Banks’ risk-taking within a banking union

Matteo Farnè and Angelos Vouldis

Economics Letters, 2021, vol. 204, issue C

Abstract: 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 underpinned by the too-big-to-fail effect, we find an inverse relationship between banks’ size and non-performing loan growth for a sample of European banks. Evidence is provided that the mechanism operates through the enhanced organisational efficiency of the supranational set-up rather than incentives alignment among the supervisors and the banks.

Keywords: Supervision; Euro area; Non-performing loans; Banking union; Too-big-to-fail (search for similar items in EconPapers)
Date: 2021
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Working Paper: Banks' risk-taking within a banking union (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:204:y:2021:i:c:s0165176521001865

DOI: 10.1016/j.econlet.2021.109909

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