Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/249354 
Year of Publication: 
2020
Series/Report no.: 
JRC Working Papers in Economics and Finance No. 2020/02
Publisher: 
Publications Office of the European Union, Luxembourg
Abstract: 
"Ending too big to fail" is a declared policy aim and a key element of the globally coordinated financial regulatory reform. An official list of banks considered to be global systemically important (G-SIBs) is published on an annual basis since 2011. The goal of the present paper is to assess to what extent equity and CDS markets care about the official releases of the G-SIB lists and, in particular, whether the inclusion of a bank in the G-SIB list is good or bad news for bank debt and equity holders. The analysis applies both event-studies and panel regressions and relies upon European banks' CDS senior and subordinated quotes and equity prices to evaluate their reactions to the publications of the G-SIB lists. The analysis spans from the first leaked G-SIB list by the Financial Times as of 2009 to the 2017 official publication of the list. Results show that equity and senior/subordinated CDS spreads react differently to the events considered and that reactions evolve over time. During the first events considered in the analysis, CDS of banks classified as G-SIBs react less than those of other banks. Results for more recent events are more mixed, potentially reflecting that recent releases of G-SIBs lists entail less information. The analysis also devotes special attention to a subset of "intermediate" banks that in principle are eligible to enter in the G-SIBs list, as compared to other banks that will obviously be included/excluded in the list given their size and footprint. This narrowed focus allows us to obtain more efficient results.
Persistent Identifier of the first edition: 
ISBN: 
978-92-76-15031-2
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

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