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The Disciplining Effect of Bank Supervision: evidence from SupTech

Author

Listed:
  • Hans Degryse
  • Cédric Huylebroek
  • Bernardus Van Doornik

Abstract

Regulators increasingly rely on supervisory technologies (SupTech) to enhance bank supervision, but their potential role in disciplining bank behavior remains unclear. We address this knowledge gap using unique data from the SupTech application of the Central Bank of Brazil. We show that, after a SupTech event, banks reveal inconsistencies in their risk reporting and tighten credit to less creditworthy firms, effectively reducing risk-taking. This credit tightening in turn has small spillovers on less creditworthy firms borrowing from affected banks. Our results can be explained by a moral suasion channel, offering novel insights into the role of SupTech in bank supervision.

Suggested Citation

  • Hans Degryse & Cédric Huylebroek & Bernardus Van Doornik, 2025. "The Disciplining Effect of Bank Supervision: evidence from SupTech," Working Papers Series 617, Central Bank of Brazil, Research Department.
    • Handle: RePEc:bcb:wpaper:617
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    File URL: https://www.bcb.gov.br/content/publicacoes/WorkingPaperSeries/WP617v2.pdf
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    References listed on IDEAS

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    More about this item

    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

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