Government Intervention and Bank Market Power: Lessons from the Global Financial Crisis for the COVID-19 Crisis
Electronic Access:
Free Download. Use the free Adobe Acrobat Reader to view this PDF file
Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Summary:
The COVID-19 pandemic could result in large government interventions in the banking industry. To shed light on the possible consequences on market power, we rely on the experience of the global financial crisis and exploit granular data on government interventions in more than 800 banks across 27 countries between 2007 and 2017. For identification, we use a multivariate matching method. We find that intervened banks experience a significant decline in market power with respect to matched non-intervened banks. This effect is more pronounced for larger and longer interventions and is driven by a rise in costs—mostly because of higher loan impairment charges—which is not followed by a similar increase in prices.
Series:
Working Paper No. 2020/275
Subject:
Bank resolution Financial crises Financial institutions Global financial crisis of 2008-2009 Loans Nonperforming loans Stocks
Frequency:
regular
English
Publication Date:
December 11, 2020
ISBN/ISSN:
9781513563886/1018-5941
Stock No:
WPIEA2020275
Pages:
34
Please address any questions about this title to publications@imf.org