Advanced Search
MyIDEAS: Login

Coordinating Bank Failure Costs and Financial Stability

Contents:

Author Info

  • Iman van Lelyveld
  • Marco Spaltro

Abstract

Banking groups have become increasingly multinational but the institutional infrastructure to deal with solvency or liquidity problems is still largely national. This might lead to financial instability if national authorities do not internalise externalities abroad. Recently ex-ante burden sharing agreements have been established (e.g. EFSF), but little empirical work has been done on potential costs and benefits of such agreements. We estimate the costs and benefits of financial stability support for large, internationally active banks under several proposed agreements. We show costs according to the 'national solution', where only home authorities inject capital, as our benchmark. 'Specific' sharing agreements would be redistributive at the expense of smaller and East European countries (not home to large cross-border banking groups). The 'general fund' mechanism will smooth costs across countries but may lead to unequal redistribution of costs. We also show that coordinating bank failure costs may bring about financial stability benefits.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.dnb.nl/en/binaries/working%20paper%20306_tcm47-256296.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 306.

as in new window
Length:
Date of creation: Aug 2011
Date of revision:
Handle: RePEc:dnb:dnbwpp:306

Contact details of provider:
Postal: Postbus 98, 1000 AB Amsterdam
Web page: http://www.dnb.nl/en/
More information through EDIRC

Related research

Keywords: Burden sharing; crisis resolution; cross-border banks;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Max Bruche & Carlos González Aguado, 2006. "Recovery Rates, Default Probabilities And The Credit Cycle," Working Papers wp2006_0612, CEMFI.
  2. Todd Sandler & Keith Sargent, 1995. "Management of Transnational Commons: Coordination, Publicness, and Treaty Formation," Land Economics, University of Wisconsin Press, vol. 71(2), pages 145-162.
  3. Friederike Niepmann & Tim Schmidt-Eisenlohr, 2010. "Bank Bailouts, International Linkages and Cooperation," CEP Discussion Papers dp1023, Centre for Economic Performance, LSE.
  4. Joe Peek & Eric Rosengren, 1993. "The Capital Crunch: Neither A Borrower Nor A Lender Be," Boston College Working Papers in Economics 243, Boston College Department of Economics.
  5. 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.
  6. Dirk Schoenmaker & Charles Goodhart, 2006. "Burden Sharing in a Banking Crisis in Europe," FMG Special Papers sp164, Financial Markets Group.
  7. María Nieto & Garry J. Schinasi, 2007. "EU Framework for Safeguarding Financial Stability: Towards an Analytical Benchmark for Assessing its Effectiveness," IMF Working Papers 07/260, International Monetary Fund.
  8. Kashyap, Anil K. & Rajan, Raghuram G. & Stein, Jeremy C., 2008. "Rethinking capital regulation," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 431-471.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:dnb:dnbwpp:306. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rob Vet).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.