The impact of the single supervisory mechanism on Eurozone banking: the assessment of trends in efficiency and frontier position

• Type: Article in International Scientific Journal
• Date: 2023

Authors

Moura, P (Author) Other; Barbosa, F (Author) Other; Alves, C (Author) Other; Ana Maria Cunha Ribeiro dos Santos Ponces Camanho (Author) FEUP

Journal

Title: Applied Economics

Pages: 1-30

ISSN: 0003-6846

Publisher: Taylor & Francis

Indexing

ISI Web of Knowledge - 0 Citations

Scopus - 0 Citations

Other information

Authenticus ID: P-00Z-KG1

DOI: 10.1080/00036846.2023.2290598

Abstract (EN): The Single Supervisory Mechanism (SSM) was implemented as a first step towards a Banking Union in November 2014. This paper investigates the impact of the SSM on Eurozone banks' efficiency and position of best-practice frontier. It is based on a balanced panel analysis of 931 European bank-year observations from 2011 to 2017 (133 banks, seven years). The study uses Data Envelopment Analysis and a difference-in-differences approach to explore the evolution of banking performance. We found that the SSM had a negative impact on the efficiency levels of Eurozone banks, particularly in the year after the introduction of the mechanism. Additionally, we observed that the frontier formed by non-Eurozone European Union banks is more productive than the frontier of Eurozone banks in all the years analysed. Both efficiency and frontier position show evidence of a recovery trend in more recent years for both groups. We also found that while Equity-to-Asset Ratio, Return on Average Assets and Gross Domestic Product per capita positively impacted banks' efficiency, domestic credit provided by banks expressed as %GDP had a negative impact on efficiency.

Language: English

Type (Professor's evaluation): Scientific

No. of pages: 30