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Government intervention and bank markups: Lessons from the global financial crisis for the COVID-19 crisis

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  • Tan, Brandon
  • Igan, Deniz
  • Martinez Peria, Maria Soledad
  • Pierri, Nicola
  • Presbitero, Andrea F.

Abstract

The COVID-19 pandemic could result in large government interventions in the banking industry. To shed light on the possible consequences on markups, we rely on the experience of the Global Financial Crisis and exploit granular data on government interventions in more than 800 banks across 27 countries between 2007 and 2017. Using a multivariate matching method, we find no evidence of an increase in markups. Interventions—especially longer and larger ones—have no significant impact on prices but they increase costs, mostly because of higher loan impairment charges, lowering markups.

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  • Tan, Brandon & Igan, Deniz & Martinez Peria, Maria Soledad & Pierri, Nicola & Presbitero, Andrea F., 2021. "Government intervention and bank markups: Lessons from the global financial crisis for the COVID-19 crisis," Journal of Banking & Finance, Elsevier, vol. 133(C).
    • Handle: RePEc:eee:jbfina:v:133:y:2021:i:c:s0378426621002715
    DOI: 10.1016/j.jbankfin.2021.106320
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    Cited by:

    1. Reint Gropp & Steven Ongena & Jörg Rocholl & Vahid Saadi, 2022. "The cleansing effect of banking crises," Economic Inquiry, Western Economic Association International, vol. 60(3), pages 1186-1213, July.
    2. Phi-Hung Nguyen & Jung-Fa Tsai & Thanh-Tuan Dang & Ming-Hua Lin & Hong-Anh Pham & Kim-Anh Nguyen, 2021. "A Hybrid Spherical Fuzzy MCDM Approach to Prioritize Governmental Intervention Strategies against the COVID-19 Pandemic: A Case Study from Vietnam," Mathematics, MDPI, vol. 9(20), pages 1-26, October.
    3. Krystyna Brzozowska & Małgorzata Gorzałczyńska-Koczkodaj & Elżbieta Ociepa-Kicińska & Przemysław Pluskota, 2023. "The Impact of the COVID-19 Pandemic on Financial Condition and Mortality in Polish Regions," Sustainability, MDPI, vol. 15(11), pages 1-18, June.
    4. Cristina Demma & Giovanni Ferri & Andrea Orame & Valerio Pesic & Valerio Vacca, 2024. "Banks' operational resilience during pandemics," Questioni di Economia e Finanza (Occasional Papers) 833, Bank of Italy, Economic Research and International Relations Area.
    5. Anju Goswami & Pooja Malik, 2024. "Identifying Financial Performance Drivers in the Indian Banking Sector During the COVID-19 Crisis," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 22(3), pages 667-719, September.

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    More about this item

    Keywords

    Banks; Government intervention; Markups; Lerner index;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General

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