Sharing the Pain? Credit Supply and Real Effects of Bank Bail-ins

High wage workers and high wage firms

Thorsten Beck, Samuel Da-Rocha-Lopes, André F Silva and Francesca Cornelli

The Review of Financial Studies, 2021, vol. 34, issue 4, 1747-1788

Abstract: We analyze the credit supply and real effects of bank bail-ins by exploiting the unexpected failure and subsequent resolution of a major Portuguese bank. Using loan-level data, we show that while firms more exposed to the bail-in suffered a significant contraction of credit at the intensive margin, they were on average able to compensate for the supply-driven shock. However, affected SMEs experienced a binding reduction of funds available through credit lines, and those with lower internal liquidity increased precautionary cash holdings and reduced investment and employment. Our results highlight the trade-off policymakers face when considering this new bank resolution mechanism.

JEL-codes: G01 G21 G28 G38 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (14)

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Working Paper: Sharing the Pain? Credit Supply and Real Effects of Bank Bail-ins (2017)
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