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The Disciplining Effect of Bank Supervision: Evidence from SupTech

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  • Degryse, Hans
  • Huylebroek, Cédric
  • Van Doornik, Bernardus

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

  • Degryse, Hans & Huylebroek, Cédric & Van Doornik, Bernardus, 2025. "The Disciplining Effect of Bank Supervision: Evidence from SupTech," CEPR Discussion Papers 19988, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:19988
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    Cited by:

    1. is not listed on IDEAS
    2. Bank for International Settlements, 2025. "Lessons on supervisory effectiveness - a literature review," BCBS Working Papers 45, Bank for International Settlements.
    3. Gambacorta, Leonardo & Lauridsen, Nico & Kiuhan-Vásquez, Samir & Prenio, Jermy, 2025. "Making Suptech Work: Evidence on the Key Drivers of Adoption," CEPR Discussion Papers 20964, Centre for Economic Policy Research.

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    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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