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A Peer-reviewed scientific articles/A1 Journal article (refereed), original research
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Have Too-Big-To-Fail Expectations Diminished? Evidence from the European Overnight Interbank Market, Journal of Financial Services Research 1 (2021). Tölö, Eero; Jokivuolle, Esa; Virén, Matti

Category A Peer-reviewed scientific articles
Sub-category A1 Journal article (refereed), original research
auki Internal authors
Tölö Eero / Macroprudential Analysis Division
All authors as text Tölö, Eero; Jokivuolle, Esa; Virén, Matti 
Number of authors
Status Published
Year of publication 2021 
Date 15.08.2021 
Name of article Have Too-Big-To-Fail Expectations Diminished? Evidence from the European Overnight Interbank Market 
Name of journal Journal of Financial Services Research
Volume of issue 60 
Number of issue
Pages 25 - 54 
Abstract Using the Eurosystem’s proprietary interbank loan data from June 2008–June 2020, we show that larger European banks have had a lower cost of overnight borrowing than smaller banks. The size premium remains significant after controlling for a large set of other factors but has decreased over time, especially in countries that were stricken by the Sovereign Debt Crisis. A difference-in-differences analysis suggests that the decline in the size premium is related to the actual bail-in events, not to the implementation dates of the Bank Recovery and Resolution Directive as such. This finding is robust to controlling for the effect of the ECB’s long-term refinancing operations. Overall, the results suggest that the regulatory move towards bail-in rather than bailout policies to deal with financially distressed banks has reduced the too-big-to-fail expectations concerning large banks.
Free text descriptor in Finnish pankit; koko; rahoitus; kustannukset; yön yli korot; pankin rahoituskustannus; Eurooppa; too-big-to-fail 
Free text descriptor in English Overnight rates, Too-big-to-fail, Bail-in, Bailouts, Implicit government guarantee, Interbank borrowing costs, Bank recovery and resolution directive 
JEL-codes G21, G22, G24, G28 
ISSN / e-ISSN 0920-8550 
auki Internet addresses
Additional information Available first online 14 March 2021.
Notes BoF DP 29/2015 
Open Access Not known

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