The implicit subsidy of banks

Joseph Noss, Rhiannon Sowerbutts 17 June 2012

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The experience of the crisis has revealed that a credible threat of failure does not always exist for banks. While equity holdings were severely diluted through state intervention, debt holders of some failed banks did not incur losses and were guaranteed by governments. To the extent that neither banks nor their creditors paid for this guarantee, it can be considered an implicit subsidy.

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Topics:  Financial markets

Tags:  UK, banks, implicit subsidy