Italian and Belgian subprime bailouts : value effect or moral hazard ?

Abstract

Bailouts of banks in financial distress have been a phenomenon that involved many European countries after the 2008 Global Financial Crisis. European banks are recovering, but have not yet turned back to pre-crisis profitability levels. This raises the question about the efficiency of European Government bailouts, with a focus on the Italian and Belgian banking system. On the one hand, the bailout is regarded as a “value effect” when stimulates banks to protect their value at stake; on the other hand, it is regarded as a “moral hazard” when leads banks to take riskier choices. The purpose of this research thesis is to investigate whether or not bailouts led to improvements in bank performance.