Does the European financial stability bail out sovereigns or banks: An event study
Horváth,Bálint Huizinga,Harry
Horváth,Bálint
Huizinga,Harry
Abstract
On May 9, 2010 euro zone countries announced the creation of the European Financial Stability Facility. This paper investigates the impact of this announcement on bank share prices, bank credit default swap (CDS) spreads, and sovereign CDS spreads. The main private beneficiaries were bank creditors. Furthermore, countries with banking systems heavily exposed to southern Europe and Ireland benefited, as evidenced by lower sovereign CDS spreads. The combined gains of bank debt holders and shareholders exceed the increase in the value of their banks’ sovereign debt exposures, suggesting that banks saw their contingent claim on the financial safety net increase in value.
Description
Date
2015-01-23
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Publisher
Research Projects
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Keywords
bailout, banking, CDS spreads, sovereign debt, G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages, G28 - Government Policy and Regulation, H63 - Debt ; Debt Management ; Sovereign Debt, SDG 10 - Reduced Inequalities
Citation
Horváth, B & Huizinga, H 2015, 'Does the European financial stability bail out sovereigns or banks : An event study', Journal of Money Credit and Banking, vol. 47, no. 1, pp. 177-206. https://doi.org/10.1111/jmcb.12173