Cross-border resolution of global banks
- Most recent regulations establish that resolution of global banking groups shall be done according to bail-in procedures and following a Single Point of Entry (SPE) as opposed to a Multiple Point of Entry (MPE) approach. The latter requires parent holding of global groups to put up front the equity capital needed to absorb losses possibly emerging in foreign subsidiaries-branches. No model rationalized so far such resolution regime. We build a model of optimal design of resolution regimes and compare three regimes: SPE with cooperative authorities, SPE with non-cooperative authorities and MPE (ring-fencing). We find that the costs for bondholders of bail-inable instruments is generally higher under noncooperative regimes and ring-fencing. We also find that in those cases banks have ex ante incentives to reduce their exposure in foreign assets. We also examine recent case studies that help us rationalize the model results.
| Author: | Ester FaiaGND, Beatrice Weder di Mauro |
|---|---|
| URN: | urn:nbn:de:hebis:30:3-371218 |
| ArXiv Id: | http://arxiv.org/abs/http://ssrn.com/abstract=2572882 |
| Parent Title (English): | SAFE working paper series ; No. 88 |
| Series (Serial Number): | SAFE working paper (88) |
| Publisher: | SAFE |
| Place of publication: | Frankfurt am Main |
| Document Type: | Working Paper |
| Language: | English |
| Date of Publication (online): | 2015/03/04 |
| Date of first Publication: | 2015/03/04 |
| Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2015/03/10 |
| Tag: | financial retrenchment; financial spillover; multiple point of entry; single point of entry; strategic interaction of regulators |
| Issue: | First draft: October 2014. This draft: March 2015. |
| Page Number: | 26 |
| HeBIS-PPN: | 357671465 |
| Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
| Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF) | |
| Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) | |
| Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE) | |
| Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Sammlungen: | Universitätspublikationen |
| Licence (German): |  Deutsches Urheberrecht |
