The Impact of State Loans Policy on Bank Stability

Emilia-Anuta Corovei ()

Knowledge Horizons - Economics, 2015, vol. 7, issue 3, 187-193

Abstract: The banking crisis has demonstrated the weakness of regulatory and countries’ institutional authorities in responding and resolving banking sector problems. Many decisions regarding intervention in the banking sector were made too late,and many such decisions were rushed, without proper evaluation of the effectiveness of the chosen mechanisms and their potential consequences for the banking sector (Hoshi, T. and Kashyap, A.K. 2010). Recent findings show that government rescue measures results in only a small proportion of bank recoveries. Our paper examines the effectiveness of the state loan policy adopted during the global financial crisis on bank stability. We combine unique bank-level data of 85 European banking institutions and cross-country data in order to estimate the impact of this state measure on the banking sector stability. Our empirical results are correlated with an existing theoretical model from the literature (Dietrich, D., Hauck, A,. (2012),) and reflect a significant negative influence of state loan policy measure on bank stability.

Keywords: Policy rescue measures; state loan; banking sector stability; banking crisis (search for similar items in EconPapers)
JEL-codes: C23 G18 G21 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:khe:journl:v:7:y:2015:i:3:p:187-193

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