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The private value of too-big-to-fail guarantees

Author

Listed:
  • Michiel Bijlsma

    () (CPB Netherlands Bureau for Economic Policy Analysis)

  • Remco Mocking

    () (CPB Netherlands Bureau for Economic Policy Analysis)

Abstract

We estimate the size of the funding advantage for a sample of 151 large European banks for the period 1-1-2008 until 15-6-2012 using rating agencies‟ assessment of banks‟ credit ratings uplift. We find that the size of the funding advantage is large and fluctuates substantially over time. It rises from 0.1% of GDP in the first half of 2008 to more than 1% of GDP mid 2011. The latter value is in line with results from other studies. We find that the marginal effect of total assets relative to GDP on the rating uplift is positive and declines with the size of the bank. In addition, a higher sovereign rating of a bank‟s home country corresponds on average to a higher rating uplift for that bank.

Suggested Citation

  • Michiel Bijlsma & Remco Mocking, 2013. "The private value of too-big-to-fail guarantees," CPB Discussion Paper 240, CPB Netherlands Bureau for Economic Policy Analysis.
  • Handle: RePEc:cpb:discus:240
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    More about this item

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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