Banks' risk-taking within a banking union

Matteo Farnè and Angelos Vouldis

No 2595, Working Paper Series from European Central Bank

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. JEL Classification: F33, G21, G28, G32, C20

Keywords: banking union; euro area; non-performing loans; supervision; too-big-to-fail (search for similar items in EconPapers)
Date: 2021-10
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec, nep-fdg and nep-rmg
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Journal Article: Banks’ risk-taking within a banking union (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20212595

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