André F. Silva


June 22nd 2020

Time: 1.00 - 2.00pm Venue: Room 3.21, Old Building, LSE (map)
Speaker: André F. Silva (Federal Reserve Board)
Seminar Title: Sharing the Pain? Credit Supply and Real Effects of Bank Bail-ins

Abstract: We analyze the credit supply and real effects of bank bail-ins by exploiting the unexpected failure and subsequent resolution of a major Portuguese bank. Using loan-level data, we show that while firms more exposed to the bail-in suffered a significant contraction of credit at the intensive margin, they were on average able to compensate for the supply-driven shock. However, affected SMEs experienced a binding reduction of funds available through credit lines, and those with lower internal liquidity increased precautionary cash holdings and reduced investment and employment. Our results highlight the trade-off policymakers face when using this new bank resolution mechanism.