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Regulation of multinational banks: A theoretical inquiry

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  • Calzolari, Giacomo
  • Loranth, Gyongyi

Abstract

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.

Suggested Citation

  • Calzolari, Giacomo & Loranth, Gyongyi, 2011. "Regulation of multinational banks: A theoretical inquiry," Journal of Financial Intermediation, Elsevier, vol. 20(2), pages 178-198, April.
  • Handle: RePEc:eee:jfinin:v:20:y:2011:i:2:p:178-198
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    More about this item

    Keywords

    Multinational banks Prudential regulation Representation form Subsidiary Branch;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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