Financial Sector Reform after the Crisis: Has Anything Happened?
46 Pages Posted: 6 Jun 2013
Date Written: May 24, 2013
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.
Keywords: financial sector reform, financial stability, Dodd-Frank Act, Volcker rule, Vickers reform, German restructuring law, Swiss too-big-to-fail regulation, event study
JEL Classification: G21, G28
Suggested Citation: Suggested Citation