Deniz Igan, Thomas Lambert, Wolf Wagner, Eden Quxian Zhang, 28 March 2018

When failed banks are sold, a would-be acquiring bank is more likely to win the auction if it spends money on lobbying. This column argues, however, that these acquirers are less effective at improving efficiency afterwards. This implies that lobbying has a double cost: it distorts the efficient allocation of failed banks, and it amplifies agency problems at the acquiring banks. Resolution frameworks will need strong accountability mechanisms and transparency to reduce this cost.

Martin Brown, Ioanna S Evangelou, Helmut Stix, 01 February 2018

A cornerstone of new bank resolution policies across the world is the introduction of bail-ins to redistribute the costs of bank failures from taxpayers to bank creditors. This column uses the bail-in of two banks in Cyprus to examine how bank depositors react to this way of resolving a crisis. In the short run, customers who experienced deposit or bond bail-ins increased their holdings of cash and reduced deposits, while those who faced only an equity bail-in did not change their behaviour. In the medium run, confidence in the banking system among all depositors remained low.

Daniel Gros, Stefano Micossi, 20 September 2008

The radical moves in the US have direct implications for European banks and indirect implications for European governments. This column discusses the likely channels and notes that several European banks are both too big to fail and may be too big to be saved by their national governments alone.

Willem Buiter, 05 March 2008

This second column on the Treasury Committee’s report on lessons from Northern Rock discusses the institutional arrangements needed to cope should a bank of non-trivial size fail.

Willem Buiter, 04 March 2008

The UK Treasury Committee recently released a report on the lessons from the plight of Northern Rock. In the first of a two-column series, Willem Buiter analyses the shortcomings of the report’s recommendations for reducing problems in the banking and ‘shadow banking’ sectors.

Events

CEPR Policy Research