Safety-Net Benefits Conferred on Difficult-to-Fail-and-Unwind Banks in the US and EU Before and During the Great Recession
AbstractThis paper models and estimates ex ante safety-net benefits at a sample of large banks in US and Europe during 2003-2008. Our results suggest that difficult-to-fail and unwind (DFU) banks enjoyed substantially higher ex ante benefits than other institutions. Safety-net benefits prove significantly larger for DFU firms in Europe and bailout decisions less driven by asset size than in the US. We also find that a proxy for regulatory capture helps to explain bailout decisions in Europe. A policy implication of our findings is that authorities could better contain safety-net benefits if they refocused their information systems on measuring volatility as well as capital.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16787.
Date of creation: Feb 2011
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- Carbó-Valverde, Santiago & Kane, Edward J. & Rodriguez-Fernandez, Francisco, 2013. "Safety-net benefits conferred on difficult-to-fail-and-unwind banks in the US and EU before and during the great recession," Journal of Banking & Finance, Elsevier, vol. 37(6), pages 1845-1859.
- Santiago Carbo-Valverde & Edward J. Kane & Francisco Rodriquez-Fernandez, 2011. "Safety-net benefits conferred on difficulty-to-fail-and-unwind banks in the U.S. and EU before and during the Great Recession," Proceedings 1132, Federal Reserve Bank of Chicago.
- G01 - Financial Economics - - General - - - Financial Crises
- G2 - Financial Economics - - Financial Institutions and Services
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
- K2 - Law and Economics - - Regulation and Business Law
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