The recent trends in long-term bank funding

Andrea Cardillo () and Andrea Zaghini

No 137, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We assess the long-term funding conditions for banks in the US, the euro area and the UK and, separately, for the group of global systemically important financial institutions (G-SIFIs), over the period 1997-2011. After the outbreak of the subprime crisis there was a considerable reshuffling of the relative weight of banks� funding sources, also due to non-conventional monetary policy interventions, government support measures and a significant increase in wholesale funding costs. By looking at 6,400 bank bonds we find that both implicit and explicit guarantees by the sovereign have a substantial role in shaping the wholesale cost of bond issuance with significant differences between AAA-rated and lower-rated countries. However, when a bank CDS exists the role of the government is significantly reduced with the market giving more weight to the soundness and creditworthiness of the issuing institution.

Keywords: long-term funding; bank balance sheet; financial crisis; G-SIFIs (search for similar items in EconPapers)
JEL-codes: G01 G18 G21 (search for similar items in EconPapers)
Date: 2012-10
New Economics Papers: this item is included in nep-ban, nep-eec and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:bdi:opques:qef_137_12

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