Series: Working Papers. 2618.
Author: Ryan Banerjee, Francisco González, José E. Gutiérrez and José María Serena
Credit
- Financial institutions, Banks
- Financial regulation
Full document
Abstract
This paper examines the credit supply effects of sale-of-business (SoB) bank resolutions under the post-global financial crisis regulatory framework, focusing on the resolution of a major Spanish bank. We provide the first micro-level evidence of how SoB resolution reshapes credit allocation. The acquiring bank preserved lending relationships, prioritizing support for riskier inherited borrowers most exposed to retrenchment by competing banks. This stabilization occurred despite tighter capital constraints, as the acquiring bank strategically reallocated credit within its broader portfolio, shifting away from more capital-intensive exposures. By preserving credit and real outcomes for inherited borrowers, the SoB resolution illustrates the potential of this tool to limit disruptions to the real economy, contingent on the acquirer’s strategic aligment and capital capacity. Our findings highlight the interplay between franchise-preservation incentives and capital constraints in shaping credit reallocation during bank resolutions.