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How binding is supervisory guidance? Evidence from the European calendar provisioning

Author

Listed:
  • Franco Fiordelisi

    (Universita' Roma 3 and University of Essex)

  • Gabriele Lattanzio

    (Nazarbayev University, Graduate School of Business)

  • Davide S. Mare

    (The World Bank and Edinburgh Business School)

Abstract

We examine whether banks respond differently to the adoption of a supervisory guidance as compared to a similar regulatory action. By exploiting the staggered and distinct supervisory and regulatory implementation of the European Calendar Provision, we indeed document that while this reform achieved the intended overall goal of reducing European banks' nonperforming loans ratios, its effect materialized during the initial release of the ECB supervisory guidance, rather than following its adoption as a Pillar 1 regulation. That is, the subsequent formalization of this supervisory initiative within a regulatory framework achieved limited economic results, while eliminating any residual flexibility for the regulatory authority concerning the degree to which the calendar provisioning should be enforced.

Suggested Citation

  • Franco Fiordelisi & Gabriele Lattanzio & Davide S. Mare, 2022. "How binding is supervisory guidance? Evidence from the European calendar provisioning," Working Papers 2022/05, Nazarbayev University, Graduate School of Business.
  • Handle: RePEc:asx:nugsbw:2022-05
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    References listed on IDEAS

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    More about this item

    Keywords

    Bank regulation; Cross-border financial institutions; Financial stability; non-performing loans;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • 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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