Mortgage-related bank penalties and systemic risk among U.S. banks
Václav Brož and
Journal of International Money and Finance, 2022, vol. 122, issue C
We analyze link between mortgage-related regulatory penalties levied on banks and the level of systemic risk in the U.S. banking industry. We employ a frequency decomposition of volatility spillovers (connectedness) to assess system-wide risk transmission with short-, medium-, and long-term dynamics. We find that after the possibility of a penalty is first announced to the public, long-term systemic risk among banks tends to increase. From the dynamic perspective, bank penalties represent an overlooked risk as they do not increase systemic risk immediately, but the risk accumulates and propagates over the long term. In this respect, bank penalties resemble still waters that run deep. In contrast, a settlement with regulatory authorities leads to a decrease in the long-term systemic risk. Our analysis is robust with respect to a number of relevant criteria.
Keywords: Bank; Global financial crisis; Mortgage penalty; Systemic risk; Financial stability (search for similar items in EconPapers)
JEL-codes: C14 C58 G14 G21 G28 K41 (search for similar items in EconPapers)
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Working Paper: Mortgage-Related Bank Penalties and Systemic Risk among U.S. Banks (2021)
Working Paper: Mortgage-related bank penalties and systemic risk among U.S. banks (2020)
Working Paper: Mortgage-Related Bank Penalties and Systemic Risk Among U.S. Banks (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:122:y:2022:i:c:s0261560621002266
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