Abstract
Asset recovery rate is a key factor for credit investors. This study explores the determinants of bank asset recovery rates during the recent downturn in the real estate sector and subsequent financial crisis. We find that banks relying on brokered deposit realize lower asset recovery rates. This suggests that these banks hold assets of poorer quality at the time of failure. In the lead up to failure, banks unable to attract new funds via brokered deposits will sell assets, typically the highest-quality, most-marketable assets, and the outcome is higher exposure to lower quality loans. Our results also suggest that the influence of real estate loan exposure on asset recovery rates is important following periods of significant downturn in property values. Finally, we believe this research will shed valuable lights for policy makers in dealing with assets of failed banks.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
