Enforcement actions against European banks in the years 2005–2022. Do financial penalties imposed on European banks follow any patterns?

Abstract

AbstractThis study aims to identify, by year and over the entire period under study (2005–2022), the countries with the most restrictive bank sanctioning policies in terms of amounts and numbers of penalties to point out the most active institutions in terms of imposing penalties, and to determine the regularities governing the process of imposing these burdens. Using linear ordering methods, groups of countries with similar levels of supervisory stringency identified with one of the supervisory actions, which are financial penalties, are distinguished. A total of 53 banks (the 50 largest European banks and an additional three banks designated as G-SIIs by the EBA) are identified from a constructed database of more than 300 European banks with penalties imposed between 2005 and 2022. The study’s conclusions indicate that the frequency of penalties cannot be clearly equated with the restrictiveness of supervisory institutions, as evidenced by the example of Hungary (multiplication of small penalties). The positioning of countries regarding the number of penalties, their value and grouping using linear ordering allows the conclusion that highly developed countries are characterized by relatively high restrictiveness. The results also show the difference between the Anglo-Saxon and continental models. The analysis in this article is the first comprehensive study of penalties imposed on banks by different types of institutions in 36 jurisdictions from the pre-GFC period up to the year in which the COVID-19 pandemic expired. The multi-faceted approach also provides a basis for formulating practical regulatory implications by redirecting sanctioning policy towards banks to their management and reducing the frequency of penalties while increasing their severity.