Hüttl, Pia, Schoenmaker, Dirk, (2016), “Fiscal capacity to support large banks”, Bruegel, 3 Οctober
During the global financial crisis and subsequent euro-debt crisis, the fiscal resources of some countries appeared to be insufficient to support their banking systems. These countries needed outside support to stabilise their banking systems and thereby their wider economies. This Policy Contribution assesses the potential fiscal costs of recapitalising large banks. Based on past financial crises, we estimate that the cost to recapitalise an individual bank amounts to 4.5 percent of its total assets. During a severe crisis, a country might have to recapitalise up to three of its large systemic banks. We assume that bail-in of private investors is not fully possible during a systemic crisis.
Relevant Posts
- Alcidi, Cinzia, Thirion, Gilles, (2016), “Assessing the Euro Area’s Shock-Absorption Capacity: Risk sharing, consumption smoothing and fiscal policy”, CEPS Special Report No.146, September
- Demertzis, Maria, B. Wolff, Guntram, (2016), “What are the prerequisites for a euro-area fiscal capacity?”,Bruegel Policy Contribution Issue n˚14, 9 September