6533b7d0fe1ef96bd125b8b8
RESEARCH PRODUCT
Centralised or decentralised banking supervision? Evidence from European banks
Giuseppe AvignoneYener AltunbasAlessio ReghezzaSalvatore Polizzisubject
Economics and Econometrics050208 financeDifference-in-differences05 social sciencesFinancial systemSample (statistics)Difference in differencesBanking sectorBank creditBanking UnionBanking supervision0502 economics and businessBank credit riskEconomicsBanking union050207 economicsRobustness (economics)Empirical evidenceFinanceCredit riskRegulationdescription
Abstract This paper analyses the impact of the Banking Union on European bank credit risk. Specifically, we investigate the effect that the establishment of the Single Supervisory Mechanism has had on the credit risk of the banks it supervises in comparison to financial institutions that are still supervised by National Supervisory Authorities. We analyse a sample of 746 European banks over the period 2011–2018, by means of a difference-in-differences methodology. We provide empirical evidence that Single Supervisory Mechanism supervised banks reduced credit risk exposure compared to banks supervised by National Supervisory Authorities, suggesting that the Banking Union has successfully reduced the riskiness of the European banking sector. Our results passed a battery of robustness tests that support the reliability of our analysis. Our contribution sheds light on the benefits of centralised versus decentralised supervision, on the effectiveness of the current supervisory system in Europe, and on its impact on European bank risk.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2021-02-01 |