Is banking in the European Union still too-big-to-fail (TBTF)? We address this question by providing a critical overview of post- crisis banking regulation and examining whether financial markets continue to expect European governments to bailout TBTF banks. To the latter end we use a novel set of primary data, gathered from fieldwork in Europe, analyse credit ratings of TBTF banks, and compare them with the ratings of other European banks. Our results suggest that the expectation of government support for European banks is still present. Most notably, TBTF banks command a long-term credit rating about three notches higher than what would be the case in the absence of the expectation of government support. Other European banks enjoy significant rating uplifts too, albeit smaller in size.
Ioannou, Stefanos Iliopoulos, PanagiotisWójcik, Dariusz
Oxford Brookes Business School
Year of publication: 2023Date of RADAR deposit: 2024-02-02