Volume (Year): (2012)
Issue (Month): (September)
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Handle: RePEc:bis:bisqtr:1209h

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  1. Yener Altunbas & Simone Manganelli & David Marques-Ibanez, 2012. "Bank Risk during the Financial Crisis: Do business models matter?," Working Papers 12003, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
  2. Berger, A.N. & Bouwman, C.H.S. & Kick, T. & Schaeck, K., 2011. "Bank risk taking and liquidity creation following regulatory interventions and capital support," Discussion Paper 2011-088, Tilburg University, Center for Economic Research.
  3. Rocco Huang & Lev Ratnovski, 2009. "The dark side of bank wholesale funding," Working Papers 09-3, Federal Reserve Bank of Philadelphia.
  4. Fabio Panetta & Thomas Faeh & Giuseppe Grande & Corrinne Ho & Michael King & Aviram Levy & Federico M. Signoretti & Marco Taboga & Andrea Zaghini, 2009. "An assessment of financial sector rescue programmes," Questioni di Economia e Finanza (Occasional Papers) 47, Bank of Italy, Economic Research and International Relations Area.
  5. Michael Brei & Leonardo Gambacorta & Goetz von Peter, 2011. "Rescue packages and bank lending," BIS Working Papers 357, Bank for International Settlements.
  6. Michael Brei & Blaise Gadanecz, 2012. "Public recapitalisations and bank risk: evidence from loan spreads and leverage," BIS Working Papers 383, Bank for International Settlements.
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