Has Centralised Supervision Made European Banks More Resilient?

46 Pages Posted: 27 Sep 2024

See all articles by Silvia Calò

Silvia Calò

European Stability Mechanism

Wildmer Daniel Gregori

affiliation not provided to SSRN

Marco Petracco Giudici

affiliation not provided to SSRN

Michela Rancan

University of Milan

Abstract

This study evaluates the impact of the centralised supervision framework in Europe in the Single Supervisory Mechanism on banks’ balance sheets. By implementing a matching procedure coupled with a difference-in-difference approach, we test for differences in Tier 1 capital to total assets ratio between centrally supervised banks and nationally supervised banks for the years 2007-2020. Our results show that centrally supervised banks consistently have a higher ratio. An investigation of the potential drivers finds an important role of mandatory capital requirements, banks’ business model and credit risk. Moreover, this effect is driven by those banks being located in countries with less stringent regulatory and legal environments. Overall, our findings suggest that centrally supervised banks have become more resilient.

Keywords: Centralised supervision, Single Supervisory Mechanism, Bank resilience, Financial stability, European regulation

Suggested Citation

Calò, Silvia and Gregori, Wildmer Daniel and Petracco Giudici, Marco and Rancan, Michela, Has Centralised Supervision Made European Banks More Resilient?. Available at SSRN: https://ssrn.com/abstract=4969162 or http://dx.doi.org/10.2139/ssrn.4969162

Silvia Calò

European Stability Mechanism ( email )

6a Circuit de la Foire Internationale
L-1347
Luxembourg

Wildmer Daniel Gregori

affiliation not provided to SSRN ( email )

No Address Available

Marco Petracco Giudici

affiliation not provided to SSRN

Michela Rancan (Contact Author)

University of Milan

Via Conservatorio, 7
Milan, 20122
Italy

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