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

Settlements, Bank for International, An Assessment of Financial Sector Rescue Programmes (July 2009). BIS Paper No. 48, Available at SSRN: https://ssrn.com/abstract=1457664 or http://dx.doi.org/10.2139/ssrn.1457664

Bank for International Settlements (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4051
Switzerland

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