Global Systemically Important Banks Regulation: 'Blessing' or 'Curse'?

Posted: 21 May 2019

See all articles by Stelios Markoulis

Stelios Markoulis

University of Cyprus - Department of Public and Business Administration; Frederick University; Cyprus International Institute of Management (CIIM)

Spiros Martzoukos

University of Cyprus - Department of Public and Business Administration; George Washington University - School of Business

Elena Patsalidou

Independent

Date Written: April 25, 2019

Abstract

In this paper we examine important recent regulatory changes that focus on G-SIBs, aiming to shed light on whether markets believe that being a G-SIB is good, a “blessing”, or bad, “a curse”. We analyse three events, one related to the designation of a bank as a G-SIB, and two to the additional capital surcharges and TLAC requirements, applicable to these banks. Interestingly, we find that each event corresponds to a different hypothesis; the first one is aligned with the profit-based hypothesis, the second one with the regulatory burden hypothesis, and the third one with the irrelevance hypothesis. We note an interesting “oxymoron” when looking at the first and second events; G-SIB designation is perceived by the market as good news, but subsequent measures attached to this status are perceived as bad news! We find this “oxymoron” to be mostly driven by Eurozone banks. Cross-sectional analysis reveals that banks with lower capital and liquidity ratios benefited more from the new regulations, but suffered more, as a result of the additional capital surcharges.

Keywords: Global Systemically Important Banks, Event study, Regulatory reforms, Capital surcharges, Total loss absorbing capacity

JEL Classification: G01, G14, G21, G28

Suggested Citation

Markoulis, Stelios and Martzoukos, Spiros Harilaos Spiridon and Patsalidou, Elena, Global Systemically Important Banks Regulation: 'Blessing' or 'Curse'? (April 25, 2019). Available at SSRN: https://ssrn.com/abstract=3377937

Stelios Markoulis (Contact Author)

University of Cyprus - Department of Public and Business Administration ( email )

75 Kallipoleos Street
P.O. Box 20537
Nicosia CY-1678
CYPRUS

Frederick University ( email )

7, Y. Frederickou Str.
Pallouriotisa
Nicosia, 1036
Cyprus

Cyprus International Institute of Management (CIIM) ( email )

P.O Box 20378
Aglandjia
Nicosia, CY-2151
Cyprus

Spiros Harilaos Spiridon Martzoukos

University of Cyprus - Department of Public and Business Administration ( email )

75 Kallipoleos Street
P.O. Box 20537
Nicosia CY-1678
CYPRUS
357-2-892474 (Phone)
357-2-892460 (Fax)

George Washington University - School of Business

Washington, DC 20052
United States
202-994-5996 (Phone)
202-994-5014 (Fax)

Elena Patsalidou

Independent ( email )

No Address Available

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