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Research Seminar of International Laboratory for Macroeconomic Analysis: Henry Penikas «Banks Only Respond to G-SIB Regulation Easing, and Not to its Tightening: Evidence from the 10 Years of the Natural Experiment»

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Dear Colleagues,

International Laboratory for Macroeconomic Analysis invites everyone to join our research seminar on the 02nd  of  December 2021 (Thursday) at 04:00 PM (Moscow). 

Speaker: Henry Penikas (Bank of Russia)

Theme: «Banks Only Respond to G-SIB Regulation Easing, and Not to its Tightening: Evidence from the 10 Years of the Natural Experiment»

Abstract:

The year of 2021 marks a 10-year anniversary of the global systemically important banks’ (G-SIBs) capital regulation. It covered the 36 world-largest banks. During the period the capital buffer was up-lifted 25 times and down-lifted 22 times, including twice during the pandemic year of 2020. Our objective is to study the banks’ response to such regulation. In order to apply the treatment effect methodology, we need to resample our data. Each year after the first G-SIB list publication acts in two roles. It is an ‘after’ period for buffer changes in the previous year. Same time it is a ‘before’ period for buffers changed in the current one. As a result, we come to a striking finding. There is an asymmetric reaction of banks to changes in G-SIB capital buffer revisions. Banks do not increase their capital ratios when the applicable buffer is raised. Earlier accumulated excessive capital allows them to do so. However, they tend to reduce those ratios most proportionately when the buffer is reduced expecting such a change to be permanent. Thus, banks seem to be more driven by the general trends for the capital cushion rises, and not that much by the individual ones.  This means that the annual G-SIB list perturbations may only incentivize more risk-taking, rather than an improvement to the microprudential stability. We may recommend to carry out G-SIB list revision at least once in three years, and not annually.

Working language: English

Link:  https://us02web.zoom.us/j/84750773706?pwd=Q0VJdTRFc1VMczNycFJ6OVdFMHExZz09

ID: 847 5077 3706

Passport: 710706

Looking forward to see you.