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Have Public Bailouts Made Banks’ Loan Books Safer?

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  • Michael Brei

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Blaise Gadanecz

Abstract

In response to the financial crisis, the authorities in a number of countries used public funds to recapitalise their banks. Did a reduction of risk in banks' lending follow these rescue operations? To help answer this question, we analyse the balance sheets and syndicated loan signings of 87 large internationally active banks. As loan signing volumes started diminishing across the board in 2009, our evidence shows that rescued banks did not reduce the risk of their new lending significantly more than non-rescued banks. Our results are relevant for the ongoing assessment of public bank rescue programmes.
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Suggested Citation

  • Michael Brei & Blaise Gadanecz, 2012. "Have Public Bailouts Made Banks’ Loan Books Safer?," Post-Print hal-01449920, HAL.
    • Handle: RePEc:hal:journl:hal-01449920
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    References listed on IDEAS

    as
    1. Manganelli, Simone & Altunbas, Yener & Marqués-Ibáñez, David, 2011. "Bank risk during the financial crisis: do business models matter?," Working Paper Series 1394, European Central Bank.
    2. Michael Brei & Blaise Gadanecz, 2012. "Public recapitalisations and bank risk: evidence from loan spreads and leverage," BIS Working Papers 383, Bank for International Settlements.
    3. Claudio Borio & Mathias Drehmann, 2011. "Toward an Operational Framework for Financial Stability: “Fuzzy” Measurement and Its Consequences," Central Banking, Analysis, and Economic Policies Book Series, in: Rodrigo Alfaro (ed.),Financial Stability, Monetary Policy, and Central Banking, edition 1, volume 15, chapter 4, pages 063-123, Central Bank of Chile.
    4. Huang, Rocco & Ratnovski, Lev, 2011. "The dark side of bank wholesale funding," Journal of Financial Intermediation, Elsevier, vol. 20(2), pages 248-263, April.
    5. Fabio Panetta & Thomas Faeh & Giuseppe Grande & Corrinne Ho & Michael R King & Aviram Levy & Federico M Signoretti & Marco Taboga & Andrea Zaghini, 2009. "An assessment of financial sector rescue programmes," BIS Papers, Bank for International Settlements, number 48.
    6. Mark Carey & Greg Nini, 2007. "Is the Corporate Loan Market Globally Integrated? A Pricing Puzzle," Journal of Finance, American Finance Association, vol. 62(6), pages 2969-3007, December.
    7. Blaise Gadanecz & Kostas Tsatsaronis & Yener Altunbas, 2008. "External support and bank behaviour in the international syndicated loan market," BIS Working Papers 265, Bank for International Settlements.
    8. Emmanuel Farhi & Jean Tirole, 2012. "Collective Moral Hazard, Maturity Mismatch, and Systemic Bailouts," American Economic Review, American Economic Association, vol. 102(1), pages 60-93, February.
    9. Petrovic, Ana & Tutsch, Ralf, 2009. "National rescue measures in response to the current financial crisis," Legal Working Paper Series 8, European Central Bank.
    10. Brei, Michael & Gambacorta, Leonardo & von Peter, Goetz, 2013. "Rescue packages and bank lending," Journal of Banking & Finance, Elsevier, vol. 37(2), pages 490-505.
    11. Michael R King, 2009. "Time to buy or just buying time? The market reaction to bank rescue packages," BIS Working Papers 288, Bank for International Settlements.
    12. Blaise Gadanecz, 2004. "The syndicated loan market," BIS Quarterly Review, Bank for International Settlements, December.
    13. Michael Chui & Dietrich Domanski & Peter Kugler & Jimmy Shek, 2010. "The collapse of international bank finance during the crisis: evidence from syndicated loan markets," BIS Quarterly Review, Bank for International Settlements, September.
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    Cited by:

    1. Gerhardt, Maria & Vennet, Rudi Vander, 2017. "Bank bailouts in Europe and bank performance," Finance Research Letters, Elsevier, vol. 22(C), pages 74-80.
    2. Hoggarth, Glenn & Hooley, John & Korniyenko, Yevgeniya, 2013. "Financial Stability Paper No 22: Which way do foreign branches sway? Evidence from the recent UK domestic credit cycle," Bank of England Financial Stability Papers 22, Bank of England.

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    More about this item

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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