Berger, Allen N.
[Verfasser:in]
;
Cai, Jin
[Sonstige Person, Familie und Körperschaft];
Roman, Raluca A.
[Sonstige Person, Familie und Körperschaft];
Sedunov, John
[Sonstige Person, Familie und Körperschaft]
Supervisory Enforcement Actions against Banks and Systemic Risk
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments September 21, 2020 erstellt
Beschreibung:
Prudential bank supervision is designed to enhance financial stability, but we are unaware of research linking this supervision to financial system risk. In particular, there are no prior findings on how supervisory enforcement actions (EAs) – major tools of supervisors – affect systemic risk. Theory is ambiguous, leaving important unanswered research and policy questions regarding the effectiveness of these tools. We empirically investigate relations between EAs and banks' contributions to systemic risk. Using instrumental variables, we find significantly smaller bank contributions to systemic risk after EAs than before them, suggesting that EAs enhance financial stability. The data also suggest that the primary channel behind this relation is reduced leverage, but lower portfolio risk also plays a role. We also find that the magnitude of our findings is greater during financial crises than normal times, and that EAs against banks are more effective in systemic risk reduction than those against individual bank managers