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Rescue packages and bank lending

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Author Info

  • Michael Brei
  • Leonardo Gambacorta
  • Goetz von Peter

Abstract

This paper examines whether the rescue measures adopted during the global financial crisis helped to sustain the supply of bank lending. The analysis proposes a setup that allows testing for structural shifts in the bank lending equation, and employs a novel dataset covering large international banks headquartered in 14 major advanced economies for the period 1995-2010. While stronger capitalisation sustains loan growth in normal times, banks during a crisis can turn additional capital into greater lending only once their capitalisation exceeds a critical threshold. This suggests that recapitalisations may not translate into greater credit supply until bank balance sheets are sufficiently strengthened.

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Bibliographic Info

Paper provided by Bank for International Settlements in its series BIS Working Papers with number 357.

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Length: 31 pages
Date of creation: Nov 2011
Date of revision:
Handle: RePEc:bis:biswps:357

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Related research

Keywords: bank lending channel; monetary policy; financial crisis; rescue packages; recapitalisation;

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References

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  1. Hasman, Augusto & López, Ángel, L. & Samartín Sáenz, Margarita, 2011. "Government, taxes and banking crises," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/12766, Universidad Carlos III de Madrid.
  2. Bank for International Settlements, 2009. "An assessment of financial sector rescue programmes," BIS Papers, Bank for International Settlements, number 48, March.
  3. Sudipto BHATTACHARYA & Kjell G. NYBORG, 2010. "Bank Bailout Menus," Swiss Finance Institute Research Paper Series 10-24, Swiss Finance Institute.
  4. McCauley, Robert & McGuire, Patrick & von Peter, Goetz, 2012. "After the global financial crisis: From international to multinational banking?," Journal of Economics and Business, Elsevier, vol. 64(1), pages 7-23.
  5. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
  6. Gambacorta, Leonardo & Mistrulli, Paolo Emilio, 2004. "Does bank capital affect lending behavior?," Journal of Financial Intermediation, Elsevier, vol. 13(4), pages 436-457, October.
  7. Ugo Albertazzi & Leonardo Gambacorta, 2006. "Bank Profitability and Taxation," Computing in Economics and Finance 2006 364, Society for Computational Economics.
  8. Skander J. Van den Heuvel, 2002. "Does bank capital matter for monetary transmission?," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 259-265.
  9. Charles Goodhart & Dirk Schoenmaker, 2009. "Fiscal Burden Sharing in Cross-Border Banking Crises," International Journal of Central Banking, International Journal of Central Banking, vol. 5(1), pages 141-165, March.
  10. Gambacorta, Leonardo, 2005. "Inside the bank lending channel," European Economic Review, Elsevier, vol. 49(7), pages 1737-1759, October.
  11. Ethan Cohen-Cole & Burcu Duygan-Bump & José Fillat & Judit Montoriol-Garriga, 2008. "Looking behind the aggregates: a reply to “Facts and Myths about the Financial Crisis of 2008”," Risk and Policy Analysis Unit Working Paper QAU08-5, Federal Reserve Bank of Boston.
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Cited by:
  1. Christophe Godlewski, 2012. "Are bank loans still “special” (especially during a crisis)? Empirical evidence from a European country," Working Papers of LaRGE Research Center 2012-03, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg (France).
  2. Michael Brei & Blaise Gadanecz, 2012. "Have public bailouts made banks' loan books safer?," BIS Quarterly Review, Bank for International Settlements, September.
  3. Ralph De Haas & Yevgeniya Korniyenko & Elena Loukoianova & Alexander Pivovarsky, 2012. "Foreign banks and the Vienna Initiative: turning sinners into saints," Working Papers 143, European Bank for Reconstruction and Development, Office of the Chief Economist.

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