The Great Banks` Depression - Deposit Withdrawals in the German Crisis of 1931

Isabel Schnabel

No 03-11, Sonderforschungsbereich 504 Publications from Sonderforschungsbereich 504, Universität Mannheim, Sonderforschungsbereich 504, University of Mannheim

Abstract: Using monthly balance-sheet data of all major German credit banks, we analyze deposit withdrawals and bank failures in the German banking and currency crisis of 1931. We show that deposit withdrawals were related to indicators of banks' liquidity and solvency and were hence not simply the consequence of a run on the German currency. We find no evidence that branch banks were more stable than unit banks. Finally, we show that larger banks had a lower probability of failure, were more likely to be bailed out by the public authorities, and were granted preferential access to the Reichsbank's discount window. We interpret these results as evidence for a 'too-big-to-fail' phenomenon.

Pages: 59 pages
Date: 2002-12-11
New Economics Papers: this item is included in nep-ifn, nep-mac and nep-rmg
Note: I would like to thank Reinhold Schnabel for very helpful discussions in the early stages of this project. Moreover, I thank Jochen Bigus, Christoph Buchheim, Mark Carlson, Martin Hellwig, Hans-Joachim Voth, David Wheelock and the participants of the Annual Meeting of the Cliometric Society in Raleigh, the Banking Workshop in Muenster, the Annual Meeting of the European Economic Association in Stockholm, the Annual Meeting of the Economic History Association in Nashville, the Annual Meeting of the Verein fuer Socialpolitik in Zuerich as well as seminar participants at Pompeu Fabra and the University of Mannheim for useful comments and suggestions.
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Working Paper: The great banks' depression: deposit withdrawals in the German crisis of 1931 (2003)
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