The Use of Blanket Guarantees in Banking Crises / Luc Laeven, Fabian Valencia.

Format:

Book

Government document

Author/Creator:

Laeven, Luc.

Contributor:

Valencia, Fabian.

Series:

IMF Working Papers; Working Paper ; No. 2008/250

IMF working paper ; WP/08/250

IMF Working Papers

Language:

English

Subjects (All):

Bank failures.

Financial crises.

Moral hazard.

Deposit insurance.

Physical Description:

1 online resource (45 pages) : illustrations, tables.

Edition:

1st ed.

Place of Publication:

Washington, D.C. : International Monetary Fund, 2008.

Language Note:

English

Summary:

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.

Contents:

Intro

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.

Notes:

Bibliographic Level Mode of Issuance: Monograph

Includes bibliographical references.

Description based on online resource; title from PDF front page (ebrary, viewed February 26, 2014).

ISBN:

9786612842016

9781462393121

1462393128

9781282842014

1282842013

9781451871081

1451871082

9781452745039

145274503X

OCLC:

460638675