Banking Risks around the World : The Implicit Safety Net Subsidy Approach
The author calculates gross safety net subsidies for a large sample of banks in 12 countries, to assess the relationship between the risk-taking behavior of banks, and certain ban characteristics. He finds that gross safety net subsidies are higher...
| Main Author: | |
|---|---|
| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2000/11/717436/banking-risks-around-world-implicit-safety-net-subsidy-approach http://hdl.handle.net/10986/19744 |
| Summary: | The author calculates gross safety net
subsidies for a large sample of banks in 12 countries, to
assess the relationship between the risk-taking behavior of
banks, and certain ban characteristics. He finds that gross
safety net subsidies are higher for banks that have
concentrated ownership, that are affiliated with a business
group, that are small, or that have high credit growth, and
for banks in countries with low GDP per capita, high
inflation, or poor quality, and enforcement of the legal
system. These findings suggest that the moral hazard
behavior of a bank depends on its institutional environment,
and its corporate governance structure. The author also
presents a matrix that shows estimates of safety net
subsidies for a range of given combinations of equity
volatilities, and equity-to-deposit ratios. These figures
could be used as input to an early warning system, for both
individual, and systemic banking problems. |
|---|