Deposit insurance after Iceland and Cyprus

Anne Sibert 02 April 2013

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The facts are now well known. The largest banks in Cyprus are insolvent, but too big for the government of Cyprus to save – at least if it wanted to avoid the ‘double drowning’ fate of Ireland. The government, trying to rescue banks, found itself needing a rescue.

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Topics:  EU institutions Financial markets Macroeconomic policy

Tags:  Iceland, deposit insurance, bank bailouts, Cyprus, bail-ins

Bank bailout guarantees and public debt

Angelo Baglioni, Umberto Cherubini 01 December 2010

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The turmoil currently taking place in Ireland is the direct consequence of the troubles affecting its banking system and the bailout guarantee provided by the Irish government. Some had predicted the challenges this would pose (see Kelly 2010 and Honohan and Lane 2009). European governments have committed a lot of money to the rescue of their banks.

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Topics:  EU policies Europe's nations and regions

Tags:  Ireland, bank bailouts, Fiscal crisis, Eurozone crisis

On forbearance lending, bank bailouts, and distinguishing the walking wounded from the living dead

Max Bruche, Gerard Llobet 09 August 2010

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As a consequence of the global crisis, there are worries that many countries will slide into a Japanese-style decade of lost growth. One of the main problems in Japan during the 1990s was that insolvent "zombie" banks decided it was a good idea to persist in lending to insolvent "zombie" firms (Peek and Rosengren 2005), a practice sometimes referred to as forbearance lending. But why would banks want to engage in such lending?

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Topics:  Europe's nations and regions Financial markets Global crisis Macroeconomic policy

Tags:  financial crisis, financial regulation, bank bailouts, forbearance lending

The impact of public guarantees on bank risk taking: Evidence from a natural experiment

Reint Gropp, Christian Gründl, Andre Güttler 20 April 2010

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Do public guarantees influence bank risk taking? Public guarantees in the wake of the global financial crisis have been widespread. Many countries either nationalised banks (such as the US: Indy Mac, Fannie Mae, Freddy Mac; UK: RBS, HBOS, Lloyds; Germany: IKB, Hypo Real Estate; Belgium/Netherlands: Dexia, Fortis), or they provided blanked guarantees for the banking system (such as Germany and Italy) or both (Beck et al. 2010, Aït-Sahalia et al. 2009).

Despite this prevalence, there is scarce evidence on the likely effect of such interventions on bank risk taking.

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Topics:  Global crisis Microeconomic regulation

Tags:  financial regulation, bank bailouts, public guarantees

“Too big to fail” is no redemption song

Avinash Persaud 10 February 2010

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A new global governance was forged in the white heat of the financial crisis. The G7 gave way to the G20 (Eichengreen 2009). Leaders representing 80% of the world’s population met and were resolute in calling for a global policy response to the crisis. Governments opened the fiscal sluice gates, interest rates were slashed, the IMF was given additional resources, and the OECD finally got tough with European tax havens.

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Topics:  Global crisis

Tags:  financial regulation, bank bailouts, “too big to fail”

The financial crisis: Financial trilemma in Europe

Dirk Schoenmaker 19 December 2009

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The single banking market was built on the premise that banks conduct the majority of their business at home and only branch out to other EU countries on a modest scale. This premise is no longer true. Some of the major European banks such as Deutsche Bank, BNP Paribas and UniCredit currently conduct more business cross-border than at home. The single market is now weighed down by its own success (Persaud 2008).

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Topics:  EU institutions Global crisis

Tags:  EU, global crisis, banking regulation, bank bailouts