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Financial Sector Reform After the Crisis: Has Anything Happened?

Author

Listed:
  • Alexander Schaefer

    (hair of International Macroeconomics, Johannes Gutenberg-Universitaet Mainz, Germany)

  • Isabel Schnabel

    (Chair of Financial Economics, Johannes Gutenberg-Universitaet Mainz, Germany)

  • Beatrice Weder di Mauro

    (Chair of International Macroeconomics, Johannes Gutenberg-Universitaet Mainz, Germany)

Abstract

We analyze the reaction of stock returns and CDS spreads of banks from Europe and the United States to four major regulatory reforms in the aftermath of the subprime crisis, employing an event study analysis. In contrast to the public perception that nothing has happened, we find that financial markets indeed reacted to the structural reforms enacted at the national level. All reforms succeeded in reducing bail-out expectations, especially for systemic banks. However, banks’ profitability was also affected, showing up in lower equity returns. The strongest effects were found for the Dodd-Frank Act (especially the Volcker rule), whereas market reactions to the German restructuring law were small.

Suggested Citation

  • Alexander Schaefer & Isabel Schnabel & Beatrice Weder di Mauro, 2013. "Financial Sector Reform After the Crisis: Has Anything Happened?," Working Papers 1304, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz, revised 24 May 2013.
    • Handle: RePEc:jgu:wpaper:1304
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    Cited by:

    1. Jussi Keppo & Josef Korte, 2018. "Risk Targeting and Policy Illusions—Evidence from the Announcement of the Volcker Rule," Management Science, INFORMS, vol. 64(1), pages 215-234, January.
    2. Jarko Fidrmuc & Philipp Schreiber & Martin Siddiqui, 2015. "The Transmission of Bank Funding to Corporate Loans: Deleveraging in Germany," Open Economies Review, Springer, vol. 26(3), pages 581-597, July.
    3. Christina Bui, 2018. "Bank Regulation and Financial Stability," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 5-2018, January-A.
    4. Sahin, Cenkhan & de Haan, Jakob & Neretina, Ekaterina, 2020. "Banking stress test effects on returns and risks," Journal of Banking & Finance, Elsevier, vol. 117(C).
    5. Elayan, Fayez A. & Aktas, Rafet & Brown, Kareen & Pacharn, Parunchana, 2018. "The impact of the Volcker rule on targeted banks, systemic risk, liquidity, and financial reporting quality," Journal of Economics and Business, Elsevier, vol. 96(C), pages 69-89.
    6. Yuehua Li & Zhentao Liu & Sha Pei, 2020. "Does bank transparency benefit from the Volcker Rule?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(2), pages 1471-1500, June.
    7. Petr Jakubik, 2020. "The impact of EIOPA statement on insurers dividends: evidence from equity market," EIOPA Financial Stability Report - Thematic Articles 18, EIOPA, Risks and Financial Stability Department.
    8. Sahin, Cenkhan & de Haan, Jakob & Neretina, Ekaterina, 2020. "Banking stress test effects on returns and risks," Journal of Banking & Finance, Elsevier, vol. 117(C).
    9. Randall Kroszner, 2016. "A Review of Bank Funding Cost Differentials," Journal of Financial Services Research, Springer;Western Finance Association, vol. 49(2), pages 151-174, June.
    10. Antonio Sánchez Serrano, 2018. "EU banks after the crisis: sinners in the hands of angry markets," Journal of Banking and Financial Economics, University of Warsaw, Faculty of Management, vol. 1(9), pages 24-51, May.
    11. Lukas Scheffknecht, 2013. "Contextualizing Systemic Risk," ROME Working Papers 201317, ROME Network.

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    More about this item

    Keywords

    Financial sector reform; financial stability; Dodd-Frank Act; Volcker rule; Vickers reform; German restructuring law; Swiss too-big-to-fail regulation; event study;
    All these keywords.

    JEL classification:

    • 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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