Harmonized Regulations and Systemic Risk: Evidence from Global-Systemically Important Banks

67 Pages Posted: 5 Aug 2015

See all articles by Kathryn L. Dewenter

Kathryn L. Dewenter

University of Washington - Michael G. Foster School of Business

Alan C. Hess

University of Washington - Michael G. Foster School of Business

Date Written: July 31, 2015

Abstract

In 2011 the Financial Stability Board designated 29 of the world’s largest banks as global-systemically important banks (G-SIB), and imposed additional restrictions on their activities. After implementation of the G-SIB regulatory regime, we find that relative to other large banks, G-SIBs’ individual default risks increased, the co-movements among G-SIBs’ stock returns, CDS spreads and implied option volatilities increased, and several accounting performance measures converged. Consequently, an adverse shock to one G-SIB is more likely to be associated with an adverse shock to other G-SIBs, which weakens the ability of the banking system to withstand the shock.

Keywords: Systemic risk, Regulation, Banks, Co-movement

JEL Classification: G21, G28

Suggested Citation

Dewenter, Kathryn L. and Hess, Alan C., Harmonized Regulations and Systemic Risk: Evidence from Global-Systemically Important Banks (July 31, 2015). Available at SSRN: https://ssrn.com/abstract=2639393 or http://dx.doi.org/10.2139/ssrn.2639393

Kathryn L. Dewenter (Contact Author)

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Dept. of Finance & Business Economics
Seattle, WA 98195-3200
United States
206-685-7893 (Phone)
206-685-9392 (Fax)

Alan C. Hess

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States
206-543 4579 (Phone)
206-543-6809 (Fax)

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