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Evidence from the Bond Market on Banks’ “Too-Big-to-Fail” Subsidy

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Abstract

Yesterday’s post presented evidence on a possible upside of very large banks, namely, lower costs. In today’s post, we focus on a possible downside, that is, whether investors in the primary bond market “discount” risk when they invest in bonds of the too-big-to-fail banks.

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  • João A. C. Santos, 2014. "Evidence from the Bond Market on Banks’ “Too-Big-to-Fail” Subsidy," Liberty Street Economics 201404326b, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:86946
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    References listed on IDEAS

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    1. Anginer, Deniz & Warburton, A. Joseph, 2014. "The Chrysler effect: The impact of government intervention on borrowing costs," Journal of Banking & Finance, Elsevier, vol. 40(C), pages 62-79.
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    More about this item

    Keywords

    Continental Illinois; large bank holding companies; largest banks; efficiency ratio; cost advantage; discount; nonbank financial institutions;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services

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