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The Unintended Consequences of the Launch of the Single Supervisory Mechanism in Europe

Published online by Cambridge University Press:  27 December 2017

Franco Fiordelisi ,
Ornella Ricci  and
Francesco Saverio Stentella Lopes
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Abstract

The launch of the Single Supervisory Mechanism (SSM) was an historic event. Beginning in Nov. 2014, the most significant banks came under the direct supervision of the European Central Bank (ECB), while national supervisory authorities (NSAs) maintained direct supervision of the remaining banks. Thus, supervision is conducted on two levels, which could cause inconsistency problems. Did the behavior of the significant banks differ from that of the less significant banks during the SSM launch? We find that the significant banks reduced their lending activity more than the less significant banks did in order to shrink their balance sheets and increase their capitalization.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 52 , Issue 6 , December 2017 , pp. 2809 - 2836
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2017 

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Footnotes

1

We thank Thorsten Beck, Emilia Bonaccorsi di Patti, Stephen Brown (the editor), Santiago Carbo, Federico Cecconi, Roy Cerqueti, Giovanni Cerulli, Vincenzo Chiorazzo, Francesco Columba, Olivier de Jonghe, Giorgio Di Giorgio, Mauro Grande, Iftekhar Hasan, Roman Matousek, Phil Molyneux, Enrico Onali, Marco Pagano, George Pennacchi (associate editor and referee), Bianca Potì, Sabrina Pucci, Giovanni Puopolo, Klaus Schaeck, Enrico Sette, Gaetano Spartà, Amine Tarazi, Anjan Thakor, and conference and seminar participants at the Financial Intermediation Network of European Studies, Banca d’Italia, CNR-GRAPE, and Durham University for helpful comments.

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