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What are the main differences between the practice of supervising large banks in the UK and in the euro area, and what are the main risks of regulatory divergence?

Author

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  • Haselmann, Rainer
  • Tröger, Tobias

Abstract

This in-depth analysis provides evidence on differences in the practice of supervising large banks in the UK and in the euro area. It identifies the diverging institutional architecture (partially supranationalised vs. national oversight) as a pivotal determinant for a higher effectiveness of supervisory decision making in the UK. The ECB is likely to take a more stringent stance in prudential supervision than UK authorities. The setting of risk weights and the design of macroprudential stress test scenarios document this hypothesis. This document was provided by the Economic Governance Support Unit at the request of the ECON Committee.

Suggested Citation

  • Haselmann, Rainer & Tröger, Tobias, 2021. "What are the main differences between the practice of supervising large banks in the UK and in the euro area, and what are the main risks of regulatory divergence?," SAFE White Paper Series 86, Leibniz Institute for Financial Research SAFE.
    • Handle: RePEc:zbw:safewh:86
    DOI: 10.2861/637380
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    References listed on IDEAS

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    1. Sumit Agarwal & David Lucca & Amit Seru & Francesco Trebbi, 2014. "Inconsistent Regulators: Evidence from Banking," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(2), pages 889-938.
    2. Weingast, Barry R, 1995. "The Economic Role of Political Institutions: Market-Preserving Federalism and Economic Development," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 11(1), pages 1-31, April.
    3. Taylor A. Begley & Amiyatosh Purnanandam & Kuncheng Zheng, 2017. "The Strategic Underreporting of Bank Risk," The Review of Financial Studies, Society for Financial Studies, vol. 30(10), pages 3376-3415.
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    Cited by:

    1. Sandra Eckert, 2022. "Sectoral Governance under the EU's Bilateral Agreements and the Limits of Joint Institutional Frameworks: Insights from EU‐Swiss Bilateralism for Post‐Brexit Relations with the UK," Journal of Common Market Studies, Wiley Blackwell, vol. 60(4), pages 1190-1210, July.

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