Does financial integration make banks act more prudential? Regulation, foreign owned banks, and the lender-of-last resort
AbstractWe develop a simple model that looks at the incentives of private banks to behave prudentially and undertake costly efforts to lower the probability of bankruptcy or having to be bailed out by a lender of last resort. Government regulators can force banks to increase efforts beyond the privately optimal level. We contrast the national case under autarky with the case of an integrated banking market with bank cross-holdings. Because banks will exert a greater overall effort to monitor their foreign activities, financial integration might lead to more rather than less prudential behavior. Neither needs financial integration lead to a regulatory race to the bottom. We use the framework to investigate the impact of regulatory coordination on bank efforts and discuss incentives for banks to organize their foreign holdings in the form or branches or subsidiaries. We show that the absence of a common lender of last resort can reduce the probability of a financial crisis. --
Download InfoIf 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.
Bibliographic InfoPaper provided by Free University Berlin, School of Business & Economics in its series Discussion Papers with number 2006/2.
Date of creation: 2006
Date of revision:
Contact details of provider:
Postal: Garystr. 21, 14195 Berlin (Dahlem)
Phone: (030) 838 2272
Fax: (030) 838 2129
Web page: http://www.wiwiss.fu-berlin.de/en/index.html
More information through EDIRC
Bank regulation; lender of last resort; European financial markets;
Other versions of this item:
- Berger, Helge & Hefeker, Carsten, 2006. "Does Financial Integration Make Banks Act More Prudential? Regulation, Foreign Owned Banks, and the Lender-of-Last Resort," HWWA Discussion Papers 339, Hamburg Institute of International Economics (HWWA).
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
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.:
- Xavier Freixas & Bruno M. Parigi & Jean-Charles Rochet, 2003.
"The lender of last resort: A 21st Century approach,"
Economics Working Papers
708, Department of Economics and Business, Universitat Pompeu Fabra.
- Freixas, Xavier & Parigi, Bruno M. & Rochet, Jean-Charles, 2003. "The lender of last resort: a 21st century approach," Working Paper Series 0298, European Central Bank.
- Freixas, Xavier & Parigi, Bruno & Rochet, Jean-Charles, 2003. "The Lender of Last Resort: A 21th Century Approach," IDEI Working Papers 215, Institut d'Économie Industrielle (IDEI), Toulouse.
- Repullo, Rafael, 2000.
"A Model of Takeovers of Foreign Banks,"
CEPR Discussion Papers
2639, C.E.P.R. Discussion Papers.
- Calzolari, Giacomo & Loranth, Gyongyi, 2005.
"Regulation of multinational banks: a theoretical inquiry,"
Working Paper Series
0431, European Central Bank.
- Calzolari, Giacomo & Loranth, Gyongyi, 2011. "Regulation of multinational banks: A theoretical inquiry," Journal of Financial Intermediation, Elsevier, vol. 20(2), pages 178-198, April.
- Calzolari, Giacomo & Lóránth, Gyöngyi, 2004. "Regulation of Multinational banks: A Theoretical Inquiry," CEPR Discussion Papers 4232, C.E.P.R. Discussion Papers.
- Douglas W. Diamond & Philip H. Dybvig, 2000.
"Bank runs, deposit insurance, and liquidity,"
Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
- Sander Osterloo & Dirk Schoenmaker, 2004.
"Financial Supervision in an Integrating Europe: Measuring Cross-Border Externalities,"
FMG Special Papers
sp156, Financial Markets Group.
- Dirk Schoenmaker & Sander Oosterloo, 2005. "Financial Supervision in an Integrating Europe: Measuring Cross-Border Externalities," International Finance, Wiley Blackwell, vol. 8(1), pages 1-27, 07.
- Holthausen, Cornelia & Rønde, Thomas, 2005.
"Cooperation in International Banking Supervision,"
CEPR Discussion Papers
4990, C.E.P.R. Discussion Papers.
- Cornelia Holthausen & Thomas Rønde, 2003. "Cooperation in International Banking Supervision," CIE Discussion Papers 2004-02, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
- Holthausen, Cornelia & Rønde, Thomas, 2004. "Cooperation in international banking supervision," Working Paper Series 0316, European Central Bank.
- Thordur Olafsson & Julia Majaha-Jartby, 2005. "Regional Financial Conglomerates: A Case for Improved Supervision," IMF Working Papers 05/124, International Monetary Fund.
- Haizhou Huang & C. A. E. Goodhart, 1999.
"A Model of the Lender of Last Resort,"
IMF Working Papers
99/39, International Monetary Fund.
- Eduardo Levy Yeyati & Tito Cordella, 2004.
IMF Working Papers
04/148, International Monetary Fund.
- Tito Cordella & Eduardo Levy Yeyati, 2004. "Country Insurance," Econometric Society 2004 North American Summer Meetings 290, Econometric Society.
- Tito Cordella & Eduardo Levy Yeyati, 2004. "Country Insurance," Business School Working Papers countryinsurance, Universidad Torcuato Di Tella.
- Eduardo Levy Yeyati & Tito Cordella, 2004. "Country Insurance," Econometric Society 2004 Latin American Meetings 136, Econometric Society.
- Haizhou Huang & C. A. E. Goodhart, 2000.
"A Simple Model of an International Lender of Last Resort,"
IMF Working Papers
00/75, International Monetary Fund.
- Haizhou Huang & Charles Goodhart, 1999. "A Simple Model of an International Lender of Last Resort," FMG Discussion Papers dp336, Financial Markets Group.
- de Bandt, Olivier & Hartmann, Philipp, 2000.
"Systemic Risk: A Survey,"
CEPR Discussion Papers
2634, C.E.P.R. Discussion Papers.
- Ceyla Pazarbasioglu & Gudrun Johnsen & Paul Louis Ceriel Hilbers & Inci Ã–tker, 2005. "Assessing and Managing Rapid Credit Growth and the Role of Supervisory and Prudential Policies," IMF Working Papers 05/151, International Monetary Fund.
- Lieven Baele & Annalisa Ferrando & Peter Hördahl & Elizaveta Krylova & Cyril Monnet, 2004. "Measuring financial integration in the euro area," Occasional Paper Series 14, European Central Bank.
- Xavier Vives, 2001. "Restructuring Financial Regulation in the European Monetary Union," Journal of Financial Services Research, Springer, vol. 19(1), pages 57-82, February.
- Prati, A. & Schinasi, G.J., 1999. "Financial Stability in European Economic and Monetary Union," Princeton Studies in International Economics 86, International Economics Section, Departement of Economics Princeton University,.
- Koulovatianos, Christos & Schröder, Carsten & Schmidt, Ulrich, 2009.
"Nonmarket household time and the cost of children,"
Open Access Publications from Kiel Institute for the World Economy
28906, Kiel Institute for the World Economy (IfW).
- Koulovatianos, Christos & Schröder, Carsten & Schmidt, Ulrich, 2006. "Non-market household time and the cost of children," Discussion Papers 2006/22, Free University Berlin, School of Business & Economics.
- Christos Koulovatianos & Carsten Schröder & Ulrich Schmidt, . "Nonmarket Household Time and the Cost of Children," Discussion Papers 08/07, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
- Christos Koulovatianos & Carsten Schröder & Ulrich Schmidt, 2006. "Non-Market Household Time and the cost of Children," Vienna Economics Papers 0606, University of Vienna, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).
If references are entirely missing, you can add them using this form.