An Assessment of Financial Sector Rescue Programmes
77 Pages Posted: 22 Aug 2009
Date Written: July 2009
Abstract
We analyse the wide array of rescue programmes adopted in several countries, following Lehman Brothers’ default in September 2008, in order to support banks and other financial institutions. We first provide an overview of the programmes, comparing their characteristics, magnitudes and participation rates across countries. We then consider the effects of the programmes on banks’ risk and valuation, looking at the behaviour of CDS premia and stock prices. We then proceed to analyse the issuance of government guaranteed bonds by banks, examining their impact on banks’ funding and highlighting undesired effects and distortions. Finally, we briefly review the recent evolution of bank lending to the private sector. We draw policy implications, in particular as regards the way of mitigating the distortions implied by such programmes and the need for an exit strategy.
JEL Classification: E58, E65, G14, G18, G21, G28, G32, G34
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Bank Loans, Bonds, and Information Monopolies Across the Business Cycle
By João A. C. Santos and Andrew Winton
-
Do Banks Price Their Informational Monopoly?
By Galina Hale and João A. C. Santos
-
Lending Relationships and Information Rents: Do Banks Exploit Their Information Advantages?
-
Why Firm Access to the Bond Market Differs Over the Business Cycle: A Theory and Some Evidence
-
Bank Capital, Borrower Power, and Loan Rates
By João A. C. Santos and Andrew Winton
-
U.S. Commercial Bank Lending Through 2008:Q4: New Evidence from Gross Credit Flows
By Silvio Contessi and Johanna Francis
-
Bank Capital, Competition and Loan Spreads
By Markus Fischer, Julian A. Mattes, ...