The March 2023 bank interventions
In March 2023 banks, both in the U.S. and Europe U.S. were hit by a wave of distress. Policymakers reacted with an array of interventions. In this paper, Merick and Schmelzing are using a new long-run database on banking-sector policy interventions over the last eight centuries to gain perspective as to how sizable this March policy intervention is within a long-run context. More specifically, this database counts a total of 540 individual lending policy interventions over the centuries, of which 410 were deployed across countries since the year 1870. They find:
- Only 57 bank distress episodes over time have seen such a particular mix, and only three have witnessed them combined with relevant private-sector bail-ins.
- Several of the recent interventions already constitute sizable interventions in long-run context, thereby continuing a secular trend of ever greater policy interventions as measured relative to economic output.
- Past evidence suggests that these interventions may yet grow substantially further in size, and could reach new all-time records.
On that basis, recent actions have already been unusual in their policy mix and size – in the database, the vast majority of events with the same pattern of interventions ultimately evolved into “systemic” bank-distress episodes.
The March 2023 bank interventions in long-run context – Silicon Valley Bank and beyond
Authors: Andrew Metrick, Paul Schmelzing
From: Yale University, Boston College
