International Evidence on Government Support and Risk Taking in the Banking Sector

Luis Brandão-Marques, Ricardo Correa and Horacio Sapriza
Authors registered in the RePEc Author Service: Luis Brandao Marques

No 2013/094, IMF Working Papers from International Monetary Fund

Abstract: Government support to banks through the provision of explicit or implicit guarantees affects the willingness of banks to take on risk by reducing market discipline or by increasing charter value. We use an international sample of bank data and government support to banks for the periods 2003-2004 and 2009-2010. We find that more government support is associated with more risk taking by banks, especially during the financial crisis (2009-10). We also find that restricting banks' range of activities ameliorates the moral hazard problem. We conclude that strengthening market discipline in the banking sector is needed to address this moral hazard problem.

Keywords: WP; government support; bank risk taking; bank regulation; bank support; bank ownership structure; support measure; Bank risk; Market Discipline; funding cost; Moody's support; government intervention; Deposit insurance; Bank deposits; Deposit rates; Inflation; Europe; East Asia; Africa; Global (search for similar items in EconPapers)
Pages: 36
Date: 2013-05-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (39)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=40501 (application/pdf)

Related works:
Working Paper: International evidence on government support and risk taking in the banking sector (2013)
Working Paper: International Evidence on Government Support and Risk-Taking in the Banking Sector (2012)
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:imf:imfwpa:2013/094

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().