Are bank holding companies a source of strength to their banking subsidiaries?
By: Adam B. Ashcraft.
Contributors: Federal Reserve Bank of New York.
Series: Staff reports ;; no. 189; Staff reports (Federal Reserve Bank of New York : Online) ;; no. 189.
Publisher: Federal Reserve Bank of New York
Published: 2004
Place of publication: [New York, N.Y.]
Language: eng
Format: Electronic resource
Subjects: Bank holding companies -- United States.; Subsidiary corporations -- United States.
Description: "I present evidence that the cross-guarantee authority granted to the FDIC by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 has unexpectedly strengthened the Federal Reserve's source-of-strength doctrine.  In particular, I find that a bank affiliated with a multi-bank holding company is significantly safer than either a stand-alone bank or a bank affiliated with a one-bank holding company.  Not only does affiliation reduce the probability of future financial distress, but distressed affiliated banks are more likely to receive capital injections and recover more quickly than other banks.  Moreover, the effects of affiliation are strengthened for an expanding bank holding company.  However, the effects of affiliation are weakened when the parent has less than full ownership of the subsidiary.  Most interestingly, my results show that these differences in behavior across affiliation did not exist before 1989, when the cross-guarantee authority was introduced"--Federal Reserve Bank of New York web site.
Notes: Includes bibliographical references.
Title from PDF file as viewed on 1/12/2005.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.