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Magdalena Ignatowski

5 August 2015
WORKING PAPER SERIES - No. 1835
Between capture and discretion - The determinants of distressed bank treatment and expected government support
English
Details
Abstract
In this paper, we analyze how sources of political influence relate to the actual regulatory treatment of distressed banks and to the expectation of bank support provided by the government. We assemble a unique dataset that links U.S. banks
JEL Code
D72 : Microeconomics→Analysis of Collective Decision-Making→Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
27 March 2014
WORKING PAPER SERIES - No. 1659
Wishful thinking or effective threat? tightening bank resolution regimes and bank risk-taking
English
Details
Abstract
We propose a framework for testing the effects of changes in bank resolution regimes on bank behaviour. By exploiting the differential relevance of recent changes in U.S. bank resolution (i.e., the introduction of the Orderly Liquidation Authority, OLA) for different types of banks, we are able to simulate a quasi-natural experiment using a difference-in-difference framework. We find that banks that are more affected by the introduction of the OLA (1) significantly decrease their overall risk-taking and (2) shift their business model and loan origination towards lower risk, indicating the general effectiveness of the regime change. This effect, however, does (3) not hold for the largest and most systemically important banks. Hence, the introduction of the OLA in the U.S. alone does not appear to have solved the too-big-to-fail problem and might need to be complemented with other measures to limit financial institutions' risk-taking.
JEL Code
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
G33 : Financial Economics→Corporate Finance and Governance→Bankruptcy, Liquidation
Network
ECB Lamfalussy Fellowship Programme