Congresos y reuniones científicas
Public Bank Lending during the Financial Crisis
Buenos Aires
Conferencia; III Congreso Anual AEDA - Consolidación del modelo productivo, propuestas para la nueva década; 2011
Institución organizadora:
Asociación de Economía para el Desarrollo de la Argentina
This paper studies the role of public bank lending in the event of nancial crises from an empirical and theoretical perspective. On the empirical side, we compare the lending responses across public and private banks to nancial crises using balance sheet information for about 882 major banks, of which 64 public banks, from 54 countries during the period 1994 and 2009. Using panel regressions, we nd ev- idence that the growth rate of public bank lending is higher than that of private banks during a crisis. The theoretical framework allows us to explore the reasons for the di erent behavior. Firstly, the objective of public banks, in contrast to private banks, is not only to minimize losses in the event of a nancial crisis, but also to promote the re- covery of the whole economy. Secondly, public banks are more likely recapitalized in times of distress because their owner, the government, tends to have more nancial resources than private shareholders. Fi- nally, public banks tend to su er less deposit withdrawals than private banks in a severe crisis because depositors perceive public banks as a safer alternative than private banks due to the implicit guarantee by the public sector.