Banking Supervision in Integrated Financial Markets: Implications for the EU
I analyze the optimal design of banking supervision in the presence of cross-border lending. Cross-border lending could imply that an individual bank failure in one country could trigger negative spillover effects in another country. Such cross-border contagion effects could turn out to be important in the EU because national banking problems could easily spread via the highly integrated interbank market. I show that if benevolent supervisors are accountable only to their own jurisdiction, they will not take cross-border contagion effects into account. Supervisors with such a national mandate fail to implement the optimum from a supranational perspective. In consequence, the probability of a bank failure will be inefficiently high. Against the background of this result, I argue in favor of institutionalizing an EU ”Supervisory Coordination Authority” to which national supervisors are accountable.
|Date of creation:||2002|
|Contact details of provider:|| Postal: Poschingerstrasse 5, 81679 Munich|
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo-group.de
More information through EDIRC
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.:
- Charles Goodhart, 2000. "The Organisational Structure of Banking Supervision," FMG Special Papers sp127, Financial Markets Group.
- Rochet, Jean-Charles, 1992. "Capital requirements and the behaviour of commercial banks," European Economic Review, Elsevier, vol. 36(5), pages 1137-1170, June.
- Giorgio Di Giorgio & Carmine Di Noia, 2001. "Financial Regulation and Supervision in the Euro Area: A Four-Peak Proposal," Center for Financial Institutions Working Papers 01-02, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Working Group of the Economic and Financial Committee, 2000. "Report on financial stability," European Economy - Economic Papers 2008 - 2015 143, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
- 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.
- Jean Tirole & Jean-Jaques Laffont, 1985.
"Using Cost Observation to Regulate Firms,"
368, Massachusetts Institute of Technology (MIT), Department of Economics.
- Joe Peek & Eric S. Rosengren & Geoffrey M. B. Tootell, 1999.
"Is Bank Supervision Central to Central Banking?,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 114(2), pages 629-653.
- A. W. Coats, 1995. "Comment," History of Political Economy, Duke University Press, vol. 27(5), pages 157-161, Supplemen.
- Speyer, Bernhard, 2001. "Internationalisation of banking and banking supervision," Research Notes 01-7, Deutsche Bank Research.
- Michael W Taylor & Marc G Quintyn, 2002.
"Regulatory and Supervisory Independence and Financial Stability,"
IMF Working Papers
02/46, International Monetary Fund.
- Marc Quintyn & Michael W. Taylor, 2003. "Regulatory and Supervisory Independence and Financial Stability," CESifo Economic Studies, CESifo, vol. 49(2), pages 259-294.
- Javier Santillán & Marc Bayle & Christian Thygesen, 2000. "The impact of the euro on money and bond markets," Occasional Paper Series 1, European Central Bank.
- Joseph G. Haubrich, 1996. "Combining bank supervision and monetary policy," Economic Commentary, Federal Reserve Bank of Cleveland, issue Nov.
- Dirk Schoenmaker, 1992. "Institutional Separation between Supervisory and Monetary Agencies," FMG Special Papers sp52, Financial Markets Group.
- Giammarino, Ronald M & Lewis, Tracy R & Sappington, David E M, 1993.
" An Incentive Approach to Banking Regulation,"
Journal of Finance,
American Finance Association, vol. 48(4), pages 1523-42, September.
- Goodhart, Charles & Schoenmaker, Dirk, 1995. "Should the Functions of Monetary Policy and Banking Supervision Be Separated?," Oxford Economic Papers, Oxford University Press, vol. 47(4), pages 539-60, October.
- Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
- Martin Summer, 2002.
"Banking Regulation and Systemic Risk,"
57, Oesterreichische Nationalbank (Austrian Central Bank).
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_812. 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: (Klaus Wohlrabe)
If references are entirely missing, you can add them using this form.