Are Banks Too Big to Fail or Too Big to Save? International Evidence from Equity Prices and CDS Spreads

Demirgüç-Kunt, Asli; Huizinga, Harry

dc.creator	Demirgüç-Kunt, Asli
dc.creator	Huizinga, Harry
dc.date	2012-03-19T18:40:48Z
dc.date	2012-03-19T18:40:48Z
dc.date	2010-07-01
dc.date.accessioned	2023-02-17T21:04:36Z
dc.date.available	2023-02-17T21:04:36Z
dc.identifier	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100719151708
dc.identifier	http://hdl.handle.net/10986/3844
dc.identifier.uri	http://localhost:8080/xmlui/handle/CUHPOERS/244808
dc.description	Deteriorating public finances around the world raise doubts about countries' abilities to bail out their largest banks. For an international sample of banks, this paper investigates the impact of government indebtedness and deficits on bank stock prices and credit default swap spreads. Overall, bank stock prices reflect a negative capitalization of government debt and they respond negatively to deficits. The authors present evidence that in 2008 systemically large banks saw a reduction in their market valuation in countries running large fiscal deficits. Furthermore, the change in bank credit default swap spreads in 2008 relative to 2007 reflects countries' deterioration of public deficits. The results of the analysis suggest that some systemically important banks can increase their value by downsizing or splitting up, as they have become too big to save, potentially reversing the trend to ever larger banks. The paper also documents that a smaller proportion of banks are systemically important -- relative to gross domestic product -- in 2008 than in the two previous years, which could reflect private incentives to downsize.
dc.language	English
dc.relation	Policy Research Working Paper ; No. 5360
dc.rights	CC BY 3.0 IGO
dc.rights	http://creativecommons.org/licenses/by/3.0/igo/
dc.rights	World Bank
dc.subject	ACCOUNTING
dc.subject	ADVISORY SERVICES
dc.subject	ASSETS RATIO
dc.subject	AVERAGE COSTS
dc.subject	BAD CREDIT
dc.subject	BAILOUT
dc.subject	BALANCE SHEETS
dc.subject	BANK ASSET
dc.subject	BANK ASSETS
dc.subject	BANK BONDS
dc.subject	BANK COMPETITION
dc.subject	BANK CREDIT
dc.subject	BANK CREDITORS
dc.subject	BANK DEPOSITS
dc.subject	BANK FAILURE
dc.subject	BANK FAILURES
dc.subject	BANK FOR INTERNATIONAL SETTLEMENTS
dc.subject	BANK LIABILITIES
dc.subject	BANK LIABILITY
dc.subject	BANK MARKET
dc.subject	BANK MERGERS
dc.subject	BANK PROFITABILITY
dc.subject	BANK REGULATION
dc.subject	BANK RISK
dc.subject	BANK SIZE
dc.subject	BANK VALUATION
dc.subject	BANKING CORPORATION
dc.subject	BANKING CRISES
dc.subject	BANKING CRISIS
dc.subject	BANKING INDUSTRY
dc.subject	BANKING SECTOR
dc.subject	BANKING SYSTEM
dc.subject	BANKING SYSTEMS
dc.subject	BANKRUPTCY
dc.subject	BANKRUPTCY PROCEEDINGS
dc.subject	BANKS
dc.subject	BENCHMARK
dc.subject	BENCHMARKS
dc.subject	BOND
dc.subject	BOND HOLDERS
dc.subject	BOND MARKET
dc.subject	BOND MARKETS
dc.subject	BOND YIELD
dc.subject	BONDS
dc.subject	BOOK VALUE
dc.subject	BORROWING
dc.subject	BORROWING CAPACITY
dc.subject	BUDGET BALANCE
dc.subject	BUDGET BALANCES
dc.subject	BUDGET CONSTRAINTS
dc.subject	BUSINESS CYCLE
dc.subject	CAPITAL ASSETS
dc.subject	CAPITAL REGULATION
dc.subject	CAPITAL REQUIREMENTS
dc.subject	CAPITALIZATION
dc.subject	CDS
dc.subject	CENTRAL BANKS
dc.subject	CENTRAL GOVERNMENT DEBT
dc.subject	CHECKS
dc.subject	CLAIM
dc.subject	COMPETITIVE ADVANTAGES
dc.subject	CONTINGENT CLAIM
dc.subject	CONTINGENT LIABILITIES
dc.subject	CORPORATE YIELD
dc.subject	CREDIT DEFAULT
dc.subject	CREDIT DEFAULT SWAP
dc.subject	CREDIT DEFAULT SWAPS
dc.subject	CREDIT DERIVATIVES
dc.subject	CREDIT INSTITUTIONS
dc.subject	CREDIT LOSSES
dc.subject	CREDIT QUALITY
dc.subject	CREDIT RATING
dc.subject	CURRENCY
dc.subject	DEBENTURE
dc.subject	DEBENTURE HOLDERS
dc.subject	DEBENTURES
dc.subject	DEBT
dc.subject	DEBT ISSUES
dc.subject	DEBT RATIO
dc.subject	DEFAULT RISK
dc.subject	DEFICITS
dc.subject	DEPENDENT
dc.subject	DEPOSIT
dc.subject	DEPOSIT INSTITUTION
dc.subject	DEPOSIT INSURANCE
dc.subject	DEPOSIT INSURANCE SCHEME
dc.subject	DEPOSIT LIABILITIES
dc.subject	DISTRESSED BANKS
dc.subject	DIVIDEND
dc.subject	DOMESTIC BANK
dc.subject	DUMMY VARIABLE
dc.subject	DUMMY VARIABLES
dc.subject	EARNING ASSETS
dc.subject	EARNINGS
dc.subject	ECONOMIC CRISIS
dc.subject	ECONOMIC RENTS
dc.subject	ECONOMIES OF SCALE
dc.subject	EMERGING MARKET
dc.subject	EMERGING MARKET ECONOMIES
dc.subject	EUROPEAN CENTRAL BANK
dc.subject	EXPECTED RETURNS
dc.subject	EXPLICIT DEPOSIT INSURANCE
dc.subject	EXTERNALITIES
dc.subject	FINANCIAL CRISIS
dc.subject	FINANCIAL INSTITUTIONS
dc.subject	FINANCIAL SAFETY
dc.subject	FINANCIAL SAFETY NETS
dc.subject	FINANCIAL SECTOR
dc.subject	FINANCIAL STUDIES
dc.subject	FINANCIAL SUPPORT
dc.subject	FISCAL AUTHORITIES
dc.subject	FISCAL BALANCE
dc.subject	FISCAL BALANCES
dc.subject	FISCAL DEFICITS
dc.subject	FOREIGN BANK
dc.subject	FUTURE FINANCIAL CRISIS
dc.subject	GDP
dc.subject	GDP PER CAPITA
dc.subject	GOVERNMENT DEBT
dc.subject	GOVERNMENT DEFICITS
dc.subject	GOVERNMENT FINANCE
dc.subject	GOVERNMENT FINANCES
dc.subject	GOVERNMENT INDEBTEDNESS
dc.subject	GOVERNMENT REVENUES
dc.subject	GROSS DOMESTIC PRODUCT
dc.subject	HIGH DEBT
dc.subject	HOLDINGS
dc.subject	IMPLICIT SUBSIDIES
dc.subject	IMPLICIT SUBSIDY
dc.subject	INDEBTED
dc.subject	INDEBTED COUNTRIES
dc.subject	INDIVIDUAL BANK
dc.subject	INDIVIDUAL BANKS
dc.subject	INFORMATION ON CREDIT
dc.subject	INSIDER TRADING
dc.subject	INSOLVENCY
dc.subject	INSURED DEPOSITS
dc.subject	INTERNATIONAL BANK
dc.subject	INTERNATIONAL BANKING
dc.subject	INTERNATIONAL BANKS
dc.subject	INVESTMENT BANKS
dc.subject	LARGE BANK
dc.subject	LARGE BANKS
dc.subject	LEADING INDICATORS
dc.subject	LEVERAGE
dc.subject	LIABILITY
dc.subject	LIQUIDITY
dc.subject	LOSSES ON BANK
dc.subject	LOSSES ON BANKS
dc.subject	MARKET DISCIPLINE
dc.subject	MARKET PRICES
dc.subject	MARKET VALUE
dc.subject	MATURITY
dc.subject	MERGER
dc.subject	MONETARY POLICY
dc.subject	MORAL HAZARD
dc.subject	MORTGAGE
dc.subject	MORTGAGE LOANS
dc.subject	NATIONAL ECONOMIES
dc.subject	NATIONAL ECONOMY
dc.subject	NEGATIVE EXTERNALITIES
dc.subject	NUMBER OF BANKS
dc.subject	POSITIVE COEFFICIENT
dc.subject	POSITIVE COEFFICIENTS
dc.subject	PRICE DISCOVERY
dc.subject	PROFITABILITY
dc.subject	PUBLIC ASSISTANCE
dc.subject	PUBLIC BUDGET
dc.subject	PUBLIC DEBT
dc.subject	PUBLIC DEBTS
dc.subject	PUBLIC FINANCE
dc.subject	PUBLIC FINANCES
dc.subject	PUT OPTION
dc.subject	REGULATORY FORBEARANCE
dc.subject	REGULATORY RESTRICTIONS
dc.subject	REORGANIZATION
dc.subject	RETURN
dc.subject	RETURN ON ASSETS
dc.subject	RETURNS
dc.subject	RISK DIVERSIFICATION
dc.subject	RISK EXPOSURE
dc.subject	RISK PROFILE
dc.subject	SAFETY NET
dc.subject	SECURITIES
dc.subject	SHAREHOLDER
dc.subject	SHAREHOLDER VALUE
dc.subject	SHAREHOLDERS
dc.subject	SMALL BANK
dc.subject	SMALL BANKS
dc.subject	SOLVENCY
dc.subject	STOCK MARKET
dc.subject	STOCK MARKET VOLATILITY
dc.subject	STOCK MARKETS
dc.subject	STOCK PRICES
dc.subject	STOCK RETURN
dc.subject	STOCK RETURNS
dc.subject	SUBORDINATED DEBT
dc.subject	SUBSIDIARIES
dc.subject	SUBSIDIARY
dc.subject	SWAP MARKET
dc.subject	SYSTEMIC BANKING CRISES
dc.subject	TAKEOVER
dc.subject	TAX
dc.subject	TAXATION
dc.subject	TRADING
dc.subject	UNION
dc.subject	VALUATION
dc.subject	WEALTH
dc.subject	WEALTH EFFECT
dc.subject	WEALTH EFFECTS
dc.subject	WINDING-UP
dc.subject	YIELD SPREADS
dc.title	Are Banks Too Big to Fail or Too Big to Save? International Evidence from Equity Prices and CDS Spreads
dc.type	Publications & Research :: Policy Research Working Paper