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The network and own effects of global-systemically-important-bank designations

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  • Egger, Peter H.
  • Li, Jie
  • Zhu, Jiaqing

Abstract

This paper considers the network structure of listed depository institutions around the globe through volatility spillovers to assess the network and own effects from Global Systemically Important Bank (GSIB) designations as done by the Financial Stability Board (FSB). Different from previous studies, after considering the (network) spillover effects of GSIB designations in the model, we cannot reject the null hypothesis that the direct effects of GSIB designations are zero for the cumulative abnormal returns of the targeted institutions. However, we unveil unintended heterogeneous spillover effects of these designations, which depend on the profitability and riskiness of the involved institutions in the network. Finally, we find evidence that the GSIB designations increase GSIBs’ resilience to external shocks, but they also induce volatility spillovers from GSIBs to other banks in the network. The intended change of the volatility-spillover intensity of GSIBs mitigates the unintended effects to some extent, but it does not offset them.

Suggested Citation

  • Egger, Peter H. & Li, Jie & Zhu, Jiaqing, 2023. "The network and own effects of global-systemically-important-bank designations," Journal of International Money and Finance, Elsevier, vol. 136(C).
  • Handle: RePEc:eee:jimfin:v:136:y:2023:i:c:s0261560623000803
    DOI: 10.1016/j.jimonfin.2023.102879
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    More about this item

    Keywords

    Global systemically important banks; Too Big to Fail; Volatility spillover; Financial networks;
    All these keywords.

    JEL classification:

    • 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
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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