Capital forbearance in the bank recovery and resolution game

• 成果类型: Article
• 署名作者: Martynova, Natalya; Perotti, Enrico; Suarez, Javier
• 署名单位: Deutsche Bundesbank; University of Amsterdam
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2022.09.006
• 发表日期: 2022
• 页码: 884-904
• 关键词: Bank supervision; Bank recapitalization; Forbearance

摘要

We analyze the strategic interaction between undercapitalized banks and a supervisor in a recovery and resolution framework in which early recapitalizations can prevent later dis-orderly failures. Capital forbearance emerges because reputational, political, economic and fiscal costs undermine supervisors' commitment to publicly resolve the banks that miss the request to privately recover. Under a weaker resolution threat, banks' incentives to re-cover are lower and supervisors may end up having to resolve more banks. When marginal resolution costs steeply increase with the scale of the intervention, private recovery ac-tions become strategic complements, producing too-many-to-resolve equilibria with high forbearance and high systemic costs.(c) 2022 Elsevier B.V. All rights reserved.