Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212427 
Year of Publication: 
2018
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 19/2018
Publisher: 
Bank of Finland, Helsinki
Abstract: 
We show that borrowing firms benefit substantially from important enforcement actions issued on U.S. banks for safety and soundness reasons. Using hand-collected data on such actions from the main three U.S. regulators and syndicated loan deals over the years 1997-2014, we find that enforcement actions decrease the total cost of borrowing by approximately 22 basis points (or $4.6 million interest for the average loan). We attribute our finding to a competition-reputation effect that forces banks to lower their cost of credit, irrespective of other changes in their business models after the enforcement action.
JEL: 
E44
E51
G21
G28
Persistent Identifier of the first edition: 
ISBN: 
978-952-323-243-3
Document Type: 
Working Paper

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