The reverse revolving door in the supervision of European banks

Stefano Colonnello, Michael Koetter, Alex Sclip and Konstantin Wagner

No 25/2023, IWH Discussion Papers from Halle Institute for Economic Research (IWH)

Abstract: We show that around one third of executive directors on the boards of national supervisory authorities (NSA) in European banking have an employment history in the financial industry. The appointment of executives without a finance background associates with negative valuation effects. Appointments of former bankers, in turn, spark positive stock market reactions. This 'proximity premium' of supervised banks is a more likely driver of positive valuation effects than superior financial expertise or intrinsic skills of former executives from the financial industry. Prior to the inception of the European Single Supervisory Mechanism, the presence of former financial industry executives on the board of NSA associates with lower regulatory capital and faster growth of banks, pointing to a more lenient supervisory style.

Keywords: banking supervision; conflicts of interest; revolving door (search for similar items in EconPapers)
JEL-codes: G14 G21 G28 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-ban, nep-eec and nep-eur
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https://www.econstor.eu/bitstream/10419/281191/1/1878193961.pdf (application/pdf)

Related works:
Working Paper: The Reverse Revolving Door in the Supervision of European Banks (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:iwhdps:281191

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