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Regulation of multinational banks: A theoretical inquiry

  • Calzolari, Giacomo
  • Loranth, Gyongyi

This paper examines national regulators' incentives to intervene in a multinational bank's activities and the extent to which these incentives differ with the bank's foreign representation choice (branch or subsidiary). Shared liability leads to higher incentives for intervention than legal separation. Cross-border deposit insurance, on the other hand, yields less intervention than when regulators compensate local depositors only. Based on these results, we derive implications for multinational banks' and regulators' preference on foreign expansion and representation.

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

Volume (Year): 20 (2011)
Issue (Month): 2 (April)
Pages: 178-198

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Handle: RePEc:eee:jfinin:v:20:y:2011:i:2:p:178-198
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622875

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  1. Buch, Claudia M. & Golder, Stefan M., 2001. "Foreign versus domestic banks in Germany and the US: a tale of two markets?," Journal of Multinational Financial Management, Elsevier, vol. 11(4-5), pages 341-361, December.
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  9. Gyöngyi Lóránth & Alan D. Morrison, 2007. "Deposit Insurance, Capital Regulations, and Financial Contagion in Multinational Banks," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(5-6), pages 917-949.
  10. Gyongyi Loranth & Alan Morrison, 2003. "Multinational Bank Capital Regulation with Deposit Insurance and Diversification Effects," OFRC Working Papers Series 2003fe11, Oxford Financial Research Centre.
  11. Charles M. Kahn & Andrew Winton, 2002. "Moral hazard and optimal subsidiary structure for financial institutions," Proceedings 808, Federal Reserve Bank of Chicago.
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  13. Bebchuk, Lucian Arye & Guzman, Andrew T, 1999. "An Economic Analysis of Transnational Bankruptcies," Journal of Law and Economics, University of Chicago Press, vol. 42(2), pages 775-808, October.
  14. Xavier Freixas, 1999. "Optimal bail out policy, conditionality and constructive ambiguity," Economics Working Papers 400, Department of Economics and Business, Universitat Pompeu Fabra.
  15. Calzolari, Giacomo & Lóránth, Gyöngyi, 2004. "Regulation of Multinational banks: A Theoretical Inquiry," CEPR Discussion Papers 4232, C.E.P.R. Discussion Papers.
  16. Robert C. Feenstra & Tracy R. Lewis, 1987. "Negotiated Trade Restrictions with Private Political Pressure," NBER Working Papers 2374, National Bureau of Economic Research, Inc.
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  18. Giacomo Calzolari, 2004. "Incentive Regulation of Multinational Enterprises," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(1), pages 257-282, 02.
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