Too-Big-To-Fail Reforms and Systemic Risk

We examine the effects of too-big-to-fail reforms using ΔCoVaR and SRISK. These systemic risk measures suggest that i) the systemic risk contribution of global systemically important banks (G-SIBs) has declined to a larger extent than other banks following the reforms; and ii) the larger the systemic risk associated with a G-SIB, the more its systemic risk has declined. These findings are consistent with the objectives of the reforms and are validated by statistical analyses, including quantile panel regressions. We also find that SRISK may overestimate systemic risk in recent years by ignoring the role of total loss absorbing capacity-eligible bonds