Bank liquidity creation following regulatory interventions and capital support

Allen N. Berger, Christa H S Bouwman, Thomas Kick, Klaus Schaeck*

*Corresponding author for this work

Research output: Contribution to journalArticle (Academic Journal)

75 Citations (Scopus)

Abstract

We study the effects of regulatory interventions and capital support (bailouts) on banks' liquidity creation. We rely on instrumental variables to deal with possible endogeneity concerns. Our key findings, which are based on a unique supervisory German dataset, are that regulatory interventions robustly trigger decreases in liquidity creation, while capital support does not affect liquidity creation. Additional results include the effects of these actions on different components of liquidity creation, lending, and risk taking. Our findings provide new and important insights into the debates about the design of regulatory interventions and bailouts.

Original languageEnglish
Pages (from-to)115-141
Number of pages27
JournalJournal of Financial Intermediation
Volume26
Early online date21 Jan 2016
DOIs
Publication statusPublished - Apr 2016

Structured keywords

  • AF Banking

Keywords

  • Bank bailouts
  • Bank distress
  • Capital support
  • Liquidity creation
  • Regulatory interventions

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