Has the Comprehensive Assessment made the European financial system more resilient?

Silvia Calo', Wildmer Daniel Gregori (), Marco Petracco Giudici and Michela Rancan
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Wildmer Daniel Gregori: European Commission, https://ec.europa.eu/jrc/en

No 2021-08, JRC Working Papers in Economics and Finance from Joint Research Centre, European Commission

Abstract: What has been the impact of the Comprehensive Assessment (CA) carried out by the ECB on banks' resilience? Implementing a difference-indifference approach, we analyse a non-risk based measure defined as the ratio of Tier 1 capital over total assets of European banks’ balance sheets during the years 2007-2018. This wide time span, compared to previous literature, allows a better analysis of CA's medium-term effects. We find that banks under the CA have a higher ratio, suggesting that the CA has contributed to foster banks' resilience. Importantly, this seems to have been achieved by banks increasing their capitalization level without shrinking their assets. In addition, this impact appears to be driven by banks located in countries where the regulatory environment and property rights are relatively less strong.

Keywords: Comprehensive assessment; European banks; Financial stability; Regulation (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2021-08
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cfn and nep-eec
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Published by the European Commission, 2021

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