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The real effects of banking supervision: Evidence from enforcement actions

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  • Danisewicz, Piotr
  • McGowan, Danny
  • Onali, Enrico
  • Schaeck, Klaus

Abstract

We present a novel way to examine macro-financial linkages by focusing on the real effects of bank supervisors’ enforcement actions. Exploiting plausibly exogenous variation in supervisory monitoring intensity, we show that enforcement actions in single-market banks trigger temporarily large adverse effects for the macroeconomy by reducing personal income growth, the number of establishments, and increasing unemployment. These effects are related to contractions in bank lending and liquidity creation, and are more pronounced when we consider enforcement actions on both single-market and multi-market banks, and in counties with fewer banks and greater external financial dependence.

Suggested Citation

  • Danisewicz, Piotr & McGowan, Danny & Onali, Enrico & Schaeck, Klaus, 2018. "The real effects of banking supervision: Evidence from enforcement actions," Journal of Financial Intermediation, Elsevier, vol. 35(PA), pages 86-101.
    • Handle: RePEc:eee:jfinin:v:35:y:2018:i:pa:p:86-101
    DOI: 10.1016/j.jfi.2016.10.003
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    More about this item

    Keywords

    Macro-financial linkages; Real effects; Economic growth; Supervision; Enforcement actions;
    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
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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