Centralized supervision cuts firm intangible assets by 2.7 percent
Borrowers from banks under the European Central Bank's Single Supervisory Mechanism reduced their share of intangible assets by 2.7 percent between 2013 and 2018, according to an ECB working paper by Miguel Ampudia, Thorsten Beck, and Alexander Popov.
Shift toward physical capital
Matching balance sheet records for 121,394 firms across 1,839 banks in 12 euro area countries, the authors show that direct ECB supervision caused companies to reallocate investment from intangible to tangible assets.
The share of intangible assets fell by at least 2.7 percent following the introduction of the Single Supervisory Mechanism in 2014.
This contraction was most severe among small firms with fewer than 50 employees, enterprises under ten years old, and research-intensive industries.
Sectoral data from EU KLEMS confirm that research and development spending fell by an additional 3.5 percent in industries heavily exposed to centrally supervised lenders.
Collateral rules constrain credit
The reallocation stemmed from reduced lending and stricter collateral rules at directly supervised banks.
Corporate lending dropped by 8.4 percent during the 2013–2014 Comprehensive Assessment transition, while survey data from SAFE show affected firms were 2.9 to 4.6 percentage points more likely to face increased collateral requirements.
Because intangible assets cannot easily serve as collateral, stricter supervisory scrutiny forced banks and borrowers toward physical investments.
Safer banks, slower progress
Enhanced banking supervision strengthened European financial stability after the debt crisis.
Yet forcing lenders toward physical collateral penalizes innovative firms driving long-term productivity growth.
Europe needs deep equity markets before supervisory stringency permanently starves the knowledge economy.
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