The private value of too-big-to-fail guarantees

Michiel Bijlsma and Remco Mocking

No 240, CPB Discussion Paper from CPB Netherlands Bureau for Economic Policy Analysis

Abstract: We estimate the size of the funding advantage for a sample of 151 large European banks for the period 1-1-2008 until 15-6-2012 using rating agencies‟ assessment of banks‟ credit ratings uplift. We find that the size of the funding advantage is large and fluctuates substantially over time. It rises from 0.1% of GDP in the first half of 2008 to more than 1% of GDP mid 2011. The latter value is in line with results from other studies. We find that the marginal effect of total assets relative to GDP on the rating uplift is positive and declines with the size of the bank. In addition, a higher sovereign rating of a bank‟s home country corresponds on average to a higher rating uplift for that bank.

JEL-codes: G01 G21 G24 (search for similar items in EconPapers)
Date: 2013-04
New Economics Papers: this item is included in nep-ban and nep-fmk
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Citations: View citations in EconPapers (2)

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