Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/215402
Authors: 
Gündüz, Yalin
Year of Publication: 
2020
Series/Report no.: 
Bundesbank Discussion Paper 09/2020
Abstract: 
This paper tests whether an increase or decrease of the capital surcharge for being a global systemically important bank (G-SIB) envisaged by regulators has an impact on the CDS prices of these banks. We find evidence that the CDS spreads of a G-SIB bank increase (decrease) after the announcement of a higher (lower) capital surcharge. However, this effect is temporary, as the mean CDS spreads revert to pre-announcement level, dropping sharply after the initial rise. Our analysis contributes to the debate on whether being designated as a G-SIB bank necessarily leads to implicit "too-big-to-fail" subsidies. The findings imply that the investors immediately update their beliefs on the systemic risk of the bank after the bucket reallocation announcement and temporarily demand more hedging against systemic risk.
Subjects: 
Too-big-to-fail
CDS spreads
systemically important banks
G-SIBs
G-SIB capital surcharges
JEL: 
G21
G28
ISBN: 
978-3-95729-677-1
Document Type: 
Working Paper

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