BIS国际清算银行-Dealing-with-bank-distress_-Insights-from-a-comprehensive-database_37页_1mb

Summary of BIS Working Paper No 909: Dealing with Bank Distress

Core Content

This working paper by Konrad Adler and Frederic Boissay examines the effectiveness of policy tools used to mitigate bank distress across 29 countries between 1980 and 2016. The authors build on a comprehensive database of more than 300 distress mitigation policies and analyze how these interventions impact economic performance during bank distress episodes. The paper emphasizes the importance of timely and broad-ranging policy responses in reducing the adverse effects of bank distress on GDP growth and macroeconomic stability.

Main Points

• Bank distress has significant and lasting negative impacts on economic output, with GDP losses exceeding 6% in most countries ten years after the onset of a crisis.
• The effectiveness of policy interventions varies depending on the initial macro-financial conditions and the timing of the response.
• Central bank lending and asset purchase schemes are particularly effective in the first and second years of a distress episode, respectively.
• Low asset valuations, high bank leverage, and weak bank performance are key indicators that suggest the need for more aggressive policy responses.
• Liquidity support from central banks is more effective when provided in the first year of a distress episode.
• The paper introduces a novel method to classify distress episodes based on macro-financial anomalies, using a Hamming distance-like measure to compare the similarity of episodes.

Key Policies and Their Effectiveness

1. Central Bank Lending Schemes (T1)

• Provide direct funding to banks and financial intermediaries.
• Include liquidity provision, special lending, and changes in collateral eligibility rules.
• Most frequently used policy tool, with an average of 1.6 schemes per year.
• Effective when provided early in the distress episode.

2. Bank Liability Guarantee Schemes (T2)

• Involve fiscal authorities guaranteeing commercial banks' debts, sometimes with fees.
• Often include optional schemes with opt-in/out clauses, which are more common than mandatory ones.
• Most schemes cover new debt issuance, not existing obligations.

3. Impaired Asset Segregation (IAS) Schemes (T3)

• Aim to isolate and manage non-performing assets.
• 40 schemes recorded in the database, with an average size of 7% of GDP.
• Typically involve haircuts of 25% on purchased assets.
• Schemes can be bank-specific or centralized, involving multiple institutions.

4. Asset Purchase Schemes (T4)

• Central banks buy specific assets on secondary markets (e.g., corporate bonds, asset-backed securities).
• Include asset swaps with safer assets, such as government bonds.
• 34 schemes are recorded, most of which occurred after 2008.

Methodology

• The paper uses a comprehensive database of macro-financial data and policy interventions.
• It focuses on similar distress episodes identified through macro-financial anomalies.
• Pairing method: Compares episodes based on shared anomalies, using a Hamming distance-like approach.
• Similarity measure: Counts the number of common anomalies between two episodes.
• Timing analysis: Measures the lag between the onset of distress and the deployment of interventions to assess their effectiveness.

Data and Limitations

• Data sources: OECD Economic Surveys, IMF Staff Reports, and LV (Laeven and Valencia) data.
• Database includes: 62 bank distress episodes with policy intervention details.
• Limitations:
  • Limited information on the size of interventions.
  • Comparability issues due to varying policy implementations and design features.
  • Narrative-based lists may be inconsistent and endogenous to policy responses.

Conclusion

• Swift and broad policy interventions are more effective in mitigating the economic impact of bank distress.
• The timing of interventions is crucial, especially in the first year of a crisis.
• The paper provides empirical evidence that supports the use of central bank lending and asset purchase schemes in addressing bank distress, particularly under certain macro-financial conditions.

Key Information

• Time frame: 1980q1 to 2016q4.
• Countries: 29 countries, with 62 identified bank distress episodes.
• Tools: 4 main types of distress mitigation policies.
• Database: Contains over 300 policy interventions, with detailed information on timing and design.
• Similarity measure: Based on shared macro-financial anomalies, akin to the Hamming distance.
• Empirical focus: Evaluates the effect of policy tools on GDP growth and macroeconomic normalization.

References to Related Literature

• Bank distress is often preceded by macro-financial imbalances, such as currency crises, credit booms, and capital inflows.
• Credit booms are predictive of financial crises, especially in emerging markets.
• Recessions associated with credit crunches and house price busts tend to be more severe and prolonged.
• The paper contributes to the literature by focusing on the effectiveness of policy responses, rather than just the causes of distress.

Figure Highlights

• Figure 1: Distribution of policy tools used in the first and second year of distress episodes.
• Figure 2: Number of mitigation tools per country and over time.
• Figure 3: Characteristics of central bank lending and liability guarantee schemes.
• Figure 4: Example of macro-financial anomalies (credit-to-GDP and log GDP) in the US and Sweden during the GFC.

Policy Implications

• Policymakers should respond quickly and comprehensively to bank distress.
• The type of distress and initial conditions should inform the choice of policy tools.
• Central bank interventions and asset purchases are particularly effective in certain scenarios.