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Developments in the value of implicit guarantees for bank debt: The role of resolution regimes and practices

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  • Sebastian Schich
  • Byoung-Hwan Kim

Abstract

High values of implicit guarantees for bank debt can be taken as signalling the market’s expectation that public authorities will rescue the institution in question in times of severe financial distress. By the same token, declines in the measure would suggest a drop in the perceived likelihood of such a bailout, perhaps reflecting the availability of more effective failure resolution tools (although they could also reflect other factors such an improvement in the asset quality of banks).

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  • Sebastian Schich & Byoung-Hwan Kim, 2013. "Developments in the value of implicit guarantees for bank debt: The role of resolution regimes and practices," OECD Journal: Financial Market Trends, OECD Publishing, vol. 2012(2), pages 35-65.
    • Handle: RePEc:oec:dafkad:5k4c7r8dvhvf
    DOI: 10.1787/fmt-2012-5k4c7r8dvhvf
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    Citations

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    Cited by:

    1. Toader, Oana, 2015. "Quantifying and explaining implicit public guarantees for European banks," International Review of Financial Analysis, Elsevier, vol. 41(C), pages 136-147.
    2. Dübel, Achim, 2013. "The capital structure of banks and practice of bank restructuring," CFS Working Paper Series 2013/04, Center for Financial Studies (CFS).
    3. Conlon, Thomas & Cotter, John, 2014. "Anatomy of a bail-in," Journal of Financial Stability, Elsevier, vol. 15(C), pages 257-263.
    4. Oliver Denk & Sebastian Schich & Boris Cournède, 2015. "Why implicit bank debt guarantees matter: Some empirical evidence," OECD Journal: Financial Market Trends, OECD Publishing, vol. 2014(2), pages 63-88.
    5. Timothy C. Irwin, 2016. "Getting the Dog to Bark: Disclosing Fiscal Risks from the Financial Sector," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 7(02), pages 1-17, June.
    6. Hans-Joachim Dübel, 2012. "After the ‘Whatever-it-takes’ Bail-out of Eurozone Bank Bondholders: The Eurozone’s Wasted Opportunity for a Banking Union That Protects Sovereign Finance," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(4), pages 46-50, December.
    7. Stig Helberg & Snorre Lindset, 2013. "Bank Debt Regulations Implications for Bank Capital and Bond Risk," Working Paper Series 14813, Department of Economics, Norwegian University of Science and Technology.
    8. Helberg, Stig & Lindset, Snorre, 2014. "How do asset encumbrance and debt regulations affect bank capital and bond risk?," Journal of Banking & Finance, Elsevier, vol. 44(C), pages 39-54.
    9. Randall Kroszner, 2016. "A Review of Bank Funding Cost Differentials," Journal of Financial Services Research, Springer;Western Finance Association, vol. 49(2), pages 151-174, June.
    10. Mario Bellia & Sara Maccaferri & Sebastian Schich, 2022. "Limiting too-big-to-fail: market reactions to policy announcements and actions," Journal of Banking Regulation, Palgrave Macmillan, vol. 23(4), pages 368-389, December.

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