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Do “Too-Big-To-Fail” Banks Receive Preferential Treatment in Bailouts? Surprising Results from a Cross-Country Analysis

Author

Listed:
  • Allen N. Berger

    (University of South Carolina - Darla Moore School of Business)

  • Simona Nistor

    (Babes-Bolyai University - Department of Finance)

  • Steven Ongena

    (University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR))

  • Sergey Tsyplakov

    (University of South Carolina - Darla Moore School of Business)

Abstract

Regulators more often bail out “Too-Big-To-Fail” banks than others, but this may not imply preferential treatment as commonly believed. Bailouts are complex dynamic processes involving more than one-time aid, so harsh treatments elsewhere in the process may counter the benefits of the higher likelihood of bailouts for these banks. Using bailout data from 22 European countries we find relatively harsh treatment for Globally-Systemically Important Banks. Regulators bail out G SIBs at later stages of financial deterioration, impose stronger restrictions, and withdraw aid after less significant recoveries. We explain these findings using cross-country data on supervisory powers, political connections, and national culture.

Suggested Citation

  • Allen N. Berger & Simona Nistor & Steven Ongena & Sergey Tsyplakov, 2024. "Do “Too-Big-To-Fail” Banks Receive Preferential Treatment in Bailouts? Surprising Results from a Cross-Country Analysis," Swiss Finance Institute Research Paper Series 24-11, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2411
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    More about this item

    Keywords

    Banks; Bailouts; Too-Big-To-Fail; European Union; G-SIBs;
    All these keywords.

    JEL classification:

    • 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

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