Observing Enforcement: Evidence from Banking

102 Pages Posted: 4 Feb 2019 Last revised: 10 Jan 2022

See all articles by Anya Kleymenova

Anya Kleymenova

Board of Governors of the Federal Reserve System

Rimmy E. Tomy

University of Chicago

Multiple version iconThere are 3 versions of this paper

Date Written: January 8, 2022


This paper finds that the disclosure of supervisory actions by bank regulators is associated
with changes in their enforcement behavior. Using a novel sample of enforcement decisions
and orders (EDOs) and a change in the disclosure regime, we find that regulators issue more
EDOs, intervene sooner, and rely more on publicly observable signals following the regime
change. EDO documents become longer, more complex and contain more boilerplate language.
Our results also indicate that intervention happens sooner and more frequently in
counties with higher news circulation, which suggests that regulators take into account the
public perception of their actions. We evaluate potentially confounding factors, including
the S&L crisis and competition from thrifts, and find robust results. We also study bank outcomes
and document that uninsured deposits decline at EDO banks in the disclosure regime,
especially for those covered in the news. Finally, we observe that bank failure accelerates
despite improvements in capital ratios and asset quality. Overall, our research provides new
insights on the disclosure of regulatory actions.

Keywords: Banking, Banking supervision, Depository institutions, Disclosure regulation, Enforcement actions, Market discipline, Regulatory incentives

JEL Classification: E44, E58, G21, G28, G38, K23, L51, M41, M48, N20, N22

Suggested Citation

Kleymenova, Anya V. and Tomy, Rimmy, Observing Enforcement: Evidence from Banking (January 8, 2022). Chicago Booth Research Paper No. 19-05, Fama-Miller Working Paper, Available at SSRN: https://ssrn.com/abstract=3327502 or http://dx.doi.org/10.2139/ssrn.3327502

Anya V. Kleymenova (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States
202-452-2662 (Phone)

Rimmy Tomy

University of Chicago ( email )

Booth School of Business
5807 S Woodlawn Ave
Chicago, IL 60637
United States

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