Government Guarantees Encourage Banks To Take More Risks, Not Lend Money, Study Finds

Government guarantees lead not to more lending but to more risk-taking by banks, according to a new research study of more than 2,200 financial institutions around the world. Dulani Jayasuriya, a candidate for a doctorate in finance at the National University of Singapore, made the finding in a not-yet-published study based on data collected by central banks and other financial authorities in 78 countries between 2001 and 2011.