This paper develops an early warning system for predicting distress for large European banks. Using a novel definition of distress derived from banks' headroom above regulatory requirements, we investigate the performance of three machine learning techniques against the traditional logistic...

This paper studies the role of banking supervision in anticipating, monitoring, and disciplining failing banks. We document that supervisors anticipate most bank failures with a high degree of accuracy. Supervisors play an important role in requiring troubled banks to recognize losses, taking...

In the last decades, during the unfolding of momentous events, we saw the growing awareness of the need for a transition to a sustainable economy. The radical economic and social change will require the mobilization of colossal resources, and hence the alignment of the financial system to this...

This paper provides a first empirical analysis of the impact of the European Central Bank's (ECB's) climate-risk-related supervisory efforts on (i) climate risk exposure and related risk management of banks; and (ii) on the induced shifts in banks' portfolio choices with regard to additional...

We ask if bank supervisors’ efforts to combat climate change affect banks' lending and their borrowers’ transition to the carbon-neutral economy. Combining information from the French supervisory agency’s climate pilot exercise with borrowers' emission data, we first show that banks that...

Banking supervisors worldwide recognise the pressing need to harness frontier technologies such as artificial intelligence (AI), particularly machine learning (ML), to enhance their efficiency and analytical capabilities. The European Central Bank (ECB) has similarly acknowledged the...

This paper evaluates the impact of the March 2020 European Central Bank recommendation that banks do not pay dividends or buy back shares on their market values. It documents a causal negative impact on bank share prices of around 7% during the two weeks following its announcement. The...

This research aims to find the most accurate model for predicting bankruptcy in the Indonesian banking industry. The data used are secondary data in the form of financial reports from 2018 to 2022. The methodology includes hypothesis testing using normality, homogeneity, and one-way ANOVA tests....

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....

This paper studies the impact of banks' dividend restrictions on the behavior of their institutional investors. Using an identification strategy that relies on the within investor variation and a difference in difference setup, I find that funds permanently decrease their ownership shares at...

This paper captures advances in prudential regulation and supervision for challenger banks and fintech in the UK. It presents a critical analysis of the prudential supervisory approaches towards fintech. The focus is placed on fast-growing firms (FGFs), building on the review performed by the...

This paper develops an early warning system for predicting distress for large European banks. Using a novel definition of distress derived from banks' headroom above regulatory requirements, we investigate the performance of three machine learning techniques against the traditional logistic...

This paper provides an overview of recent analytical work1 conducted, under their own aegis, by experts from various European authorities and institutions in the field of crypto-asset monitoring. Currently, risks stemming from crypto-assets and the potential implications for central banking...

Physical climate risks can have a large regional impact, which can influence mortgage loans' credit risk and should be priced by the lenders. Motivated by the relevance of climate change for financial intermediaries, our paper aims at analysing if physical climate risks are being reflected in...

This paper explores the impact of bank transparency on market efficiency by comparing banks that disclose supervisory capital requirements to those that remain opaque. Due to the informational content of supervisory capital requirements for the market this opacity might hinder market efficiency....

Regardless of the individual perspectives on Artificial Intelligence (AI), it can transform the personal and professional lives at an unprecedented pace. It will also impact one of the most regulated and supervised industries in the world - the financial sector. Risk-based supervision (RBS) has...

The objective of the current work is to estimate to what extent support measures of the Bank of Russia and the Government of the Russian Federation promoted financial stability of banks and the financial market overall so to sustain lending economy-wide during the crisis periods of 2014, 2020,...

A large literature at the intersection of economics and finance offers prescriptions for regulating banks to increase financial stability. This literature abstracts from the discretion that accounting standards give banks over financial reporting, creating a gap between the information assumed...

Monetary and Capital Markets (MCM) department delivered a hybrid technical assistance (TA) mission to assist the Bangko Sentral ng Pilipinas (BSP) in developing a supervisory framework for operational resilience. An earlier mission in 2022 assisted BSP to develop a regulatory framework for...

This technical note focuses on regulation and supervision of less significant institutions as part of the Slovak Republic's Financial Sector Assessment Program. Národná banka Slovenska's (NBS) supervisory approach focuses on Less Significant Institution (LSI) risks and vulnerabilities however...

Supporting the Authority´s objectives on development of risk-based supervision of the banking sector, this technical assistance for the Bank of Lao P.D.R., conducted in Vientiane from June 10-14, 2024, provided advice on improvement of the aspects of risk-based supervision, including revising...

This paper examines how microprudential policy affects income inequality, and whether and how the effect of macroprudential policy on income inequality depends on the stance of microprudential policy. The dataset covers 70 countries over the period 1996-2013. Applying the system GMM estimation...

In managing their capital, banks balance the risk of breaching regulatory requirements against the cost of maintaining and speedily restoring "management" buffers. Using 68 quarters of data on 17 US and 17 euro-area banks, we find systematic reductions in steady-state management buffer targets...

A large literature at the intersection of economics and finance offers prescriptions for regulating banks to increase financial stability. This literature abstracts from the discretion that accounting standards give banks over financial reporting, creating a gap between the information assumed...

Regulators increasingly rely on supervisory technologies (SupTech) to enhance bank supervision, but their potential role in disciplining bank behavior remains unclear. We address this knowledge gap using unique data from the SupTech application of the Central Bank of Brazil. We show that, after...

There is an ongoing debate about the role of income diversification in enhancing bank stability within the financial services industry in Europe. Some advocate for diversification, while others argue that its importance should not be overstated. Some financial institutions are encouraged to...