IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Burden Sharing in a Banking Crisis in Europe

Listed author(s):
  • Dirk Schoenmaker
  • Charles Goodhart


Pan-European banks are starting to emerge, while arrangements for financial supervision and stability are still nationally rooted. This raises the issue who should bear the burden of any proposed recapitalisation should failures occur in large cross-border banks. A recapitalisation is efficient if the social benefits (preserving systemic stability) exceed the cost of recapitalisation. Using the multi-country model of Freixas (2003), it is shown that ex post negotiations on burden sharing lead to an underprovision of recapitalisations.We explore different ex ante burden sharing mechanisms. The first is a general scheme financed from the seigniorage of participating central banks (generic burden sharing). The second relates the burden to the location of the assets of the bank to be recapitalised (specific burden sharing). As a country's benefits and that country's contribution to the costs are better aligned in the specific scheme, the latter is better able to overcome the co-ordination failure. Finally, decision-making procedures for administering an ex ante burden sharing mechanism are required.Download Paper

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Financial Markets Group in its series FMG Special Papers with number sp164.

in new window

Date of creation: Mar 2006
Handle: RePEc:fmg:fmgsps:sp164
Contact details of provider: Web page:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:fmg:fmgsps:sp164. 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: (The FMG Administration)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.