Sharing the pain? Credit supply and real effects of bank bail-ins

Thorsten Beck, Samuel Da-Rocha-Lopes, André F. Silva

Research output: Contribution to journalArticlepeer-review

10 Citations (Scopus)

Abstract

We analyze the credit supply and real effects of bank bail-ins by exploiting the unexpected failure and subsequent resolution of a major Portuguese bank. Using loan-level data, we show that while firms more exposed to the bail-in suffered a significant contraction of credit at the intensive margin, they were on average able to compensate for the supply-driven shock. However, affected SMEs experienced a binding reduction of funds available through credit lines, and those with lower internal liquidity increased precautionary cash holdings and reduced investment and employment. Our results highlight the trade-off policymakers face when considering this new bank resolution mechanism.

Original languageEnglish
Pages (from-to)1747-1788
Number of pages42
JournalReview Of Financial Studies
Volume34
Issue number4
DOIs
Publication statusPublished - 1 Apr 2021

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