- Wednesday, October 2, 2019 at 12:00PM - 1:30PM
- *Room Change* SLB Room 111
- Open To The Yale Community
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ABSTRACT: It is now common to have separate regulators for larger, more complex and cross-border active financial firms as opposed to smaller financial firms. Exploiting the establishment of a new supranational regulator responsible for banks larger than EUR 30 billion in assets in Europe (the Single Supervisory Mechanism SSM), we investigate how separation of regulation impacts regulatory outcomes as well as risk shifting activities among banks under the different regulators. We show that local national regulators are systematically more lenient as compared to the supranational supervisor. Banks under SSM surveillance report higher risk weights, higher probability of default and lower collateral to loan ratios for exposures to the same firm as compared to banks under national supervision. The differential regulatory treatment results in higher capital charges for affected banks and has substantial impact on their activities. Affected banks react to the stricter supervision by shifting loans and security holdings to banks that do not fall under scrutiny of the SSM. This reduction is more pronounced in riskier assets which leads to a higher proportion of risky assets being held by smaller non-SSM banks. Matching the credit register with firm level balance sheet data, we further show that firms receiving loans only from SSM banks exhibit reduced employment, sales and investment compared to other firms.
- From "Supranational Supervision" by Prof. Dr. Rainer Haselmann, the SAFE Chair of Finance, Accounting and Taxation, Department of Economics, Johann Wolfgang Goethe University in Frankfurt am Main, joint with Shikhar Singla (London Business School) and Vikrant Vig (London Business School).
Lunch will be available starting at 12:00 pm; the talk will begin at 12:15 pm.
Please RSVP to the Yale Law School Center for the Study of Corporate Law by Thursday, September 26, 2019.
Yale Law School Center for the Study of Corporate Law