Mortgage-Related Bank Penalties and Systemic Risk Among U.S. Banks

Václav Brož and Evžen Kočenda

No 2019/25, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: 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 to draw conclusions about 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. In contrast, a settlement with regulatory authorities leads to a decrease in the long-term systemic risk. Our analysis is relevant both to authorities imposing penalties as well as to those in charge of financial stability.

Keywords: Bank; financial stability; global financial crisis; mortgage; penalty; systemic risk (search for similar items in EconPapers)
JEL-codes: C14 C58 G14 G21 G28 K41 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2019-09, Revised 2019-09
New Economics Papers: this item is included in nep-ban, nep-cba, nep-law, nep-ore and nep-rmg
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Related works:
Journal Article: Mortgage-related bank penalties and systemic risk among U.S. banks (2022)
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)
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