Template-Type: ReDIF-Paper 1.0
Author-Name: Tirupam Goel
Author-X-Name-First: Tirupan
Author-X-Name-Last: Goel
Author-Name: Ulf Lewrick
Author-X-Name-First: Ulf 
Author-X-Name-Last: Lewrick
Author-Name: Aakriti Mathur
Author-X-Name-First: Aakriti
Author-X-Name-Last: Lewrick
Title: Does regulation only bite the less profitable? Evidence from the too-big-to-fail reforms
Abstract: Regulatory reforms following the financial crisis of 2007–08 created incentives for large global banks to lower their systemic importance. We establish that differences in profitability shape banks' response to these reforms. Indeed, profitability is key because it underpins banks' ability to generate capital and drives the opportunity cost of shrinking. Our analysis shows that only the less profitable banks lowered their systemic footprint relative to their equally unprofitable peers that were unaffected by the regulatory treatment. The more profitable banks, by contrast, continued to raise their systemic importance in sync with their untreated peers.
Length: 59 pages
Creation-Date: 2021-01
File-URL: https://www.bis.org/publ/work922.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work922.htm
File-Format: text/html
Number: 922
Keywords: global systemically important bank (G-SIB), textual analysis, capital regulation, systemic risk, bank profitability, difference-in-differences (DD)
Classification-JEL: G21, G28, L51
Handle: RePEc:bis:biswps:922