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Cross-border coordination of prudential supervision and deposit guarantees

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  • Hardy, Daniel C.
  • Nieto, Maria J.
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    Abstract

    We study the optimal joint design of prudential supervision and deposit guarantee regulations in a multi-country, integrated banking market, where policy-makers have preferences regarding profitability and stability of the banking sector. Non-coordinated policies will tend to yield too little supervision and too much deposit insurance. The paper concludes with recommendations on policy priorities in this area.

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    File URL: http://www.sciencedirect.com/science/article/pii/S1572308910000045
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Financial Stability.

    Volume (Year): 7 (2011)
    Issue (Month): 3 (August)
    Pages: 155-164

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    Handle: RePEc:eee:finsta:v:7:y:2011:i:3:p:155-164

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    Web page: http://www.elsevier.com/locate/jfstabil

    Related research

    Keywords: Deposit guarantees Bank supervision Cross-border coordination EU;

    References

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    1. Eisenbeis, Robert A. & Kaufman, George G., 2008. "Cross-border banking and financial stability in the EU," Journal of Financial Stability, Elsevier, vol. 4(3), pages 168-204, September.
    2. International Monetary Fund, 2006. "Regulatory Capture in Banking," IMF Working Papers 06/34, International Monetary Fund.
    3. Luc Laeven, 2004. "The Political Economy of Deposit Insurance," Journal of Financial Services Research, Springer, vol. 26(3), pages 201-224, December.
    4. David G. Mayes & María J. Nieto & Larry Wall, 2008. "Multiple safety net regulators and agency problems in the EU: Is Prompt Corrective Action partly the solution?," Banco de Espa�a Working Papers 0819, Banco de Espa�a.
    5. Demirguc-Kunt, Asli & Detragiache, Enrica, 2002. "Does deposit insurance increase banking system stability? An empirical investigation," Journal of Monetary Economics, Elsevier, vol. 49(7), pages 1373-1406, October.
    6. Demirguc-Kunt, Asli & Huizinga, Harry, 2004. "Market discipline and deposit insurance," Journal of Monetary Economics, Elsevier, vol. 51(2), pages 375-399, March.
    7. Charles Goodhart, 2008. "The Regulatory Response to the Financial Crisis," FMG Special Papers sp177, Financial Markets Group.
    8. Demirgüç-Kunt, Asli & Kane, Edward J. & Laeven, Luc, 2008. "Determinants of deposit-insurance adoption and design," Journal of Financial Intermediation, Elsevier, vol. 17(3), pages 407-438, July.
    9. Dell'Ariccia, Giovanni & Marquez, Robert, 2006. "Competition among regulators and credit market integration," Journal of Financial Economics, Elsevier, vol. 79(2), pages 401-430, February.
    10. Gillian G. H. Garcia & Maria J. Nieto, 2007. "Preserving Financial Stability: A Dilemma For The European Union," Contemporary Economic Policy, Western Economic Association International, vol. 25(3), pages 444-458, 07.
    11. Krimminger, Michael H., 2008. "The resolution of cross-border banks: Issues for deposit insurers and proposals for cooperation," Journal of Financial Stability, Elsevier, vol. 4(4), pages 376-390, December.
    12. Buch, Claudia M. & DeLong, Gayle, 2008. "Do weak supervisory systems encourage bank risk-taking?," Journal of Financial Stability, Elsevier, vol. 4(1), pages 23-39, April.
    13. Holthausen, Cornelia & Rønde, Thomas, 2005. "Cooperation in International Banking Supervision," CEPR Discussion Papers 4990, C.E.P.R. Discussion Papers.
    14. Dirk Schoenmaker & Charles Goodhart, 2006. "Burden Sharing in a Banking Crisis in Europe," FMG Special Papers sp164, Financial Markets Group.
    15. Robert Marquez & Giovanni Dell'Ariccia, 2001. "Competition Among Regulators," IMF Working Papers 01/73, International Monetary Fund.
    16. David S. Hoelscher & Michael Taylor & Ulrich H. Klueh, 2006. "The Design and Implementation of Deposit Insurance Systems," IMF Occasional Papers 251, International Monetary Fund.
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    Citations

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    Cited by:
    1. Engineer, Merwan H. & Schure, Paul & Gillis, Mark, 2013. "A positive analysis of deposit insurance provision: Regulatory competition among European Union countries," Journal of Financial Stability, Elsevier, vol. 9(4), pages 530-544.
    2. Xin Huang & Hao Zhou & Haibin Zhu, 2009. "Assessing the systemic risk of a heterogeneous portfolio of banks during the recent financial crisis," Finance and Economics Discussion Series 2009-44, Board of Governors of the Federal Reserve System (U.S.).
    3. Agur, Itai, 2013. "Multiple bank regulators and risk taking," Journal of Financial Stability, Elsevier, vol. 9(3), pages 259-268.

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