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Supervisory enforcement actions and bank deposits

Manthos Delis (), Panagiotis K. Staikouras and Chris Tsoumas

Journal of Banking & Finance, 2019, vol. 106, issue C, 110-123

Abstract: We assess the effect of formal enforcement actions against banks for safety and soundness reasons on punished banks’ deposits, and then examine whether this effect is caused by demand-side or supply-side forces. To this end, we use hand-collected data on enforcement actions, and bank-quarter data on deposits and other bank characteristics from 2000 through 2014. Our results show that total deposits at punished banks decrease by 8.5% in the post-enforcement year, with uninsured deposits declining by 14.5% and insured deposits falling by 7.4%. We also find that the deposit decline is predominantly caused by demand-side forces, that is, by punished banks’ decision to curtail the asset side of their balance sheet.

Keywords: Enforcement actions; Bank deposits; Depositor monitoring (search for similar items in EconPapers)
JEL-codes: G21 G28 G01 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.jbankfin.2019.05.024

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