Does bank supervision oversight impact economic activity? The case of the European Union

Abstract

The role of regulation in the banking industry undeniably becomes more prominent when its flaws endanger the homeostasis of the financial system. The goal of this work project is to analyse the effects of supervisory rating shocks in real activity for the European Union and analyse the difference in response between its Northern and Southern segments. Through the construction of a proxy of the CAMELS rating, and the selection of real GDP growth rate as the measure of real activity, I address the magnitude of the shocks through the use of a vector autoregressive (VAR) model and the local projections approach