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On Becoming an O-SII (“Other Systemically Important Institution”)

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  • Andrieș, Alin Marius
  • Nistor, Simona
  • Ongena, Steven
  • Sprincean, Nicu

Abstract

How have financial markets reacted to the disclosure of the list of Other Systemically Important Institutions by the European Banking Authority? With an event study of bank stock prices, we document that the immediate reaction of the stock market is negative, suggesting that the included financial institutions are perceived to be less profitable because they are subject to tighter regulation. However, within a few days, investors change their perception in the case of both euro-zone and noneuro-zone banks, which can be attributed to their too-big-to-fail status. CDS spreads react similarly, increasing first before decreasing almost immediately thereafter. On the day of the event, abnormal returns are more negative for banks selected using supervisory judgement and for large banks. In the long run, the market reacts more positively in the case of financial institutions selected using discretionary information and those with a lower capitalization. (143 words)

Suggested Citation

  • Andrieș, Alin Marius & Nistor, Simona & Ongena, Steven & Sprincean, Nicu, 2020. "On Becoming an O-SII (“Other Systemically Important Institution”)," Journal of Banking & Finance, Elsevier, vol. 111(C).
  • Handle: RePEc:eee:jbfina:v:111:y:2020:i:c:s0378426619302961
    DOI: 10.1016/j.jbankfin.2019.105723
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    1. Vogel, Ursula, 2020. "O-SII designation and deposit funding costs," Economics Letters, Elsevier, vol. 192(C).

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    More about this item

    Keywords

    Other systemically important institutions; Bank stock prices; CDS spreads; Event study; Abnormal returns;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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