We study the relationship between banks' size and risk-taking in the context of supranational banking supervision. Consistently with theoretical work on banking unions and in contrast to analyses emphasising incentives under- pinned by the too-big-to-fail effect, we find an inverse relationship...

Euro area governments have committed to break the doom loop between banks and sovereigns. But policymakers disagree on how to treat sovereign exposures in bank regulation. Our contribution is to model endogenous sovereign portfolio reallocation by banks in response to regulatory reform....

Prior to the financial crisis, prudential regulation in the EU was implemented non-uniformly across countries, as options and discretions allowed national authorities to apply a more favorable regulatory treatment. We exploit the national implementation of the CRD and derive a country measure of...

This paper examines the drivers of the retrenchment in cross-border banking in the European Union (EU) since the global financial crisis, which stands out in international comparison as banks located in the euro area and in the rest of the EU reduced their cross-border claims by around 25%....

Using a difference-in-differences approach and relying on conftdential supervisory data and an unique proprietary data set available at the European Central Bank related to the 2016 EU-wide stress test, this paper presents novel empirical evidence that supervisory scrutiny associated to stress...

We present a quantitative model of deposit insurance. We characterize the policymaker's optimal choices of coverage for depositors and premiums raised from banks. Premiums contribute to a deposit insurance fund that lowers taxpayers' resolution cost of bank failures. We find that riskadjusted...

We analyse the impact of the adoption of expected credit loss accounting (IFRS 9) on the timeliness and potential procyclicality of banks' loan loss provisioning. We use granular loan-level data from the euro area's credit register and investigate both firm-level credit events and macroeconomic...

The architecture of supervision - how we define the allocation of supervisory powers to different policy institutions - can have implications for policy conduct and for the economic and financial environment in which these policies are implemented. Theoretically, an integrated structure for...

This paper examines common regulation as cause of interbank contagion. Studies based on the correlation of bank assets and the extent of interbank lending may underestimate the likelihood of contagion because they do not incorporate the fact that banks have a common regulator. In our model, the...

Using a unique dataset of the Euro area and the U.S. bank lending standards, we find that low (monetary policy) short-term interest rates soften standards, for household and corporate loans. This softening - especially for mortgages - is amplified by securitization activity, weak supervision for...