Bank bonds: size, systemic relevance and the sovereign : [Version April 2014]

  • We analyze the risk premium on bank bonds at origination with a special focus on the role of implicit and explicit public guarantees and the systemic relevance of the issuing institutions. By looking at the asset swap spread on 5,500 bonds, we find that explicit guarantees and sovereign creditworthiness have a substantial effect on the risk premium. In addition, while large institutions still enjoy lower issuance costs linked to the TBTF framework, we find evidence of enhanced market disciple for systemically important banks which face, since the onset of the financial crisis, an increased premium on bond placements.

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Author:Andrea Zaghini
Parent Title (English):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 454
Series (Serial Number):CFS working paper series (454)
Publisher:Center for Financial Studies
Place of publication:Frankfurt, M.
Document Type:Working Paper
Year of Completion:2014
Year of first Publication:2014
Publishing Institution:Universit├Ątsbibliothek Johann Christian Senckenberg
Release Date:2014/05/28
Tag:G-SIFIs; Market discipline; Sovereign guarantees; Too-big-to-fail
Issue:Version April 2014
Page Number:27
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht