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To Be or Not to Be a G-SIB: Does It Matter?

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  • Sebastian Schich
  • Oana Toader

Abstract

Elements of recent bank regulatory reform directly focus on ending the "too-big-to-fail" phenomenon. As part of these efforts, a number of banks have been designated as "globally systemically important banks" (henceforth G-SIBs) and a tighter regulatory, supervisory and resolution failure regime has been imposed on them. The present article asks what has been the effect of this special treatment on the value of implicit bank debt guarantees of these banks, as measured by credit rating uplifts. Based on a sample of 27 G-SIBs and a control group of 177 other large banks from 23 countries for the 2007 to 2015 period, the article finds that this treatment has not yet significantly altered the value of implicit bank debt guarantees for G-SIBs. They continue to benefit from a significantly higher value of implicit guarantee than other banks. The article also finds that tightened resolution practices, at the national level, have significantly reduced the value of implicit guarantees for other banks, but not for G-SIB banks.

Suggested Citation

  • Sebastian Schich & Oana Toader, 2017. "To Be or Not to Be a G-SIB: Does It Matter?," Journal of Financial Management, Markets and Institutions, Società editrice il Mulino, issue 2, pages 169-192.
    • Handle: RePEc:mul:jdp901:doi:10.12831/88826:y:2017:i:2:p:169-192
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    Citations

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    Cited by:

    1. Robert Jarrow & Philip Protter & Alejandra Quintos, 2021. "Computing the Probability of a Financial Market Failure: A New Measure of Systemic Risk," Papers 2110.10936, arXiv.org, revised Dec 2022.
    2. Gündüz, Yalin, 2020. "The market impact of systemic risk capital surcharges," Discussion Papers 09/2020, Deutsche Bundesbank.
    3. Bellia, Mario & Heynderickx, Wouter & Maccaferri, Sara & Schich, Sebastian, 2020. "Do CDS markets care about the G-SIB status?," Working Papers 2020-02, Joint Research Centre, European Commission.
    4. Behn, Markus & Schramm, Alexander, 2020. "The impact of G-SIB identification on bank lending: evidence from syndicated loans," Working Paper Series 2479, European Central Bank.
    5. Dr. Nicole Allenspach & Oleg Reichmann & Javier Rodriguez-Martin, 2021. "Are banks still 'too big to fail'? - A market perspective," Working Papers 2021-18, Swiss National Bank.
    6. Behn, Markus & Schramm, Alexander, 2021. "The impact of G-SIB identification on bank lending: Evidence from syndicated loans," Journal of Financial Stability, Elsevier, vol. 57(C).
    7. Aurélien Violon & Dominique Durant & Oana Toader, 2020. "The Impact of the Designation of Global Systemically Important Banks on Their Business Model," International Journal of Central Banking, International Journal of Central Banking, vol. 16(5), pages 95-142, October.

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