<p class="MsoNormal" style="text-align:justify">Regulatory reforms following the financial crisis of 2007&ndash;08 created incentives for large global banks to lower their systemic importance. We establish that differences in profitability shape banks&rsquo; regulatory response. Profitability is key because it underpins banks&rsquo; ability to generate capital dynamically and drives the opportunity cost of shrinking. Using textual analysis to identify the regulatory treatment, we show that only the less profitable banks lowered their systemic footprint relative to their equally unprofitable peers that were unaffected by the regulatory treatment. The more profitable banks, by contrast, continued to raise their systemic importance in sync with their untreated peers.<o:p></o:p></p>