Bank bonds: size, systemic relevance and the sovereign

Andrea Zaghini

No 966, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: I analyze the risk premium on bank bonds at origination with special focus on the role of implicit and explicit public guarantees and the systemic relevance of issuing institutions. Looking at the asset swap spread on 5,500 bonds, I find that explicit guarantees and sovereign creditworthiness have a substantial effect on the risk premium. In addition, while large institutions still enjoy lower issuance costs linked to the TBTF framework, I find evidence of enhanced market discipline for systemically important banks which have faced an increased premium on bond placements since the onset of the financial crisis.

Keywords: Too-big-to-fail; market discipline; sovereign guarantees; G-SIFIs (search for similar items in EconPapers)
JEL-codes: G01 G18 G21 (search for similar items in EconPapers)
Date: 2014-07
New Economics Papers: this item is included in nep-ban and nep-cfn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Journal Article: Bank Bonds: Size, Systemic Relevance and the Sovereign (2014)
Working Paper: Bank bonds: Size, systemic relevance and the sovereign (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_966_14

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