Rescue packages and bank lending, November 2011

Abstract

This paper examines whether the rescue measures adopted during the global financial crisis helped to sustain the supply of bank lending. The analysis proposes a setup that allows testing for structural shifts in the bank lending equation, and employs a novel dataset covering large international banks headquartered in 14 major advanced economies for the period 1995–2010. While stronger capitalisation sustains loan growth in normal times, banks during a crisis can turn additional capital into greater lending only once their capitalisation exceeds a critical threshold. This suggests that recapitalisations may not translate into greater credit supply until bank balance sheets are sufficiently strengthened. JEL classification: E44, G01, G21.

Extracted Key Phrases

14 Figures and Tables

Cite this paper

@inproceedings{Brei2011RescuePA, title={Rescue packages and bank lending, November 2011}, author={M. L. Brei and Leonardo Gambacorta}, year={2011} }