Coordinating Bank Failure Costs and Financial Stability
Banking groups have become increasingly multinational but the institutional infrastructure to deal with solvency or liquidity problems is still largely national. This might lead to financial instability if national authorities do not internalise externalities abroad. Recently ex-ante burden sharing agreements have been established (e.g. EFSF), but little empirical work has been done on potential costs and benefits of such agreements. We estimate the costs and benefits of financial stability support for large, internationally active banks under several proposed agreements. We show costs according to the 'national solution', where only home authorities inject capital, as our benchmark. 'Specific' sharing agreements would be redistributive at the expense of smaller and East European countries (not home to large cross-border banking groups). The 'general fund' mechanism will smooth costs across countries but may lead to unequal redistribution of costs. We also show that coordinating bank failure costs may bring about financial stability benefits.
|Date of creation:||Aug 2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.dnb.nl/en/
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.:
- MarÃa Nieto & Garry J. Schinasi, 2007.
"EU Framework for Safeguarding Financial Stability; Towards An Analytical Benchmark for Assessing its Effectiveness,"
IMF Working Papers
07/260, International Monetary Fund.
- María J. Nieto & Garry J. Schinasi, 2008. "EU framework for safeguarding financial stability: Towards an analytical benchmark for assessing its effectiveness," Banco de Espa�a Occasional Papers 0801, Banco de Espa�a.
- Friederike Niepmann & Tim Schmidt-Eisenlohr, 2010.
"Bank Bailouts, International Linkages and Cooperation,"
1016, Oxford University Centre for Business Taxation.
- Friederike Niepmann & Tim Schmidt-Eisenlohr, 2013. "Bank Bailouts, International Linkages, and Cooperation," American Economic Journal: Economic Policy, American Economic Association, vol. 5(4), pages 270-305, November.
- Friederike Niepmann & Tim Schmidt-Eisenlohr, 2011. "Bank Bailouts, International Linkages and Cooperation," Working Papers 170, Oesterreichische Nationalbank (Austrian Central Bank).
- Friederike Niepmann & Tim Schmidt-Eisenlohr, 2011. "Bank Bailouts, International Linkages and Cooperation," CESifo Working Paper Series 3384, CESifo Group Munich.
- Friederike Niepmann & Tim Schmidt-Eisenlohr, 2010. "Bank Bailouts, International Linkages and Cooperation," CEP Discussion Papers dp1023, Centre for Economic Performance, LSE.
- Friederike Niepmann & Tim Schmidt-Eisenlohr, 2010. "Bank Bail-Outs, International Linkages and Cooperation," Economics Working Papers ECO2010/05, European University Institute.
- Carlos González-Aguado & Max Bruche, 2006.
"Recovery Rates, Default Probabilities and the Credit Cycle,"
FMG Discussion Papers
dp572, Financial Markets Group.
- Bruche, Max & González-Aguado, Carlos, 2010. "Recovery rates, default probabilities, and the credit cycle," Journal of Banking & Finance, Elsevier, vol. 34(4), pages 754-764, April.
- Max Bruche & Carlos González Aguado, 2006. "Recovery Rates, Default Probabilities And The Credit Cycle," Working Papers wp2006_0612, CEMFI.
- Max Bruche & Carlos Gonzalez-Aguado, 2006. "Recovery rates, default probabilities and the credit cycle," LSE Research Online Documents on Economics 24524, London School of Economics and Political Science, LSE Library.
- Kashyap, Anil K. & Rajan, Raghuram G. & Stein, Jeremy C., 2008. "Rethinking capital regulation," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 431-471.
- Joe Peek & Eric Rosengren, 1991.
"The capital crunch: neither a borrower nor a lender be,"
91-4, Federal Reserve Bank of Boston.
- Peek, Joe & Rosengren, Eric, 1995. "The Capital Crunch: Neither a Borrower nor a Lender Be," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(3), pages 625-38, August.
- Joe Peek & Eric Rosengren, 1993. "The Capital Crunch: Neither A Borrower Nor A Lender Be," Boston College Working Papers in Economics 243, Boston College Department of Economics.
- Krimminger, Michael H., 2008. "The resolution of cross-border banks: Issues for deposit insurers and proposals for cooperation," Journal of Financial Stability, Elsevier, vol. 4(4), pages 376-390, December.
- Todd Sandler & Keith Sargent, 1995. "Management of Transnational Commons: Coordination, Publicness, and Treaty Formation," Land Economics, University of Wisconsin Press, vol. 71(2), pages 145-162.
- Dirk Schoenmaker & Charles Goodhart, 2006. "Burden Sharing in a Banking Crisis in Europe," FMG Special Papers sp164, Financial Markets Group.
When requesting a correction, please mention this item's handle: RePEc:dnb:dnbwpp:306. 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: (Rob Vet)
If references are entirely missing, you can add them using this form.