Do “Too-Big-To-Fail” Banks Receive Preferential Treatment in Bailouts? Surprising Results from a Cross-Country Analysis

Allen N. Berger, Simona Nistor, Steven Ongena and Sergey Tsyplakov
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Allen N. Berger: University of South Carolina - Darla Moore School of Business
Simona Nistor: Babes-Bolyai University - Department of Finance
Sergey Tsyplakov: University of South Carolina - Darla Moore School of Business

No 24-11, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Regulators more often bail out “Too-Big-To-Fail” banks than others, but this may not imply preferential treatment as commonly believed. Bailouts are complex dynamic processes involving more than one-time aid, so harsh treatments elsewhere in the process may counter the benefits of the higher likelihood of bailouts for these banks. Using bailout data from 22 European countries we find relatively harsh treatment for Globally-Systemically Important Banks. Regulators bail out G SIBs at later stages of financial deterioration, impose stronger restrictions, and withdraw aid after less significant recoveries. We explain these findings using cross-country data on supervisory powers, political connections, and national culture.

Keywords: Banks; Bailouts; Too-Big-To-Fail; European Union; G-SIBs (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2024-02
New Economics Papers: this item is included in nep-ban, nep-eec and nep-fdg
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2411

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