Economics and Finance

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Photo of Panagiota Papadimitri

Panagiota Papadimitri

Biography

Nationality: Greek                     Supervisor: Professor Gioia Pescetto/Fotios Pasouras            Year of graduation:

Title of Thesis: “Supervisory effectiveness from an economic, institutional and political scope”

Synopsis

The banking system has become one of the most regulated areas of economic activity; especially after the outburst of the subprime crisis. Governments and central banks adopt policies that aim at forming a safer financial system; by imposing stringent regulations and more invasive supervision. However, to achieve more effective banking supervision it is important to consider mechanisms that are able to support laws and regulations. Such mechanisms are the enforcement powersthat supervisors have over banks. Enforcement actions are a key supervisory tool that aims to increase bank safety and soundness and ensure that financial institutions manage risks appropriately.

An important question of relevance to policy making and supervisory agencies; but also to academics is: How do formal enforcement actions impact banking institutions? Existing studies focus mainly on banks’ risk and performance. Some other studies, find that regulatory interventions are likely to affect liquidity creation of banks and cause loan portfolio and bank lending shrinkage. Yet, empirical evidence and theoretical work on the topic is not extensive and various issues have been ignored. The project aims to bridge the field of regulatory enforcement with political strategies and corporate governance.

More precisely, the limited empirical evidence leads to the following research questions:

(a) Do political lobbying and political connections influence regulatory enforcement costs?

(b) Does corporate governance influence enforcement actions? Are banks with good corporate governance less likely to become subject to enforcement actions?

(c) Do enforcement actions lead to restructuring of the corporate governance systems? How do politically connected firms respond to such actions?

The outcome is expected to further explain issues raised by academics, policymakers, other stakeholders. It will provide information that will permit supervisors and regulators to detect operational malfunctions on an early stage and undertake prompt corrective measures. Moreover, the research output is expected to provide valuable information to a bank’s managerial and risk division; while shedding light on the ex-ante impact of formal enforcement actions from a “corporate” point of view.