The Impact of Legislation on Credit Risk - Comparative Evidence From the United States, the United Kingdom and Germany

 
Author/Editor: Schmieder, Christian ; Schmieder, Philipp
 
Publication Date: March 01, 2011
 
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: This study investigates the link between bankruptcy and security legislation and potential credit losses faced by banks based on a cross-country study for the United States (US), the United Kingdom (UK) and Germany. Focusing on corporate credit, we find that legislation produces the highest credit risk in the US, followed by Germany, while UK law is found to be most favorable for banks. US banks gains from the higher number of informal restructurings (without losses) but lose from the low level of recovery in formal proceedings. German banks demand more credit risk mitigants than UK and US banks do, but still recover less than do UK banks. To be at par with UK banks, US banks would have to recover more than twice as much in formal proceedings, while German proceedings would have to be shortened by about one half.
 
Series: Working Paper No. 11/55
Subject(s): Bankruptcy | Banks | Corporate sector | Credit risk | Cross country analysis | Economic models | Germany | Legislation | Loans | United Kingdom | United States

Author's Keyword(s): Legislation | Corporate Credit Risk | Recovery Rates
 
English
Publication Date: March 01, 2011
Format: Paper
Stock No: WPIEA2011055 Pages: 53
Price:
US$18.00 (Academic Rate:
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