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The importance of being systemically important financial institutions

Author

Listed:
  • Bongini, Paola
  • Nieri, Laura
  • Pelagatti, Matteo

Abstract

We investigate whether financial markets reacted to the regulatory changes implied by the publication of the list of systemically important financial institutions (SIFI) and the new rules designed to address the too-big-to-fail problem of systemic banks. By applying event study methodology to a sample of 70 of the world’s largest banks, we assess whether the stock prices of SIFIs reacted significantly and differently from those of other large banks not deemed to be systemically important following the release of information regarding the methodology used to identify SIFIs and their new capital requirements; the disclosure of the first list of 29 SIFIs; and the publication of the updated list of 28 SIFIs. Overall, we determine that financial markets did not univocally react to the new regulation regarding SIFIs. However markets discriminated between high and low capitalized banks and they correctly estimated the probable effects of the additional capital requirements.

Suggested Citation

  • Bongini, Paola & Nieri, Laura & Pelagatti, Matteo, 2015. "The importance of being systemically important financial institutions," Journal of Banking & Finance, Elsevier, vol. 50(C), pages 562-574.
    • Handle: RePEc:eee:jbfina:v:50:y:2015:i:c:p:562-574
    DOI: 10.1016/j.jbankfin.2014.07.006
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    More about this item

    Keywords

    Systemic risk; Financial institutions; Event study; Regulatory reforms; Capital adequacy;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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