Public recapitalisations and bank risk: evidence from loan spreads and leverage
A number of countries' authorities put in place bank rescue packages using public funds in response to the global financial crisis. Were these public recapitalisations followed by a reduction of risk in banks' loan books? To answer this question, in this paper the balance sheets and syndicated loan portfolios of 87 large internationally active banks, approximately half of which were rescued during the crisis, are analysed for the period 2000-10. Evidence is presented that banks that were later rescued took on higher risk in their loan books before the crisis than banks that were not, especially in their home markets. Although the riskiness of loan signings started diminishing across the board in 2009, we do not find consistent evidence that rescued banks reduced their risk relatively more than non rescued banks during the crisis.
|Date of creation:||Jul 2012|
|Date of revision:|
|Contact details of provider:|| Postal: Centralbahnplatz 2, CH - 4002 Basel|
Phone: (41) 61 - 280 80 80
Fax: (41) 61 - 280 91 00
Web page: http://www.bis.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Michael R King, 2009. "Time to buy or just buying time? The market reaction to bank rescue packages," BIS Working Papers 288, Bank for International Settlements.
- Hakenes, Hendrik & Schnabel, Isabel, 2004.
"Banks without Parachutes -- Competitive Effects of Government Bail-out Policies,"
Sonderforschungsbereich 504 Publications
04-53, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
- Hakenes, Hendrik & Schnabel, Isabel, 2010. "Banks without parachutes: Competitive effects of government bail-out policies," Journal of Financial Stability, Elsevier, vol. 6(3), pages 156-168, September.
- Hakenes, Hendrik & Schnabel, Isabel, 2004. "Banks without parachutes : competitive effects of government bail-out policies," Papers 04-53, Sonderforschungsbreich 504.
- Hakenes, Hendrik & Schnabel, Isabel, 2004. "Banks without Parachutes - Competitive Effects of Government Bail-out Policies," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 8, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Hendrik Hakenes & Isabel Schnabel, 2004. "Banks without Parachutes – Competitive Effects of Government Bail-out Policies," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2004_12, Max Planck Institute for Research on Collective Goods.
- Acharya, Viral V. & Yorulmazer, Tanju, 2007.
"Too many to fail--An analysis of time-inconsistency in bank closure policies,"
Journal of Financial Intermediation,
Elsevier, vol. 16(1), pages 1-31, January.
- Viral Acharya & Tanju Yorulmazer, 2007. "Too many to fail - an analysis of time-inconsistency in bank closure policies," Bank of England working papers 319, Bank of England.
- Acharya, Viral V & Yorulmazer, Tanju, 2004. "Too Many to Fail - An Analysis of Time Inconsistency in Bank Closure Policies," CEPR Discussion Papers 4778, C.E.P.R. Discussion Papers.
- Brei, Michael & Gambacorta, Leonardo & von Peter, Goetz, 2013.
"Rescue packages and bank lending,"
Journal of Banking & Finance,
Elsevier, vol. 37(2), pages 490-505.
- Kevin C. Murdock & Thomas F. Hellmann & Joseph E. Stiglitz, 2000. "Liberalization, Moral Hazard in Banking, and Prudential Regulation: Are Capital Requirements Enough?," American Economic Review, American Economic Association, vol. 90(1), pages 147-165, March.
- Bengt Holmstrom & Jean Tirole, 1997. "Financial Intermediation, Loanable Funds, and The Real Sector," The Quarterly Journal of Economics, Oxford University Press, vol. 112(3), pages 663-691.
- Anil K Kashyap & Jeremy C. Stein & David W. Wilcox, 1992.
"Monetary Policy and Credit Conditions: Evidence From the Composition of External Finance,"
NBER Working Papers
4015, National Bureau of Economic Research, Inc.
- Kashyap, Anil K & Stein, Jeremy C & Wilcox, David W, 1993. "Monetary Policy and Credit Conditions: Evidence from the Composition of External Finance," American Economic Review, American Economic Association, vol. 83(1), pages 78-98, March.
- Anil K. Kashyap & Jeremy C. Stein & David W. Wilcox, 1991. "Monetary policy and credit conditions: evidence from the composition of external finance," Finance and Economics Discussion Series 154, Board of Governors of the Federal Reserve System (U.S.).
When requesting a correction, please mention this item's handle: RePEc:bis:biswps:383. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Beslmeisl)
If references are entirely missing, you can add them using this form.