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An assessment of financial sector rescue programmes

Fabio Panetta (), Thomas Faeh (), Giuseppe Grande, Corrinne Ho (), Michael King (), Aviram Levy (), Federico Signoretti (), Marco Taboga () and Andrea Zaghini ()
Additional contact information
Fabio Panetta: Banca d'Italia
Thomas Faeh: Bank for International Settlements
Corrinne Ho: Bank for International Settlements
Aviram Levy: Banca d'Italia

No 47, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We analyse the wide array of rescue programmes adopted in several countries, following Lehman Brothers� default in September 2008, in order to support banks and other financial institutions. We first provide an overview of the programmes, comparing their characteristics, magnitudes and participation rates across countries. We then consider the effects of the programmes on banks� risk and valuation, looking at the behaviour of CDS premia and stock prices. We then proceed to analyse the issuance of government guaranteed bonds by banks, examining their impact on banks� funding and highlighting undesired effects and distortions. Finally, we briefly review the recent evolution of bank lending to the private sector. We draw policy implications, in particular as regards the way of mitigating the distortions implied by such programmes and the need for an exit strategy.

Keywords: bank asset guarantees; capital injection; banks; financial sector; financial crisis; bank consolidation; bank mergers and acquisitions; event studies; government guaranteed bonds; credit crunch; exit strategy (search for similar items in EconPapers)
JEL-codes: E58 E65 G14 G18 G21 G28 G32 G34 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-eec, nep-mac and nep-rmg
Date: 2009-07
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