English, Article, Journal or magazine article edition: Banks without Parachutes -- Competitive Effects of Government Bail-out Policies Hakenes, Hendrik; Schnabel, Isabel

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Bookmark: http://trove.nla.gov.au/version/43654
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Banks without Parachutes -- Competitive Effects of Government Bail-out Policies
Author
  • Hakenes, Hendrik
  • Schnabel, Isabel
Physical Description
  • preprint
Notes
  • The explicit or implicit protection of banks through government bail-out policies is a universal phenomenon. We analyze the competitive effects of such policies in two models with different degrees of transparency in the banking sector. Our main result is that the bail-out policy unambiguously leads to higher risk-taking at those banks that do not enjoy a bail-out guarantee. The reason is that the prospect of a bail-out induces the protected bank to expand, thereby intensifying competition in the deposit market and depressing other banks' margins. In contrast, the effects on the protected bank's risk-taking and on welfare depend on the transparency of the banking sector.
  • RePEc:xrs:sfbmaa:04-53
Language
  • English
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