Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/208318
Authors: 
Maddaloni, Angela
Scopelliti, Alessandro
Year of Publication: 
2019
Series/Report no.: 
ECB Working Paper No. 2284
Abstract: 
Prior to the financial crisis, prudential regulation in the EU was implemented non-uniformly across countries, as options and discretions allowed national authorities to apply a more favorable regulatory treatment. We exploit the national implementation of the CRD and derive a country measure of regulatory flexibility (for all banks in a country) and of supervisory discretion (on a case-by-case basis). Overall, we find that banks established in countries with a less stringent prudential framework were more likely to require public support during the crisis. We instrument some characteristics of bank balance sheets with these prudential indicators to investigate how they affect bank resilience. The share of non-interest income explained by the prudential environment is always associated with an increase in the likelihood of financial distress during the crisis. Prudential frameworks also explain banks' liquidity buffers even in absence of a specific liquidity regulation, which points to possible spillovers across regulatory instruments.
Subjects: 
Prudential Regulation and Supervision
European Banking
Cross-country Heterogeneities
Rules versus Discretion
Banking Union
JEL: 
G01
G21
G28
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-3546-3
Document Type: 
Working Paper

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