Fines for Misconduct in the Banking Sector – What is the Situation in the EU?

Publication: White Paper No. 47
Topic Area: Financial Institutions
Authors: Martin Götz,
Tobias Tröger
Date: Mar 2017
Keywords: financial stability, banking supervision, banking regulation, bank sanctions, monetary penalties
Abstract:

Bank regulators have the discretion to discipline banks by executing enforcement actions to ensure that banks correct deficiencies regarding safe and sound banking principles. We highlight the trade-offs regarding the execution of enforcement actions for financial stability. Following this we provide an overview of the differences in the legal framework governing supervisors’ execution of enforcement actions in the Banking Union and the United States. After discussing work on the effect of enforcement action on bank behaviour and the real economy, we present data on the evolution of enforcement actions and monetary penalties by U.S. regulators. We conclude by noting the importance of supervisors to levy efficient monetary penalties and stressing that a division of competences among different regulators should not lead to a loss of efficiency regarding the execution of enforcement actions.

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