BIS paper flags spillovers from bank dividends

The Bank for International Settlements
Photo: Daniel Hinge

Because bank balance sheets interlock, the equity position of one bank can affect the entire system, according to models laid out in a Bank for International Settlements (BIS) working paper, published today (September 13).

Bank capital and dividend externalities by Viral Acharya, Hanh Le and Hyun Song Shin models a situation where bank dividends impose externalities by making the whole system less resilient. By contrast, raising equity is "a public good", but banks cannot gain the full benefits

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