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An assessment of financial sector rescue programmes

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Fabio Panetta & Thomas Faeh & Giuseppe Grande & Corrinne Ho & Michael King & Aviram Levy & Federico M. Signoretti & Marco Taboga & Andrea Zaghini, 2009. "An assessment of financial sector rescue programmes," Questioni di Economia e Finanza (Occasional Papers) 47, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:opques:qef_47_09
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    References listed on IDEAS

    as
    1. Silvio Contessi & Johanna L. Francis, 2013. "U.S. Commercial Bank Lending Through 2008:Q4: New Evidence From Gross Credit Flows," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 428-444, January.
    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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    bank asset guarantees; capital injection; banks; financial sector; financial crisis; bank consolidation; bank mergers and acquisitions; event studies; government guaranteed bonds; credit crunch; exit strategy;

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • 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
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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