Risky bank guarantees

Taneli M�kinen (), Lucio Sarno and Gabriele Zinna
Additional contact information
Taneli M�kinen: Bank of Italy
Authors registered in the RePEc Author Service: Taneli Mäkinen

No 1232, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: Applying standard portfolio-sort techniques to bank asset returns for 15 countries from 2004 to 2018, we uncover a risk premium associated with implicit government guarantees. This risk premium is intimately tied to sovereign risk, suggesting that guaranteed banks, defined as those of particular importance to the national economy, inherit the risk of the guarantor. Indeed, this premium does not exist in safe-haven countries. We rationalize these findings with a model in which implicit government guarantees are risky in the sense that they provide protection that depends on the aggregate state of the economy.

Keywords: banks; sovereign risk; risk premium; government guarantee (search for similar items in EconPapers)
JEL-codes: G23 (search for similar items in EconPapers)
Date: 2019-07
New Economics Papers: this item is included in nep-ban, nep-ore and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.bancaditalia.it/pubblicazioni/temi-disc ... 232/en_tema_1232.pdf (application/pdf)

Related works:
Journal Article: Risky bank guarantees (2020)
Working Paper: Risky Bank Guarantees (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_1232_19

Access Statistics for this paper

More papers in Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area Contact information at EDIRC.
Bibliographic data for series maintained by ().