Use of Blanket Guarantees in Banking Crises.
Title:
Use of Blanket Guarantees in Banking Crises.
Author:
Laeven, Luc.
ISBN:
9781452745039
Personal Author:
Physical Description:
1 online resource (45 pages)
Series:
IMF Working Papers
Contents:
Contents -- I. Introduction -- II. Country Experiences -- III. Effectiveness of Blanket Guarantees -- A. Empirical Analysis -- IV. The Costs of Using Blanket Guarantees -- V. Policy Implications -- VI. Conclusions -- Tables -- 1. Selected Blanket Guarantee Episodes -- 2. Selected Bank-Specific Guarantee Announcements -- 3. Impact of Blanket Guarantees on Liquidity Support -- 4. Short-Term and Medium-Term Effects of Guarantees on Liquidity Support -- 5. Impact of Blanket Guarantees on Foreign Liabilities -- 6. Short-Term and Medium-Term Effect of Guarantees on Foreign Liabilities -- 7. Blanket Guarantee and Extensive Liquidity Support -- 8. Blanket Guarantees, Crisis Intensity, and Fiscal Costs -- A1. Sequence of Events in Selected Crisis Episodes -- A2. IMF Programs and Bank Restructuring Policies -- Figures -- 1. Effectiveness of Depositors' Guarantees in Selected Countries -- 2. Fiscal Costs and Blanket Guarantees -- 3. Crisis Intensity and Blanket Guarantees -- References.
Abstract:
In episodes of significant banking distress or perceived systemic risk to the financial system, policymakers have often opted for issuing blanket guarantees on bank liabilities to stop or avoid widespread bank runs. In theory, blanket guarantees can prevent bank runs if they are credible. However, guarantee could add substantial fiscal costs to bank restructuring programs and may increase moral hazard going forward. Using a sample of 42 episodes of banking crises, this paper finds that blanket guarantees are successful in reducing liquidity pressures on banks arising from deposit withdrawals. However, banks'' foreign liabilities appear virtually irresponsive to blanket guarantees. Furthermore, guarantees tend to be fiscally costly, though this positive association arises in large part because guarantees tend to be employed in conjunction with extensive liquidity support and when crises are severe.
Local Note:
Electronic reproduction. Ann Arbor, Michigan : ProQuest Ebook Central, 2017. Available via World Wide Web. Access may be limited to ProQuest Ebook Central affiliated libraries.
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