Rescue packages and bank lending |
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Authors: | Michael Brei Leonardo Gambacorta Goetz von Peter |
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Affiliation: | 1. Université Paris Ouest-Nanterre La Défense, EconomiX, 200 Avenue de la République, 92001 Nanterre, France;2. Bank for International Settlements, Monetary and Economic Department, Centralbahnplatz 2, 4002 Basel, Switzerland |
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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. |
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Keywords: | E44 G01 G21 |
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