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Cooperation in International Banking Supervision

  • Cornelia Holthausen

    (European Central Bank)

  • Thomas Rønde

    (Institute of Economics, University of Copenhagen)

This paper analyzes cooperation between sovereign national authorities in the supervision and regulation of a multinational bank. We take a political economy approach to regulation and assume that supervisors maximize the welfare of their own country. The communication between the supervisors is modeled as a cheap talk game. We show that: (1) unless the interests of the countries are perfectly aligned, first best closure regulation cannot be implemented; (2) the more aligned the interests are, the higher is welfare; (3) the bank can allocate its investments strategically across countries to escape closure.

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Paper provided by University of Copenhagen. Department of Economics. Centre for Industrial Economics in its series CIE Discussion Papers with number 2004-02.

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Length: 42 pages
Date of creation: Dec 2003
Date of revision:
Handle: RePEc:kud:kuieci:2004-02
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  22. Agnes A Belaisch & Joaquim Vieira Ferreira Levy & Laura E. Kodres & Angel J. Ubide, 2001. "Euro-Area Banking At the Crossroads," IMF Working Papers 01/28, International Monetary Fund.
  23. Giacomo Calzolari & Gyongyi Loranth, 2001. "On the Regulation of Multinational Banks," Rivista di Politica Economica, SIPI Spa, vol. 91(4), pages 297-, April-May.
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  25. Lannoo, Karel & Wyplosz, Charles & Bénassy-Quéré, Agnès, 1999. "Financial supervision and policy coordination in the EMU," ZEI Working Papers B 11-1999, University of Bonn, ZEI - Center for European Integration Studies.
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