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Abstract

Employing a unique data set for the period 2000-2010, this paper examines the impact of enforcement actions sanctions on bank capital, risk, and performance. We find that high risk weighted asset ratios tend to attract supervisory intervention. Sanctions whose cause lies at the core of bank safety and soundness curtail the risk-weighted asset ratio, but amplify the risk of insolvency and returns volatility, which implies that these sanctions do not improve the riskprofile of the involved banks, possibly because they come too late. Sanctions targeting internal control and risk management weaknesses appear to be well-timed and to restrain further increases in the risk-weighted assets ratio without impairing bank fundamentals. Sanctions against institution-affiliated parties do not seem to affect bank behavior. We suggest that supervisory attention should be placed on the timely uncovering of internal control and risk management deficiencies as this would allow the early tackling of the origins of financial distress.



Item Type: MPRA Paper -

Original Title: Enforcement actions and bank behavior-

Language: English-

Keywords: Enforcement actions; banking supervision; capital; bank risk; bank performance-

Subjects: G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and RegulationG - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; MortgagesG - Financial Economics > G0 - General > G01 - Financial Crises-





Author: Delis, Manthos D

Source: https://mpra.ub.uni-muenchen.de/43557/







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