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

Demirgü ; ç ; -Kunt, Asli ; Huizinga, Harry

关键词: ACCOUNTING;    ADVISORY SERVICES;    ASSETS RATIO;    AVERAGE COSTS;    BAD CREDIT;   

DOI  :  10.1596/1813-9450-5360
RP-ID  :  WPS5360

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

Deteriorating public finances around theworld raise doubts about countries' abilities to bailout their largest banks. For an international sample ofbanks, this paper investigates the impact of governmentindebtedness and deficits on bank stock prices and creditdefault swap spreads. Overall, bank stock prices reflect anegative capitalization of government debt and they respondnegatively to deficits. The authors present evidence that in2008 systemically large banks saw a reduction in theirmarket valuation in countries running large fiscal deficits.Furthermore, the change in bank credit default swap spreadsin 2008 relative to 2007 reflects countries'deterioration of public deficits. The results of theanalysis suggest that some systemically important banks canincrease their value by downsizing or splitting up, as theyhave become too big to save, potentially reversing the trendto ever larger banks. The paper also documents that asmaller proportion of banks are systemically important --relative to gross domestic product -- in 2008 than in thetwo previous years, which could reflect private incentivesto downsize.