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

Thorsten Beck (), Samuel Da-Rocha-Lopes and Andre Silva ()
Authors registered in the RePEc Author Service: Samuel Da-Rocha Lopes

No 12058, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We analyze the credit supply and real sector effects of bank bail-ins by exploiting the unexpected failure of a major bank in Portugal and its subsequent resolution. Using a unique dataset of matched firm-bank data on credit exposures and interest rates from the Portuguese credit register, we show that while banks more exposed to the bail-in significantly reduced credit supply after the shock, affected firms were able to compensate this credit contraction with other sources of funding, including new lending relationships. Although there was no loss of external funding, we observe a moderate tightening of credit conditions as well as lower investment and employment at firms more exposed to the intervention, particularly SMEs. We explain the latter real effects by higher precautionary cash holdings due to increased uncertainty.

Keywords: Bail-ins; bank failures; credit supply; employment; investment (search for similar items in EconPapers)
JEL-codes: E22 E24 E58 G01 G21 G28 G32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-eur and nep-mac
Date: 2017-05
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