Working Paper: CEPR ID: DP15564
Authors: Hans Degryse; Mike Mariathasan; Thi Hien Tang
Abstract: Global Systemically Important Banks (GSIBs) benefit from implicit government guarantees but face additional capital requirements and oversight. This paper examines the effectiveness of the Financial Stability Board’s recently introduced GSIB-framework and its short-run implications for the real economy, by exploiting the leak of a partially accurate GSIB list by the Financial Times. We find that GSIB-designation reduces the supply of syndicated loans to risky corporate borrowers by 8%, and that these borrowers experience lower asset-, investment- and sales growth than similar firms borrowing from non-GSIB banks. The results appear to be driven by stricter supervision, not by higher capital surcharges.
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Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| GSIB designation (G28) | reduction in supply of syndicated loans to risky corporate borrowers (G33) |
| GSIB designation (G28) | lower asset investment and sales growth by borrowers (G51) |
| GSIB designation (G28) | cut in lending to high-risk borrowers at the intensive margin (G21) |
| GSIB designation (G28) | no adjustment in lending to low-risk borrowers (G21) |
| lending adjustments (G21) | reduction in asset growth of GSIB-dependent risky borrowers (F65) |
| lending adjustments (G21) | decrease in investment growth of GSIB-dependent risky borrowers (F65) |