Too big to fail: some empirical evidence on the causes and consequences of public banking interventions in the United Kingdom
AbstractDuring the 2007-09 financial crisis, the banking sector received an extraordinary level of public support. In this empirical paper, we examine the determinants of a number of public sector interventions: government funding or central bank liquidity insurance schemes, public capital injections, and nationalisations. We use bank-level data spanning all British and foreign banks operating within the United Kingdom. We use multinomial logit regression techniques and find that a bank’s size, relative to the size of the entire banking system, typically has a large positive and non-linear effect on the probability of public sector intervention for a bank. We also use instrumental variable techniques to show that British interventions helped; there is fragile evidence that the wholesale (non-core) funding of an affected institution increased significantly following capital injection or nationalisation.
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Bibliographic InfoPaper provided by Bank of England in its series Bank of England working papers with number 460.
Length: 26 pages
Date of creation: 21 Aug 2012
Date of revision:
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nationalisation; capital injection; liquidity; crisis; foreign; empirical; data; logit;
Find related papers by JEL classification:
- G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-03 (All new papers)
- NEP-BAN-2012-09-03 (Banking)
- NEP-CBA-2012-09-03 (Central Banking)
- NEP-MON-2012-09-03 (Monetary Economics)
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