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Cross-Border Resolution of Global Banks: Bail in under Single Point of Entry versus Multiple Points of Entry

Author

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  • Weder di Mauro, Beatrice
  • Faia, Ester
Abstract
The design of resolution regimes for global groups has been the central theme since the global financial crisis. No model rationalized the optimal design of bail-in regimes and their welfare consequences. We do so in a model with strategically optimizing authorities and banks. We model three regimes: cooperative-SPE (Single Point of Entry), uncooperative-SPE and MPE (Multiple Points of Entry). Welfare losses in each regime depend on the degree of banks’ liabilities home bias. SPE cooperative generally minimizes losses since authorities internalize cross-country spillovers, unless groups are highly decentralized. High capital requirements by acting as discipline devise reduce losses and blur the difference between regimes. SPE has however unintended consequences: under cooperation it increases financial re-trenchment in previously segmented markets (by the same token it stimulates integration in well integrated markets), under non-cooperation subsidiarization emerges as an endogenous outcome.

Suggested Citation

  • Weder di Mauro, Beatrice & Faia, Ester, 2016. "Cross-Border Resolution of Global Banks: Bail in under Single Point of Entry versus Multiple Points of Entry," CEPR Discussion Papers 11171, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:11171
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Vittoria Cerasi & Stefano Montoli, 2020. "Bank resolution and multinational banks," Working Papers 447, University of Milano-Bicocca, Department of Economics, revised Jul 2020.
    2. Dirk Schoenmaker, 2017. "A macro approach to international bank resolution," Policy Contributions 21231, Bruegel.
    3. Dirk Schoenmaker, 2020. "Trans-Tasman cooperation in banking supervision and resolution," Journal of Banking Regulation, Palgrave Macmillan, vol. 21(1), pages 15-25, March.
    4. Dirk Schoenmaker, 2018. "Resolution of international banks: Can smaller countries cope?," International Finance, Wiley Blackwell, vol. 21(1), pages 39-54, March.
    5. Näther, Maria & Vollmer, Uwe, 2019. "National versus supranational bank regulation: Gains and losses of joining a banking union," Economic Systems, Elsevier, vol. 43(1), pages 1-18.
    6. Thorsten Beck & Samuel Da-Rocha-Lopes & André F Silva & Francesca Cornelli, 2021. "Sharing the Pain? Credit Supply and Real Effects of Bank Bail-ins [High wage workers and high wage firms]," The Review of Financial Studies, Society for Financial Studies, vol. 34(4), pages 1747-1788.
    7. Patrick Bolton & Martin Oehmke, 2019. "Bank Resolution and the Structure of Global Banks," The Review of Financial Studies, Society for Financial Studies, vol. 32(6), pages 2384-2421.
    8. Bolton, Patrick & Oehmke, Martin, 2019. "Bank resolution and the structure of global banks," LSE Research Online Documents on Economics 90056, London School of Economics and Political Science, LSE Library.
    9. Haufler, Andreas, 2021. "Regulatory and bailout decisions in a banking union," Journal of Banking & Finance, Elsevier, vol. 133(C).

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    More about this item

    Keywords

    Global financial architecture; Recovery and resolution planing; Single point of entry; Strategic regulatory interaction; Financial spillover; Financial retrenchment;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • F3 - International Economics - - International Finance

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