Title: | Enforcement of banking regulation and the cost of borrowing |
Author: | Deli, Yota ; Delis, Manthos D. ; Hasan, Iftekhar ; Liu, Liuling |
Organization: | Bank of Finland |
Series: | Bank of Finland Research Discussion Papers |
Series number: | 19/2018 |
Year of publication: | 2018 |
Publication date: | 18.10.2018 |
Published in: | Available also as Journal of Banking and Finance 2019 ; 101 ; April. |
Pages: | 60 |
Subject (yso): | pankit; sääntely; luotot; hinnoittelu; hinnat; kustannukset |
Keywords: | pankkitoiminta |
JEL: | E44; E51; G21; G28 |
Other keywords: | Bank supervision; Enforcement actions; Syndicated loans; Loan pricing |
Abstract: | We show that borrowing firms benefit substantially from important enforcement actions issued on U.S. banks for safety and soundness reasons. Using hand-collected data on such actions from the main three U.S. regulators and syndicated loan deals over the years 1997-2014, we find that enforcement actions decrease the total cost of borrowing by approximately 22 basis points (or $4.6 million interest for the average loan). We attribute our finding to a competition-reputation effect that forces banks to lower their cost of credit, irrespective of other changes in their business models after the enforcement action. |
Rights: | https://helda.helsinki.fi/bof/copyright |
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