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Multinational Banks and Supranational Supervision

Author

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  • Calzolari, Giacomo
  • Colliard, Jean-Edouard
  • Lóránth, Gyöngyi

Abstract

We study the supervision of multinational banks (MNBs), allowing for either national or supranational supervision. National supervision leads to insufficient monitoring of MNBs due to a coordination problem between supervisors. Supranational supervision solves this problem and generates more monitoring. However, this increased monitoring can have unintended consequences, as it also affects the choice of foreign representation. Indeed, supranational supervision encourages MNBs to expand abroad using branches rather than subsidiaries, resulting in more pressure on their domestic deposit insurance fund. In some cases, it discourages foreign expansion altogether, so that financial integration paradoxically decreases. Our framework has implications on the design of supervisory arrangements for MNBs, the European Single Supervisory Mechanism being a prominent example.

Suggested Citation

  • Calzolari, Giacomo & Colliard, Jean-Edouard & Lóránth, Gyöngyi, 2016. "Multinational Banks and Supranational Supervision," CEPR Discussion Papers 11326, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:11326
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    Cited by:

    1. repec:spr:series:v:9:y:2018:i:1:d:10.1007_s13209-017-0171-z is not listed on IDEAS
    2. Rafael Repullo, 2018. "Hierarchical bank supervision," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 9(1), pages 1-26, March.
    3. Faia, Ester & Weder, Beatrice, 2016. "Cross-Border Resolution of Global Banks: Bail in under Single Point of Entry versus Multiple Points of Entry," CEPR Discussion Papers 11171, C.E.P.R. Discussion Papers.
    4. Buch, Claudia M. & Krause, Thomas & Tonzer, Lena, 2017. "Drivers of systemic risk: Do national and European perspectives differ?," Discussion Papers 09/2017, Deutsche Bundesbank.
    5. Elena Carletti & Giovanni Dell'Ariccia & Robert Marquez, 2016. "Supervisory Incentives in a Banking Union," IMF Working Papers 16/186, International Monetary Fund.

    More about this item

    Keywords

    Banking Union; Cross-border banks; Monitoring; Multinational banks; regulation; Supervision;

    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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