Behaving strategically? Evidence from the Centralisation of Banking Supervision

Event Abstract

On December 14, 2012, the European authorities abruptly announced the transfer of supervisory responsibilities of large banks from their national authorities to a supranational entity. As of January 1, 2014 banks with assets larger than €30 billion would be supervised by the European Central Bank. Using public data we show evidence of strategic behaviour by certain banks (i.e. sorters) around the threshold, that shrank in size to avoid centralized supervision. Over time these sorters exhibited distinct different behaviour than non-sorters including higher levels of nonperforming loans. We use instrumental variable to show that the centralization of banking supervision led to more stringent supervisory standards. Our results are robust to the use of confidential supervisory and credit register including comprehensive data on lender borrower credit relationships.

Booking

This is an open event; there is no need to book. Please feel free to attend and bring your colleagues, classmates and friends.

Speaker bio

Professor Franco Fiordelisi  currently associate editor of the European Journal of Finance, In the past, Franco was associate editor of the Journal of Banking and Finance (2012 -2015). He was visiting research scholar at the Olin Business School, Washington University in St. Louis, U.S. (Fulbright Scholarship), the Federal Reserve of New York (2017) and the European Central Bank (in 2010, 2017, 2018).