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Sharing the Pain? Credit Supply and Real Effects of Bank Bail-ins

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  • Beck, Thorsten
  • Da-Rocha-Lopes, Samuel
  • Silva, Andre

Abstract

We analyze the credit supply and real sector effects of bank bail-ins by exploiting the unexpected failure of a major bank in Portugal and its subsequent resolution. Using a unique dataset of matched firm-bank data on credit exposures and interest rates from the Portuguese credit register, we show that while banks more exposed to the bail-in significantly reduced credit supply after the shock, affected firms were able to compensate this credit contraction with other sources of funding, including new lending relationships. Although there was no loss of external funding, we observe a moderate tightening of credit conditions as well as lower investment and employment at firms more exposed to the intervention, particularly SMEs. We explain the latter real effects by higher precautionary cash holdings due to increased uncertainty.

Suggested Citation

  • Beck, Thorsten & Da-Rocha-Lopes, Samuel & Silva, Andre, 2017. "Sharing the Pain? Credit Supply and Real Effects of Bank Bail-ins," CEPR Discussion Papers 12058, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12058
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    Cited by:

    1. Dirk Schoenmaker, 2017. "A macro approach to international bank resolution," Policy Contributions 21231, Bruegel.

    More about this item

    Keywords

    Bail-ins; bank failures; credit supply; employment; investment;

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G01 - Financial Economics - - General - - - Financial Crises
    • 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

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