Transnational banking supervision, distance-to-distress and credit risk: the SSM case
Autor(a) principal: | |
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Data de Publicação: | 2023 |
Outros Autores: | , |
Tipo de documento: | Artigo |
Idioma: | eng |
Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
Texto Completo: | http://hdl.handle.net/10400.14/38164 |
Resumo: | We assess the impact of adopting a transnational supervisor on the distance-to-distress and credit risk of large and complex banks, exploring the establishment of the Single Supervisory Mechanism (SSM) in 2014 as a quasi-natural experiment. Using a differences-indifferences approach, we compare SSM banks vis-à-vis banks with a similar size and complexity operating in European countries outside the SSM. Our results suggest that adopting a transnational supervisor increases the distance-to-distress, particularly for banks operating in countries with larger banking sectors, higher market concentration and greater supervisory discretion. We also show that SSM banks reduced loan loss reserves and NPLs significantly more than non-SSM banks, but only among the most capitalized banks-which is consistent with the notion that well-capitalized banks are better able to weather haircuts induced by credit risk reduction initiatives. Interestingly, we find that SSM banks from countries with greater supervisory discretion saw their NPLs increase in the first years of the SSM, which could reflect the elimination of national idiosyncrasies in credit risk accounting. In general, the evidence presented in our paper suggests that transnational supervision bears a superior ability to increase the distance-to-distress, reduce credit risk, and harmonize supervisory practices among large and complex banks. |
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Transnational banking supervision, distance-to-distress and credit risk: the SSM caseBankingCredit riskDistance-to-distressSupervisionONDsWe assess the impact of adopting a transnational supervisor on the distance-to-distress and credit risk of large and complex banks, exploring the establishment of the Single Supervisory Mechanism (SSM) in 2014 as a quasi-natural experiment. Using a differences-indifferences approach, we compare SSM banks vis-à-vis banks with a similar size and complexity operating in European countries outside the SSM. Our results suggest that adopting a transnational supervisor increases the distance-to-distress, particularly for banks operating in countries with larger banking sectors, higher market concentration and greater supervisory discretion. We also show that SSM banks reduced loan loss reserves and NPLs significantly more than non-SSM banks, but only among the most capitalized banks-which is consistent with the notion that well-capitalized banks are better able to weather haircuts induced by credit risk reduction initiatives. Interestingly, we find that SSM banks from countries with greater supervisory discretion saw their NPLs increase in the first years of the SSM, which could reflect the elimination of national idiosyncrasies in credit risk accounting. In general, the evidence presented in our paper suggests that transnational supervision bears a superior ability to increase the distance-to-distress, reduce credit risk, and harmonize supervisory practices among large and complex banks.Veritati - Repositório Institucional da Universidade Católica PortuguesaAlves, Carlos F.Marques, Bernardo P.Silva, Joana C.20232023-12-23T00:00:00Z2023-01-01T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10400.14/38164eng1350-485110.1080/13504851.2022.209259085132783844000815372000001info:eu-repo/semantics/embargoedAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-08-15T01:42:36ZPortal AgregadorONG |
dc.title.none.fl_str_mv |
Transnational banking supervision, distance-to-distress and credit risk: the SSM case |
title |
Transnational banking supervision, distance-to-distress and credit risk: the SSM case |
spellingShingle |
Transnational banking supervision, distance-to-distress and credit risk: the SSM case Alves, Carlos F. Banking Credit risk Distance-to-distress Supervision ONDs |
title_short |
Transnational banking supervision, distance-to-distress and credit risk: the SSM case |
title_full |
Transnational banking supervision, distance-to-distress and credit risk: the SSM case |
title_fullStr |
Transnational banking supervision, distance-to-distress and credit risk: the SSM case |
title_full_unstemmed |
Transnational banking supervision, distance-to-distress and credit risk: the SSM case |
title_sort |
Transnational banking supervision, distance-to-distress and credit risk: the SSM case |
author |
Alves, Carlos F. |
author_facet |
Alves, Carlos F. Marques, Bernardo P. Silva, Joana C. |
author_role |
author |
author2 |
Marques, Bernardo P. Silva, Joana C. |
author2_role |
author author |
dc.contributor.none.fl_str_mv |
Veritati - Repositório Institucional da Universidade Católica Portuguesa |
dc.contributor.author.fl_str_mv |
Alves, Carlos F. Marques, Bernardo P. Silva, Joana C. |
dc.subject.por.fl_str_mv |
Banking Credit risk Distance-to-distress Supervision ONDs |
topic |
Banking Credit risk Distance-to-distress Supervision ONDs |
description |
We assess the impact of adopting a transnational supervisor on the distance-to-distress and credit risk of large and complex banks, exploring the establishment of the Single Supervisory Mechanism (SSM) in 2014 as a quasi-natural experiment. Using a differences-indifferences approach, we compare SSM banks vis-à-vis banks with a similar size and complexity operating in European countries outside the SSM. Our results suggest that adopting a transnational supervisor increases the distance-to-distress, particularly for banks operating in countries with larger banking sectors, higher market concentration and greater supervisory discretion. We also show that SSM banks reduced loan loss reserves and NPLs significantly more than non-SSM banks, but only among the most capitalized banks-which is consistent with the notion that well-capitalized banks are better able to weather haircuts induced by credit risk reduction initiatives. Interestingly, we find that SSM banks from countries with greater supervisory discretion saw their NPLs increase in the first years of the SSM, which could reflect the elimination of national idiosyncrasies in credit risk accounting. In general, the evidence presented in our paper suggests that transnational supervision bears a superior ability to increase the distance-to-distress, reduce credit risk, and harmonize supervisory practices among large and complex banks. |
publishDate |
2023 |
dc.date.none.fl_str_mv |
2023 2023-12-23T00:00:00Z 2023-01-01T00:00:00Z |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/article |
format |
article |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://hdl.handle.net/10400.14/38164 |
url |
http://hdl.handle.net/10400.14/38164 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.relation.none.fl_str_mv |
1350-4851 10.1080/13504851.2022.2092590 85132783844 000815372000001 |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/embargoedAccess |
eu_rights_str_mv |
embargoedAccess |
dc.format.none.fl_str_mv |
application/pdf |
dc.source.none.fl_str_mv |
reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação instacron:RCAAP |
instname_str |
Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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RCAAP |
institution |
RCAAP |
reponame_str |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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1777303222235430912 |