Supranational supervision

Arbeitspapier

We exploit the establishment of a supranational supervisor in Europe (the Single Supervisory Mechanism) to learn how the organizational design of supervisory institutions impacts the enforcement of financial regulation. Banks under supranational supervision are required to increase regulatory capital for exposures to the same firm compared to banks under the local supervisor. Local supervisors provide preferential treatment to larger institutes. The central supervisor removes such biases, which results in an overall standardized behavior. While the central supervisor treats banks more equally, we document a loss in information in banks' risk models associated with central supervision. The tighter supervision of larger banks results in a shift of particularly risky lending activities to smaller banks. We document lower sales and employment for firms receiving most of their funding from banks that receive a tighter supervisory treatment. Overall, the central supervisor treats banks more equally but has less information about them than the local supervisor.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: LawFin Working Paper ; No. 46

Classification and Topics

• Classification: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financial Institutions and Services: Government Policy and Regulation
• Subject: Financial Regulation ; Financial Supervision ; Banking Union

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Haselmann, Rainer ; Singla, Shikhar ; Vig, Vikrant
• Event: Veröffentlichung
• (who): Goethe University, Center for Advanced Studies on the Foundations of Law and Finance (LawFin)
• (where): Frankfurt a. M.
• (when): 2022

Further information

• Handle: http://hdl.handle.net/10419/267746
• Last update: 10.03.2025, 11:42 AM CET