“During the recent financial crisis, the absence of an orderly resolution regime forced governments of several countries to provide extraordinary support to a number of systemically important financial institutions (SIFIs) that were considered too-big-to-fail. Since then, new laws such as the Dodd-Frank Act have established a framework to resolve SIFIs without the need for government bail-outs. These types of laws have important implications for senior bondholders of SIFIs, as the use of the new regimes would likely expose creditors to losses. Given this change, this post investigates whether markets are adjusting their perceptions of the risk associated with global SIFIs. We find that in response to shifting regulatory regimes, investors are beginning to price in a higher risk of default on senior bonds issued by the institutions.”
Sabrina is the also the solo Editor/Publisher and Founder of LLRX.com® – Legal, technology and knowledge discovery resources on the “moving edge” for Librarians, Lawyers, Researchers, Academic and Public Interest Communities – launched in 1996.