Despite this fact, the European Union (EU) Supervisory Authorities have quite different
styles of supervision, which are only partially addressed in the European Central Bank (ECB)
approach to supervision (Carretta et al., 2015). Masciandaro et al. (2011) nd a relatively
complex EU supervision framework with, at the bottom layer, a large and heterogeneous
group of national supervisory authorities, with a wide variety of architectures, governance
arrangements, supervisory cultures and regulatory frameworks.
The recent Comprehensive Assessment exercise carried out by the ECB in close
collaboration with the European Banking Authority represented, de facto, the rst
opportunity for the comparison of the risk cultures of supervised entities and supervisors.
This work is aimed to assess the risk culture of a sample of Central Banks and
Supervisory Authorities in Europe as well as of the ECB. The main assumptions are:
• the existence of a signicant degree of differentiation of the risk cultures among
supervisors, which also reects the country-specic factors (Mihet, 2012); and
• the presence of a “distance” between these cultures and the risk culture of the ECB.
In this perspective, the paper points out that these diversities, especially in presence of credit
markets still characterized by poor integration, could create unwanted distortion effects
during the initial stages of the Banking Union.
This paper has important policy implications. In fact, if it is true that supervisory risk
cultures are quite different among EU countries, the establishment of a Banking Union could
require a severe “tness effort” from ECB, to properly manage the relationship with the
different cultures of EU national supervisors.
The rest of the paper is structured as follows. Section 2 presents the main literature; Section 3
describes the methods; Section 4 presents the results and conclusions are drawn in Section 5.
Supervisory style can be dened as the behaviour that supervisors adopt in supervision,
according to different mixes of tools, resources and available information. When analysing
supervisory styles, it is possible to move between two extremes, thus determining an ample
set of possible supervisory interventions’ congurations (Carretta et al., 2009;Caprio, 2012;
Carretta et al., 2013).
On the one hand, there is a more formal style characterized by vertical relationships
between supervisors and supervised nancial intermediaries; the emphasis is on general,
prescriptive rules of conduct; on-going supervision is prevailing and it is based on frequent
and detailed reporting; sanctions are imposed mostly because of formal and technical
failures; the focus on the enhancement of internal governance of supervised banks is weak.
On the other hand, there is a more result-oriented supervisory style characterized by
horizontal relationships between supervisors and supervised nancial intermediaries; the
emphasis is on comprehension and sharing of best practices; inspections are prevailing;
supervisors are geographically close to supervised entities; sanctions are mostly imposed
because of failures in internal organization and control; the focus on the enhancement of
corporate and internal governance of supervised banks is strong.
Might differences in supervisory styles affect supervisory performance? In principle,
given the two goals of stability and efciency of the nancial system, some supervisory
styles could have positive effects on one goal but not, to the same extent, on the other one;
they could reach their objectives either in the short run or in the long run. A style that shows
to be very demanding in terms of formal compliance could increase compliance costs, thus
reducing the efciency of the supervised banks. Alternatively, a style that appears more
oriented towards cooperation and proximity, by stimulating a learning process on safe and