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Banking supervision, monetary policy and risk-taking: big data evidence from 15 credit registers

Carlo Altavilla (), Miguel Boucinha (), Jose-Luis Peydro () and Frank Smets

No 2349, Working Paper Series from European Central Bank

Abstract: We analyse the effects of supranational versus national banking supervision on credit supply, and its interactions with monetary policy. For identification, we exploit: (i) a new, proprietary dataset based on 15 European credit registers; (ii) the institutional change leading to the centralisation of European banking supervision; (iii) high-frequency monetary policy surprises; (iv) differences across euro area countries, also vis-à-vis non-euro area countries. We show that supranational supervision reduces credit supply to firms with very high ex-ante and ex-post credit risk, while stimulating credit supply to firms without loan delinquencies. Moreover, the increased risk-sensitivity of credit supply driven by centralised supervision is stronger for banks operating in stressed countries. Exploiting heterogeneity across banks, we find that the mechanism driving the results is higher quantity and quality of human resources available to the supranational supervisor rather than changes in incentives due to the reallocation of supervisory responsibility to the new institution. Finally, there are crucial complementarities between supervision and monetary policy: centralised supervision offsets excessive bank risk-taking induced by a more accommodative monetary policy stance, but does not offset more productive risk-taking. Overall, we show that using multiple credit registers – first time in the literature – is crucial for external validity. JEL Classification: E51, E52, E58, G01, G21, G28

Keywords: AnaCredit; banking; euro area crisis; monetary policy; supervision (search for similar items in EconPapers)
Date: 2020-01
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec and nep-mac
Note: 2279334
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Related works:
Working Paper: Banking Supervision, Monetary Policy and Risk-Taking: Big Data Evidence from 15 Credit Registers (2020) Downloads
Working Paper: Banking supervision, monetary policy and risk-taking: Big data evidence from 15 credit registers (2020) Downloads
Working Paper: Banking Supervision, Monetary Policy and Risk-Taking: Big Data Evidence from 15 Credit Registers (2020) Downloads
Working Paper: Banking Supervision, Monetary Policy and Risk-Taking: Big Data Evidence from 15 Credit Registers (2019) Downloads
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