Winners and Losers from Supervisory Enforcement Actions against Banks

70 Pages Posted: 21 Feb 2017 Last revised: 27 Nov 2018

See all articles by Raluca A. Roman

Raluca A. Roman

Federal Reserve Bank of Philadelphia

Date Written: October 2018


We investigate how supervisory enforcement actions against banks affect business borrowers, and some real economic consequences of these effects. An initial event-study analysis suggests negative short-term valuation effects of these actions for large relationship borrowers, which are reversed after new loans are granted. Loan-level analysis suggests that sanctioned banks try to offset the uncertainty and reputational damage of the actions by improving credit for both relationship and non-relationship large businesses, but decrease credit to small businesses. Enforcement actions also ameliorate financial constraints of large relationship borrowers, with favorable economic consequences for employment and R&D investment, but not for capital investment.

Keywords: Enforcement Actions, Bank Lending, Financial Contracting, Financial Constraints

JEL Classification: G21, G28, G32, K42

Suggested Citation

Roman, Raluca A., Winners and Losers from Supervisory Enforcement Actions against Banks (October 2018). Available at SSRN: or

Raluca A. Roman (Contact Author)

Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

Register to save articles to
your library


Paper statistics

Abstract Views
PlumX Metrics