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Bank liquidity creation following regulatory interventions and capital support


  • Berger, Allen N.
  • Bouwman, Christa H.S.
  • Kick, Thomas
  • Schaeck, Klaus


We study the effects of regulatory interventions and capital support (bailouts) on banks’ liquidity creation. We rely on instrumental variables to deal with possible endogeneity concerns. Our key findings, which are based on a unique supervisory German dataset, are that regulatory interventions robustly trigger decreases in liquidity creation, while capital support does not affect liquidity creation. Additional results include the effects of these actions on different components of liquidity creation, lending, and risk taking. Our findings provide new and important insights into the debates about the design of regulatory interventions and bailouts.

Suggested Citation

  • Berger, Allen N. & Bouwman, Christa H.S. & Kick, Thomas & Schaeck, Klaus, 2016. "Bank liquidity creation following regulatory interventions and capital support," Journal of Financial Intermediation, Elsevier, vol. 26(C), pages 115-141.
  • Handle: RePEc:eee:jfinin:v:26:y:2016:i:c:p:115-141
    DOI: 10.1016/j.jfi.2016.01.001

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    Cited by:

    1. Schupp, Fabian & Silbermann, Leonid, 2017. "The role of structural funding for stability in the German banking sector," Discussion Papers 03/2017, Deutsche Bundesbank.
    2. repec:eee:intfin:v:55:y:2018:i:c:p:81-93 is not listed on IDEAS
    3. Kick, Thomas & Kreiser, Swetlana & Merkl, Christian, 2018. "Loan supply and bank capital: A micro-macro linkage," FAU Discussion Papers in Economics 04/2018, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
    4. repec:eee:finana:v:53:y:2017:i:c:p:48-65 is not listed on IDEAS
    5. Götz, Martin R. & Tröger, Tobias H., 2017. "Fines for misconduct in the banking sector: What is the situation in the EU?," SAFE White Paper Series 47, Goethe University Frankfurt, Research Center SAFE - Sustainable Architecture for Finance in Europe.
    6. Guizani, Brahim & Watanabe, Wako, 2016. "The effects of public capital infusions on banks’ risk-shifting to the deposit insurance system in Japan," Journal of Financial Stability, Elsevier, vol. 26(C), pages 15-30.
    7. repec:eee:jbfina:v:79:y:2017:i:c:p:57-73 is not listed on IDEAS
    8. Davydov, Denis & Fungáčová, Zuzana & Weill, Laurent, 2017. "Cyclicality of bank liquidity creation," BOFIT Discussion Papers 5/2017, Bank of Finland, Institute for Economies in Transition.
    9. Francesco Marchionne & Beniamino Pisicoli & Michele Fratianni, 2017. "Regulation, financial crises, and liberalization traps," Mo.Fi.R. Working Papers 143, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    10. repec:eee:finsta:v:37:y:2018:i:c:p:107-111 is not listed on IDEAS
    11. repec:eee:jbfina:v:93:y:2018:i:c:p:54-70 is not listed on IDEAS
    12. repec:ura:ecregj:v:1:y:2018:i:1:p:303-314 is not listed on IDEAS
    13. Alin-Marius ANDRIEȘ & Florentina IEȘAN-MUNTEAN & Simona NISTOR, 2016. "The effectiveness of policy interventions in CEE countries," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 7, pages 93-124, June.
    14. repec:gam:jsusta:v:10:y:2018:i:9:p:3142-:d:167479 is not listed on IDEAS
    15. Simón Sosvilla-Rivero & Victor Echevarria Icaza, 2017. "Systemic banks, capital composition and CoCo bonds issuance:The effects on bank risk," Working Papers 17-03, Asociación Española de Economía y Finanzas Internacionales.
    16. repec:eee:jbfina:v:82:y:2017:i:c:p:203-216 is not listed on IDEAS
    17. repec:eee:finsta:v:32:y:2017:i:c:p:86-98 is not listed on IDEAS
    18. repec:eee:jaecon:v:66:y:2018:i:1:p:244-265 is not listed on IDEAS
    19. Pierpaolo GIANNOCCOLO & José Manuel MANSILLA-FERNÁNDEZ, 2017. "Bank Restructuring, Competition, and Lending Supply: Evidence from the Spanish Banking Sector," Departmental Working Papers 2017-16, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    20. Maaike Diepstraten & Carin van der Cruijsen, 2017. "To stay or go? Consumer bank switching behaviour after government interventions," DNB Working Papers 550, Netherlands Central Bank, Research Department.
    21. Deli, Yota & Delis, Manthos D. & Hasan, Iftekhar & Liu, Liuling, 2016. "Bank enforcement actions and the terms of lending," Research Discussion Papers 23/2016, Bank of Finland.
    22. repec:eee:jbfina:v:87:y:2018:i:c:p:411-426 is not listed on IDEAS
    23. William Bassett & Selva Demiralp & Nathan Lloyd, 2016. "Government Support of Banks and Bank Lending," Koç University-TUSIAD Economic Research Forum Working Papers 1611, Koc University-TUSIAD Economic Research Forum.


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