Too Big to Fail: Some Empirical Evidence on the Causes and Consequences of Public Banking Interventions in the United Kingdom

26 Pages Posted: 30 Aug 2012

See all articles by Andrew Kenan Rose

Andrew Kenan Rose

University of California - Haas School of Business; NUS Business School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Tomasz Wieladek

Bank of England

Date Written: August 21, 2012

Abstract

During the 2007-09 financial crisis, the banking sector received an extraordinary level of public support. In this empirical paper, we examine the determinants of a number of public sector interventions: government funding or central bank liquidity insurance schemes, public capital injections, and nationalisations. We use bank-level data spanning all British and foreign banks operating within the United Kingdom. We use multinomial logit regression techniques and find that a bank’s size, relative to the size of the entire banking system, typically has a large positive and non-linear effect on the probability of public sector intervention for a bank. We also use instrumental variable techniques to show that British interventions helped; there is fragile evidence that the wholesale (non-core) funding of an affected institution increased significantly following capital injection or nationalisation.

Keywords: Nationalisation, capital injection, liquidity, crisis, foreign, empirical, data, logit

JEL Classification: G38

Suggested Citation

Rose, Andrew Kenan and Wieladek, Tomasz, Too Big to Fail: Some Empirical Evidence on the Causes and Consequences of Public Banking Interventions in the United Kingdom (August 21, 2012). Bank of England Working Paper No. 460, Available at SSRN: https://ssrn.com/abstract=2137595 or http://dx.doi.org/10.2139/ssrn.2137595

Andrew Kenan Rose

University of California - Haas School of Business ( email )

Berkeley, CA 94720
United States
510-642-6609 (Phone)
510-642-4700 (Fax)

HOME PAGE: http://faculty.haas.berkeley.edu/arose

NUS Business School ( email )

1E Kent Ridge Road
NUHS Tower Block Level 7
Singapore, 119228
Singapore

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Tomasz Wieladek (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
86
Abstract Views
687
rank
354,157
PlumX Metrics