Bank Health Post-Crisis
Economic growth is persistently low following a financial crisis, possibly because of a continuing weal banking system. In a financial crisis bank health is significantly damaged. Post-crisis regulatory changes have aimed at restoring bank health, but measuring bank health by Tobin's Q, we find that the ill health of banks in the recent U.S. financial crisis and the Euro crisis has persisted, especially compared to other crises in advanced economies. The low Q's cannot be explained by the state of the macro-economy. The results seem to suggest that bank regulatory changes may be repressive.
This paper was prepared for the Banque de France Financial Stability Review. We thank Thomas Bonczek, Arun Gupta, Toomas Laarits, and Adriana Robertson for comments and suggestions. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.