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

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  • Fiordelisi, Franco
  • Ricci, Ornella
  • Stentella Lopes, Francesco Saverio

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.

Suggested Citation

  • Fiordelisi, Franco & Ricci, Ornella & Stentella Lopes, Francesco Saverio, 2017. "The Unintended Consequences of the Launch of the Single Supervisory Mechanism in Europe," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 52(6), pages 2809-2836, December.
  • Handle: RePEc:cup:jfinqa:v:52:y:2017:i:06:p:2809-2836_00
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    Cited by:

    1. Ampudia, Miguel & Beck, Thorsten & Beyer, Andreas & Colliard, Jean-Edouard & Leonello, Agnese & Maddaloni, Angela & Marqués-Ibáñez, David, 2019. "The architecture of supervision," Working Paper Series 2287, European Central Bank.
    2. Iryna Okolelova & Jacob Bikker, 2018. "The Single Supervisory Mechanism: competitive implications for the banking sectors in the euro area," DNB Working Papers 621, Netherlands Central Bank, Research Department.
    3. Molyneux, Philip & Reghezza, Alessio & Xie, Ru, 2019. "Bank margins and profits in a world of negative rates," Journal of Banking & Finance, Elsevier, vol. 107(C), pages 1-1.
    4. Fiordelisi, Franco & Pennacchi, George & Ricci, Ornella, 2020. "Are contingent convertibles going-concern capital?," Journal of Financial Intermediation, Elsevier, vol. 43(C).
    5. Brunella Bruno & Immacolata Marino, 2018. "How Do Banks Respond to Non-Performing Loans?," CSEF Working Papers 513, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 02 May 2020.

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