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

Beck, T. ORCID: 0000-0001-8382-2066, Silva, A. and Da-Rocha-Lopes, S. (2020). Sharing the Pain? Credit Supply and Real Effects of Bank Bail-ins. The Review of Financial Studies, doi: 10.1093/rfs/hhaa067

Abstract

We analyze the credit supply and real effects of bank bail-ins by exploiting the unexpected failure and subsequent resolution of a major Portuguese bank. Using matched firm-bank data on credit exposures and interest rates, we show that banks more exposed to the bail-in significantly reduced credit supply and tightened credit conditions at the intensive margin. While affected firms were on average able to compensate the reduction in overall credit, SMEs experienced a binding contraction of funds available through credit lines. Those with lower ex-ante internal liquidity responded to this shock by increasing precautionary cash holdings and reducing investment and employment.

Publication Type: Article
Additional Information: This is a pre-copyedited, author-produced version of an article published in Review of Financial Studies following peer review. The version of record Beck, T. , Silva, A. and Da-Rocha-Lopes, S. (2020). Sharing the Pain? Credit Supply and Real Effects of Bank Bail-ins. The Review of Financial Studies, will be available online at:https://doi.org/10.1093/rfs/hhaa067
Subjects: H Social Sciences > HG Finance
Departments: Business School > Finance
Date Deposited: 24 Feb 2020 13:13
URI: https://openaccess.city.ac.uk/id/eprint/23768
[img] Text - Accepted Version
This document is not freely accessible until 10 June 2022 due to copyright restrictions.

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