DP9502 Financial Sector Reform After the Crisis: Has Anything Happened?

Author(s):	Alexander Schäfer, Isabel Schnabel, Beatrice Weder di Mauro
Publication Date:	June 2013
Keyword(s):	Dodd-Frank Act, event study, Financial sector reform, financial stability, German restructuring law, Swiss too-big-to-fail regulation, Vickers reform, Volcker rule
JEL(s):	G21, G28
Programme Areas:	International Macroeconomics, Financial Economics
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=9502

We analyze the reactions of stock returns and CDS spreads of banks from Europe and the United States to four major regulatory reforms in the aftermath of the subprime crisis, employing an event study analysis. In contrast to the public perception that nothing has happened, we find that financial markets indeed reacted to the structural reforms enacted at the national level. All reforms succeeded in reducing bail-out expectations, especially for systemic banks. However, banks' profitability was also affected, showing up in lower equity returns. The strongest effects were found for the Dodd-Frank Act (especially the Volcker rule), whereas market reactions to the German restructuring law were small.