Mikko Mäkinen (BOFIT): The 2008 Global Financial Crisis and Bank Learning

Mikko Mäkinen (BOFIT): The 2008 Global Financial Crisis and Bank Learning

Abstract

What the 2008 GFC tells about bank learning? Do the banks that perform worst in the crisis change their behavior more than other banks? Is there persistence in bank performance so that some banks are prone to perform poorly during crises? To examine these questions, I focus on the Russian banking sector since the country was severely hit by the 2008 GFC and then by the 2015 crisis. Using a unique panel data set of individual banks and diverse empirical specifications, I find that banks, on average, were able to enhance their capitalization and ROA after the GFC, despite at the same time bad loans increased. For the worst performing banks, however, capitalization decreased and bad loans increased after the GFC. Second, I find no difference in capitalization between the worst performing banks and other banks in the post-crisis period, but the difference in bad loans is positively significant and ROA negatively significant. Finally, the banks that performed worst in the GFC did not perform significantly worse than other banks in the 2015.

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