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Bank Stability and Enforcement Actions in Banking

Author

Listed:
  • Stefano Caiazza

    (Università di Roma "Tor Vergata")

  • Matteo Cotugno

    (Università di Catania)

  • Franco Fiordelisi

    (Università di Roma III)

  • Valeria Stefanelli

    (Università Niccolò Cusano)

Abstract
This paper analyzes the causes and consequences of the enforcement actions (sanctions) imposed by supervisory authorities for banks. Focusing on a sample of Italian banks between 2005 and 2012, we found 302 sanctions regarding 3,588 persons (i.e. Board of directors, Top Managers, and Chief Executive Officers) were sanctioned in banks. We have three main results. First, enforcement actions are given to banks having high credit risk and poor Return on Assets (both one and two years in before the sanction). Second, sanctioned banks are unable to change their conduct in the first year following the enforcement sanction and the stability levels do not improve. Rather, it takes at least two years after an enforcement action so that banks are able to improve their stability. We also provide evidence that socio-eco-demographic differences in Italy have a substantial impact on the banks reaction after enforcement actions.

Suggested Citation

  • Stefano Caiazza & Matteo Cotugno & Franco Fiordelisi & Valeria Stefanelli, 2015. "Bank Stability and Enforcement Actions in Banking," CEIS Research Paper 334, Tor Vergata University, CEIS, revised 20 Mar 2015.
    • Handle: RePEc:rtv:ceisrp:334
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    References listed on IDEAS

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    Cited by:

    1. Götz, Martin R. & Tröger, Tobias H., 2017. "Fines for misconduct in the banking sector: What is the situation in the EU?," SAFE White Paper Series 47, Leibniz Institute for Financial Research SAFE.
    2. Ke, Konglin & Xu, Wanting & He, Yujie, 2024. "Do regulatory penalties reduce risk-taking of banks?," The North American Journal of Economics and Finance, Elsevier, vol. 70(C).
    3. Guerello, Chiara & Murè, Pina & Rovo, Natasha & Spallone, Marco, 2019. "On the informative content of sanctions," The North American Journal of Economics and Finance, Elsevier, vol. 48(C), pages 591-612.

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    More about this item

    Keywords

    Enforcement actions; Supervisory; Credit Risk;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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