How Binding Is Supervisory Guidance? : Evidence from the European Calendar Provisioning
This paper investigates whether banks respond differently to supervisory guidance than to specific regulatory action. Using a sample of subsidiaries of European banks operating in developing countries, the study exploits the sequencing in the super...
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World Bank, Washington, DC
2022
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| Online Access: | http://documents.worldbank.org/curated/en/099712205172222193/IDU04756c4680f87d046860b6af0e7a34c058952 http://hdl.handle.net/10986/37449 |
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okr-10986-374492022-05-19T05:10:36Z How Binding Is Supervisory Guidance? : Evidence from the European Calendar Provisioning Fiordelisi, Franco Lattanzio, Gabriele Mare, David S. SUPERVISORY GUIDANCE BANKING REGULATION EUROPEAN CALENDAR PROVISIONING BANK CAPITAL ADEQUACY CROSS-BORDER FINANCIAL INSTITUTIONS FINANCIAL STABILITY NON-PERFORMING LOANS BANKING SUPERVISION BASEL COMMITTEE This paper investigates whether banks respond differently to supervisory guidance than to specific regulatory action. Using a sample of subsidiaries of European banks operating in developing countries, the study exploits the sequencing in the supervisory and regulatory implementation of a reform on provisioning for credit losses for identification, generally referred to as European calendar provisioning. While the reform achieved the intended goal of reducing European banks’ nonperforming loan ratios, its effects were greater during the initial implementation of the supervisory guidance than after its enactment as a binding regulation. This finding is consistent with the notion that the subsequent formalization of the supervisory initiative within a regulatory framework achieved limited results because it eliminated the flexibility the regulatory authority had concerning the stringency with which European calendar provisioning was enforced. Finally, the study offers evidence of a mechanism through which policies in advanced economies affect banking outcomes in developing countries to which their local financial authorities should be alert. 2022-05-18T15:40:55Z 2022-05-18T15:40:55Z 2022-05 Working Paper http://documents.worldbank.org/curated/en/099712205172222193/IDU04756c4680f87d046860b6af0e7a34c058952 http://hdl.handle.net/10986/37449 English Policy Research Working Papers;10050 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Policy Research Working Paper Publications & Research Europe |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
SUPERVISORY GUIDANCE BANKING REGULATION EUROPEAN CALENDAR PROVISIONING BANK CAPITAL ADEQUACY CROSS-BORDER FINANCIAL INSTITUTIONS FINANCIAL STABILITY NON-PERFORMING LOANS BANKING SUPERVISION BASEL COMMITTEE |
| spellingShingle |
SUPERVISORY GUIDANCE BANKING REGULATION EUROPEAN CALENDAR PROVISIONING BANK CAPITAL ADEQUACY CROSS-BORDER FINANCIAL INSTITUTIONS FINANCIAL STABILITY NON-PERFORMING LOANS BANKING SUPERVISION BASEL COMMITTEE Fiordelisi, Franco Lattanzio, Gabriele Mare, David S. How Binding Is Supervisory Guidance? : Evidence from the European Calendar Provisioning |
| geographic_facet |
Europe |
| relation |
Policy Research Working Papers;10050 |
| description |
This paper investigates whether banks
respond differently to supervisory guidance than to specific
regulatory action. Using a sample of subsidiaries of
European banks operating in developing countries, the study
exploits the sequencing in the supervisory and regulatory
implementation of a reform on provisioning for credit losses
for identification, generally referred to as European
calendar provisioning. While the reform achieved the
intended goal of reducing European banks’ nonperforming loan
ratios, its effects were greater during the initial
implementation of the supervisory guidance than after its
enactment as a binding regulation. This finding is
consistent with the notion that the subsequent formalization
of the supervisory initiative within a regulatory framework
achieved limited results because it eliminated the
flexibility the regulatory authority had concerning the
stringency with which European calendar provisioning was
enforced. Finally, the study offers evidence of a mechanism
through which policies in advanced economies affect banking
outcomes in developing countries to which their local
financial authorities should be alert. |
| format |
Working Paper |
| author |
Fiordelisi, Franco Lattanzio, Gabriele Mare, David S. |
| author_facet |
Fiordelisi, Franco Lattanzio, Gabriele Mare, David S. |
| author_sort |
Fiordelisi, Franco |
| title |
How Binding Is Supervisory Guidance? : Evidence from the European Calendar Provisioning |
| title_short |
How Binding Is Supervisory Guidance? : Evidence from the European Calendar Provisioning |
| title_full |
How Binding Is Supervisory Guidance? : Evidence from the European Calendar Provisioning |
| title_fullStr |
How Binding Is Supervisory Guidance? : Evidence from the European Calendar Provisioning |
| title_full_unstemmed |
How Binding Is Supervisory Guidance? : Evidence from the European Calendar Provisioning |
| title_sort |
how binding is supervisory guidance? : evidence from the european calendar provisioning |
| publisher |
World Bank, Washington, DC |
| publishDate |
2022 |
| url |
http://documents.worldbank.org/curated/en/099712205172222193/IDU04756c4680f87d046860b6af0e7a34c058952 http://hdl.handle.net/10986/37449 |
| _version_ |
1764487179217666048 |