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Resolution of International Banks: Can Smaller Countries Cope?

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  • Schoenmaker, Dirk

Abstract

The stability of a banking system ultimately depends on the strength and credibility of the fiscal backstop. While large countries can still afford to resolve large global banks on their own, small and medium-sized countries face a policy choice. This paper investigates the impact of resolution on banking structure. The financial trilemma model indicates that smaller countries can either conduct joint supervision and resolution of their global banks (based on single point of entry resolution) or reduce the size of their global banks and move to separate resolution of these banks’ national subsidiaries (based on multiple point of entry resolution). Our empirical results show that the euro-area countries are heading for joint resolution based on burden sharing, while the UK and Switzerland have started a process of downsizing their banks.

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  • Schoenmaker, Dirk, 2016. "Resolution of International Banks: Can Smaller Countries Cope?," CEPR Discussion Papers 11600, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:11600
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    1. Anginer, Deniz & Cerutti, Eugenio & Martínez Pería, María Soledad, 2017. "Foreign bank subsidiaries' default risk during the global crisis: What factors help insulate affiliates from their parents?," Journal of Financial Intermediation, Elsevier, vol. 29(C), pages 19-31.
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    8. Charles Goodhart & Dirk Schoenmaker, 2016. "The Global Investment Banks are now all Becoming American: Does that Matter for Europeans?," Journal of Financial Regulation, Oxford University Press, vol. 2(2), pages 163-181.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. E Pluribus Unum: single vs. multiple point of entry resolution
      by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets on 2018-12-03 13:22:14

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    Cited by:

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    2. Thorsten Beck & Samuel Da-Rocha-Lopes & André F Silva & Francesca Cornelli, 2021. "Sharing the Pain? Credit Supply and Real Effects of Bank Bail-ins [High wage workers and high wage firms]," The Review of Financial Studies, Society for Financial Studies, vol. 34(4), pages 1747-1788.
    3. Thomas Conlon & John Cotter, 2019. "Subordinate Resolution ‐‐ An Empirical Analysis of European Union Subsidiary Banks," Journal of Common Market Studies, Wiley Blackwell, vol. 57(4), pages 857-876, July.
    4. Alexander Lehmann & Bruegel, 2019. "Crisis management for euro-area banks in central Europe," Policy Contributions 33343, Bruegel.
    5. Haufler, Andreas, 2021. "Regulatory and bailout decisions in a banking union," Journal of Banking & Finance, Elsevier, vol. 133(C).
    6. José Alejandro Fernández Fernández, 2020. "Considerations of the SPE and MPE resolution," Journal of Banking Regulation, Palgrave Macmillan, vol. 21(3), pages 278-287, September.
    7. Daniel Nikolaev, 2018. "The Impact Of Commercial Banks On Convergence In The European Union," Economic Archive, D. A. Tsenov Academy of Economics, Svishtov, Bulgaria, issue 4 Year 20, pages 60-78.

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    More about this item

    Keywords

    Global financial architecture; International banks; Burden sharing; Resolution planning; Single point of entry; Multiple point of entry;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • 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

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