Public bank lending in times of crisis

MICHAEL BREI; ALFREDO SCHCLAREK

Journal of Financial Stability

Elsevier

Lugar: Amsterdam; Año: 2013 vol. 9 p. 820 - 820

1572-3089

his paper studies the role of government-owned banks in the event of financial crises. The study takes an empirical perspective focusing on bank lending. We compare the lending responses across government-owned and private banks to financial crises using the balance sheet information of 764 major banks headquartered in 50 countries over the period of 1994?2009. Using a nested panel regression framework that allows for parameter shifts in the bank lending equation, we find robust evidence that government-owned banks increase their lending during crises relative to normal times, while private banks? lending decreases. Government-owned banks thus counteract the lending slowdown of private banks. The findings suggest that governments can play an active counter-cyclical role in their banking systems directly through government-owned banks.