Reforms, Risk and Arbitrage: The Impact of G20 Post-Crisis Reform Implementation on Systemic Risk and Arbitrage in Banking and Insurance

Abstract: This thesis analyzes the effect of the implementation progress of the G20 post-crisis reform on systemic risk and bank foreign claims. First, indices measuring jurisdiction-level implementation progress of the reform and its different areas are constructed, and subsequently, SRISK, a common measure of systemic risk is regressed on these indices and other regulatory variables in a fixed effects regression. Second, differences in the implementation of the reforms are connected to regulatory arbitrage. Bilateral foreign claims of banks on an aggregate country level are regressed on the difference in reform implementation between source and recipient countries, along with other variables, in a fixed effects regression. The results of the first analysis show that a further progression of G20 reform implementation increased systemic risk in banking and reduced systemic risk in insurance and those of the second analysis show some evidence for regulatory arbitrage following increased differences in G20 reform implementation between countries.