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An assessment of financial sector rescue programmes

  • Fabio Panetta

    ()

    (Banca d'Italia)

  • Thomas Faeh

    ()

    (Bank for International Settlements)

  • Giuseppe Grande

    ()

    (Banca d'Italia)

  • Corrinne Ho

    ()

    (Bank for International Settlements)

  • Michael King

    ()

    (Bank for International Settlements)

  • Aviram Levy

    ()

    (Banca d'Italia)

  • Federico M. Signoretti

    ()

    (Banca d'Italia)

  • Marco Taboga

    ()

    (Banca d'Italia)

  • Andrea Zaghini

    ()

    (Banca d'Italia)

We analyse the wide array of rescue programmes adopted in several countries, following Lehman Brothers� default in September 2008, in order to support banks and other financial institutions. We first provide an overview of the programmes, comparing their characteristics, magnitudes and participation rates across countries. We then consider the effects of the programmes on banks� risk and valuation, looking at the behaviour of CDS premia and stock prices. We then proceed to analyse the issuance of government guaranteed bonds by banks, examining their impact on banks� funding and highlighting undesired effects and distortions. Finally, we briefly review the recent evolution of bank lending to the private sector. We draw policy implications, in particular as regards the way of mitigating the distortions implied by such programmes and the need for an exit strategy.

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File URL: http://www.bancaditalia.it/pubblicazioni/qef/2009-0047/QEF_47.pdf
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Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Questioni di Economia e Finanza (Occasional Papers) with number 47.

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Date of creation: Jul 2009
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Handle: RePEc:bdi:opques:qef_47_09
Contact details of provider: Postal: Via Nazionale, 91 - 00184 Roma
Web page: http://www.bancaditalia.it

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  1. Silvio Contessi & Johanna Francis, 2009. "U.S. Commercial Bank Lending through 2008:Q4: New Evidence from Gross Credit Flows," Fordham Economics Discussion Paper Series dp2009-04, Fordham University, Department of Economics.
  2. Pierre Collin-Dufresne, 2001. "The Determinants of Credit Spread Changes," Journal of Finance, American Finance Association, vol. 56(6), pages 2177-2207, December.
  3. 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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