Quantifying and Explaining Implicit Public Guarantees for European Banks

Oana Toader ()

Working Papers from HAL

Abstract: This study provides estimations of public implicit guarantees over the period 1997 to 2012 using a rating-based model. The investigation focuses on a sample of 45 large, listed European banks. It appears that the main element for determining the value of the public subsidy is the intrinsic strength of the bank. In addition, we provide evidence on the importance of guarantor strength on the value of the implicit guarantee: a higher sovereign rating of a bank‟s home country leads to larger implicit subsidies for bank' debt. Our findings also suggest that the recently observed decrease in the value of implicit subsidies goes beyond the decline in European sovereigns' strength. Rather, it is consistent with the implementation of resolution regimes and practices moving from a "bail-out" resolution policy to "bail-in" recapitalizations. Bank insolvencies would be handled in a more explicit context. Therefore, expectations on implicit public support are reduced.

Keywords: banks; implicit subsidy; ratings; resolution; garantie publique implicite; banques; régulation; résolution bancaire; rating (search for similar items in EconPapers)
Date: 2014-06-26
New Economics Papers: this item is included in nep-ban, nep-cba and nep-eec
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01015376
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://shs.hal.science/halshs-01015376/document (application/pdf)

Related works:
Journal Article: Quantifying and explaining implicit public guarantees for European banks (2015)
Working Paper: Quantifying and Explaining Implicit Public Guarantees for European Banks (2013)
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:hal:wpaper:halshs-01015376

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().