Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments January 19, 2023 erstellt
Beschreibung:
Past papers show that public bailouts increase the moral hazard of rescued banks. What happens to other banks in the banking sector? Using a hand-collected dataset of European banks from 2007 to 2017 and adopting a dynamic difference-in-differences approach, we document that public bailouts influence the behavior of other banks in the system that share similar characteristics to those rescued (peers), especially if the rescue packages do not contain restrictions on bank activities. Specifically, after a bank is rescued, peers show greater Non-Performing Loans ratios and lower margins. We also investigate the channels through competitive effects that affect peers’ behavior. First, peers worsen their asset quality by accounting for more potential losses in the near term. Second, their margins drop both for an increase in their funding costs and for a decrease in the interest income collected from their borrowers. Our findings highlight the role of conditionalities attached to public rescue packages in smoothing peers’ risk-taking incentives and avoiding distortions in the competition