'Too Systemically Important To Fail’ in Banking – Evidence from Bank Mergers and Acquisitions
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In this paper, we examine the systemic risk implications of
banking institutions that are considered ‘Too-systemically-important-
to-fail’ (TSITF). We exploit a sample of bank mergers and
acquisitions (MandAs) in nine EU economies between 1997 and 2007
to capture safety net subsidy effects and evaluate their ramifications
for systemic risk. We find that safety net benefits derived
from MandA activity have a significantly positive association with
rescue probability, suggesting moral hazard in banking systems.
We, however, find no evidence that gaining safety net subsidies
leads to TSITF bank’s increased interdependency over peer banks
| Original language | English |
|---|---|
| Pages (from-to) | 258–282 |
| Journal | Journal of International Money and Finance |
| Volume | 49 |
| Issue number | part B |
| DOIs | |
| Publication status | Published - 2 Apr 2014 |