The Impact of G-SIB Identification on Bank Lending: Evidence from Syndicated Loans
57 Pages Posted: 17 Sep 2020
Date Written: August 4, 2020
This paper uses granular data on syndicated loans to analyse the impact of international reforms for Global Systemically Important Banks (G-SIBs) on bank lending behavior. Using a difference-in-differences estimation strategy, we find no effect of the reforms on overall credit supply, while at the same time documenting a substantial decline in borrower- and loan-specific risk factors for the affected banks. Moreover, we detect a significant decline in the pricing gap between interest rates charged by G-SIBs and other banks, which we interpret as indirect evidence for a reduction in funding cost subsidies. Overall, our results suggest that the G-SIB reforms have helped to mitigate moral hazard problems associated with systemically important banks, while the consequences for the real economy have been limited.
Keywords: bank regulation, bank lending, systemically important banks
JEL Classification: G20, G21, G28
Suggested Citation: Suggested Citation