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Supervisory enforcement actions and bank deposits

Author

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  • Delis, Manthos D.
  • Staikouras, Panagiotis K.
  • Tsoumas, Chris

Abstract

We assess the effect of formal enforcement actions against banks for safety and soundness reasons on punished banks’ deposits, and then examine whether this effect is caused by demand-side or supply-side forces. To this end, we use hand-collected data on enforcement actions, and bank-quarter data on deposits and other bank characteristics from 2000 through 2014. Our results show that total deposits at punished banks decrease by 8.5% in the post-enforcement year, with uninsured deposits declining by 14.5% and insured deposits falling by 7.4%. We also find that the deposit decline is predominantly caused by demand-side forces, that is, by punished banks’ decision to curtail the asset side of their balance sheet.

Suggested Citation

  • Delis, Manthos D. & Staikouras, Panagiotis K. & Tsoumas, Chris, 2019. "Supervisory enforcement actions and bank deposits," Journal of Banking & Finance, Elsevier, vol. 106(C), pages 110-123.
    • Handle: RePEc:eee:jbfina:v:106:y:2019:i:c:p:110-123
    DOI: 10.1016/j.jbankfin.2019.05.024
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    References listed on IDEAS

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    Cited by:

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    2. John Gallemore, 2023. "Bank financial reporting opacity and regulatory intervention," Review of Accounting Studies, Springer, vol. 28(3), pages 1765-1810, September.
    3. Byeongchan An & Robert M. Bushman & Anya V. Kleymenova & Rimmy E. Tomy, 2022. "Social Externalities of Bank Enforcement Actions: The Case of Minority Lending," Finance and Economics Discussion Series 2022-036, Board of Governors of the Federal Reserve System (U.S.).
    4. Berger, Allen N. & Cai, Jin & Roman, Raluca A. & Sedunov, John, 2022. "Supervisory enforcement actions against banks and systemic risk," Journal of Banking & Finance, Elsevier, vol. 140(C).
    5. Matteo Cotugno & Antonio D'Amato & Angela Gallo & Valeria Stefanelli, 2021. "Do supervisory enforcement actions affect board composition?," Corporate Governance: An International Review, Wiley Blackwell, vol. 29(1), pages 22-44, January.

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    More about this item

    Keywords

    Enforcement actions; Bank deposits; Depositor monitoring;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G01 - Financial Economics - - General - - - Financial Crises

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