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Global systemically important banks regulation: Blessing or curse?

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  • Markoulis, Stelios
  • Martzoukos, Spiridon
  • Patsalidou, Elena

Abstract

Do market participants believe that recent regulations will curb moral hazard at global systemically important banks (G-SIBs)? We analyze market returns to three events: the 2011 designation of certain banks as G-SIBs, the November 2014 identification of banks subject to additional capital surcharges, and the November 2015 announcement of Total Loss Absorption Capacity (TLAC) requirements. We find that reaction to the “designation event” fits the profit-based-reaction hypothesis, reaction to the “additional capital surcharges event” fits the regulatory burden hypothesis, and reaction to the “TLAC event” fits the irrelevance hypothesis. Weaker banks benefited more from being designated as G-SIBs, while EU banks suffered more from the additional capital surcharges.

Suggested Citation

  • Markoulis, Stelios & Martzoukos, Spiridon & Patsalidou, Elena, 2022. "Global systemically important banks regulation: Blessing or curse?," Global Finance Journal, Elsevier, vol. 52(C).
    • Handle: RePEc:eee:glofin:v:52:y:2022:i:c:s1044028320302805
    DOI: 10.1016/j.gfj.2020.100580
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