GSIB Status and Corporate Lending: An International Analysis

Abstract

After the global financial crisis, the Financial Stability Board (FSB) began designating some financial institutions as “Global Systemically Important Banks (GSIBs)”. Because GSIB status implies additional regulatory scrutiny and higher capital requirements we examine the impact of a bank’s GSIB designation on its lending behavior and implications for the real economy. We find the announcement of a bank’s GSIB status to reduce credit supply in the syndicated loan market and the lending cut to primarily affect risky corporate borrowers. These borrowers subsequently experience lower asset-, investment- and sales growth, compared to similar firms borrowing from non-GSIB banks, suggesting that they are unable to substitute to other external finance providers.