Abstract

THE SINGLE SUPERVISORY MECHANISM AND ITS IMPLICATIONS FOR THE PROFITABILITY OF EUROPEAN BANKS

Ioanna Avgeri
Athens University of Economics and Business

Yiannis Dendramis
Athens University of Economics and Business

Helen Louri
Athens University of Economics and Business and London School of Economics

 

Abstract

The scope of this paper is to examine if and how the establishment of the Single Supervisory Mechanism (SSM) influenced the profitability of European banks. To do so, we employ the returns on assets and equity as alternative indicators for profitability. Using data for 344 European banks in 2011-2017 we apply the difference-in-differences methodology combined with matching techniques. Our main findings indicate a statistically significant and positive effect on profitability for the directly supervised banks, especially banks located in the periphery of the euro area, implying that institutional improvements introduced by the SSM were beneficial not only for strengthening stability and increasing credibility but also for improving performance and enhancing integration.

 

Keywords: European Banking Union; SSM; Bank profitability; policy evaluation.

JEL Classification: C23, C51, G21


Acknowledgements: Research support from the Research Centre of the Athens University of Economics and Business is gratefully acknowledged. Any errors remain our responsibility.


Correspondence:
Helen Louri
Athens University of Economics and Business
76, Patision str.
104 34, Athens
e-mail: elouri@aueb.gr


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