Does individual SREP results reveal real news?

The disclosure of SREP results aims to enhance transparency and reduce opacity in the banking sector. Prior to 2020, there was no standardized framework for disclosure, leading to diversity in approaches across banks and countries. In 2020, the ECB established a common disclosure framework by publishing individual capital requirements resulting from the SREP exercise. This study fills a research gap in the literature by examining the impact of individual SREP results on bank share prices and identifying the information that influences the market reaction. The sample includes 168 SREP communications from 43 significant institutions in 14 European countries. The findings indicate that the disclosure of SREP results provides new information to the market, allowing for more accurate pricing distinctions and alleviating investor concerns. These findings have implications for regulators and market participants in understanding the role of SREP in market dynamics.