The Bright Side of Transparency: Evidence from Supervisory Capital Requirements

76 Pages Posted: 21 Jun 2021 Last revised: 2 Sep 2021

See all articles by Nordine Abidi

Nordine Abidi

International Monetary Fund

Livia Amato

HEC Paris

Ixart Miquel-Flores

European Central Bank (ECB); Frankfurt School of Finance & Mangement.

Quentin Vandeweyer

University of Chicago - Booth School of Business

Date Written: June 14, 2021

Abstract

Should regulators disclose private information about the creditworthiness of the companies it supervises? This paper exploits a change in the disclosure policy of the European Central Bank (ECB) in 2020 to make progress on this question. We compare European banks along multiple dimensions before and after the ECB published for the first time bank-by-bank information on Pillar 2 requirements (P2R). We show that bond prices and cross-border holdings of debt securities are sensitive to new regulatory information as well as to rating gaps between the ECB and private credit rating agencies. Overall, our results support the view that supervisors have specific, distinctive, and valuable knowledge of the banks they supervise.

Keywords: Transparency, Financial Integration, Banking Supervision, Prudential Regulation

JEL Classification: G11, G18, G21, F36, E58

Suggested Citation

Abidi, Nordine and Amato, Livia and Miquel-Flores, Ixart and Vandeweyer, Quentin, The Bright Side of Transparency: Evidence from Supervisory Capital Requirements (June 14, 2021). Available at SSRN: https://ssrn.com/abstract=3866364 or http://dx.doi.org/10.2139/ssrn.3866364

Nordine Abidi

International Monetary Fund ( email )

700 19th Street, N.W.
Washington DC
United States

Livia Amato

HEC Paris

1 rue de la Liberation
1 rue de la Liberation
Jouy-en-Josas, Ile-de-France 78350
France

Ixart Miquel-Flores (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstraße 20
Frankfurt am Main, 60325
Germany

Frankfurt School of Finance & Mangement. ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

Quentin Vandeweyer

University of Chicago - Booth School of Business ( email )

5807 S Woodlawn Ave
Chicago, IL 60637
United States

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