Phd in MANAGEMENT, BANKING AND COMMODITY SCIENCES

Thesis title: SUPERVISORY SANCTIONS AND BANKS' BEHAVIOUR

The global financial crisis has identified a number of weaknesses in the regulatory and in the supervisory system and for this reason the debate on the effectiveness of supervisory measures is still ongoing. This research, as well as providing a detailed overview of the Italian and European supervisory system, aims to investigate whether sanctions may be predictive of banks' probability of default or otherwise may reduce potential situation of instability. To analyse these aspects a multiple case-study analysis is performed taken into account the most sanctioned Italian banks from 2015 to 2020 considering both all sanctions imposed by Italian supervisory authorities and sanctions imposed only by the Bank of Italy. Each sanctioned selected bank is analysed from both an accounting perspective - using data provided by Moody’s Analytics BankFocus - and from a regulatory perspective analysing the sanctions received. The main findings indicate that sanctions are often imposed after or at the same time of bank’s compulsory administrative liquidation declaration and therefore do not impact on the probability of default neither increasing it (through the impact on profit) nor reducing it (improving the quality of bank management and possible misconduct). Considering this result and the latest Italian banking crises, it seems that sanctions are not dissuasive as stated in the Single Supervisory Mechanism Regulation (SSMR) and that non-financial measures (such as meetings or inspections) were not sufficient to avoid crises. In this context supervisory approach may need to be revised to better identify a more effective and dissuasive approach combining both the use of ex-ante sanctions and other supervisory measures to prevent potential excessive risk-taking. The study also provides some considerations on the possibility of sanctions being considered as unconventional indicators of Merger and Acquisition (M&A) activity.