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Lobbying on Regulatory Enforcement Actions: Evidence from Banking

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  • Thomas Lambert

Abstract

This paper analyzes the relationship between bank lobbying and supervisory decisions of regulators, and documents its moral hazard implications. Exploiting bank-level information on the universe of commercial and savings banks in the United States, I find that regulators are less likely to initiate enforcement actions against lobbying banks. In addition, I show that lobbying banks are riskier and reliably underperform their non-lobbying peers. Overall, these results appear rather inconsistent with an information-based explanation of bank lobbying, but consistent with the theory of regulatory capture.

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  • Thomas Lambert, 2016. "Lobbying on Regulatory Enforcement Actions: Evidence from Banking," Working Papers CEB 16-017, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:sol:wpaper:2013/228423
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    Cited by:

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    2. Ampudia, Miguel & Beck, Thorsten & Beyer, Andreas & Colliard, Jean-Edouard & Leonello, Agnese & Maddaloni, Angela & Marqués-Ibáñez, David, 2019. "The architecture of supervision," Working Paper Series 2287, European Central Bank.
    3. Koetter, Michael & Popov, Alexander, 2018. "Politics, banks, and sub-sovereign debt: unholy trinity or divine coincidence?," Working Paper Series 2146, European Central Bank.
    4. Bernal, Oscar & Girard, Alexandre & Gnabo, Jean-Yves, 2016. "The importance of conflicts of interest in attributing sovereign credit ratings," International Review of Law and Economics, Elsevier, vol. 47(C), pages 48-66.
    5. Benoit, Sylvain & Hurlin, Christophe & Pérignon, Christophe, 2019. "Pitfalls in systemic-risk scoring," Journal of Financial Intermediation, Elsevier, vol. 38(C), pages 19-44.
    6. G. P. Manish & Colin O’Reilly, 2019. "Banking regulation, regulatory capture and inequality," Public Choice, Springer, vol. 180(1), pages 145-164, July.

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    More about this item

    Keywords

    Banking supervision; enforcement actions; lobbying; moral hazard; risk taking;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • 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

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