Is the financial safety net a barrier to cross-border banking ?
A bank's interest expenses rise with its degree of internationalization, measured by its share of foreign liabilities in total liabilities or a Herfindahl index of international liability concentration, especially if the bank is performing badly. The results in this paper suggest that an international bank's cost of funds raised through a foreign subsidiary is 1.5-2.4 percent higher than the cost of funds for a purely domestic bank. That is a sizeable difference, given that the overall mean cost of funds is 3.3 percent. These results can be explained by limited incentives for national authorities to bail out an international bank, as well as an inefficient recovery and resolution process for international banks. In any event, a less reliable financial safety net appears to be a barrier to cross-border banking.
|Date of creation:||01 Jan 2012|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
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.:
- Kane, Edward J, 2000.
"Incentives for Banking Megamergers: What Motives Might Regulators Infer from Event-Study Evidence?,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 32(3), pages 671-701, August.
- Edward J. Kane, 2000. "Incentives for banking megamergers: what motives might regulators infer from event-study evidence?," Proceedings, Federal Reserve Bank of Cleveland, pages 671-705.
- Edward J. Kane, 2000. "Incentives for banking megamergers: what motives might regulations infer from event-study evidence?," Proceedings 675, Federal Reserve Bank of Chicago.
- Michael C. Lovell, 1963. "Seasonal Adjustment of Economic Time Series and Multiple Regression," Cowles Foundation Discussion Papers 151, Cowles Foundation for Research in Economics, Yale University.
- Alicia GarcÃa-Herrero & Francisco F. VÃ¡zquez, 2007.
"International Diversification Gains and Home Bias in Banking,"
IMF Working Papers
07/281, International Monetary Fund.
- García-Herrero, Alicia & Vázquez, Francisco, 2013. "International diversification gains and home bias in banking," Journal of Banking & Finance, Elsevier, vol. 37(7), pages 2560-2571.
- Sironi, Andrea, 2003.
" Testing for Market Discipline in the European Banking Industry: Evidence from Subordinated Debt Issues,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 35(3), pages 443-72, June.
- Andrea Sironi, 2000. "Testing for market discipline in the European banking industry: evidence from subordinated debt issues," Finance and Economics Discussion Series 2000-40, Board of Governors of the Federal Reserve System (U.S.).
- Joel F. Houston & Chen Lin & Yue Ma, 2012.
"Regulatory Arbitrage and International Bank Flows,"
152012, Hong Kong Institute for Monetary Research.
- Charles Goodhart & Dirk Schoenmaker, 2009. "Fiscal Burden Sharing in Cross-Border Banking Crises," International Journal of Central Banking, International Journal of Central Banking, vol. 5(1), pages 141-165, March.
- Penas, Maria Fabiana & Unal, Haluk, 2004. "Gains in bank mergers: Evidence from the bond markets," Journal of Financial Economics, Elsevier, vol. 74(1), pages 149-179, October.
- Dario Focarelli & Alberto Franco Pozzolo, 2005.
"Where Do Banks Expand Abroad? An Empirical Analysis,"
The Journal of Business,
University of Chicago Press, vol. 78(6), pages 2435-2464, November.
- Focarelli, Dario & Pozzolo, Alberto Franco, 2003. "Where Do Banks Expand Abroad? An Empirical Analysis," Economics & Statistics Discussion Papers esdp03009, University of Molise, Dept. EGSeI.
- Demirguc-Kunt, Asli & Huizinga, Harry, 2004. "Market discipline and deposit insurance," Journal of Monetary Economics, Elsevier, vol. 51(2), pages 375-399, March.
- Yulia Makarova & Anna Ilyina & Christian Schmieder & Eugenio Cerutti, 2010.
"Bankers Without Borders? Implications of Ring-Fencing for European Cross-Border Banks,"
IMF Working Papers
10/247, International Monetary Fund.
- Eugenio Cerutti & Anna Ilyina & Yulia Makarova & Christian Schmieder, 2010. "Bankers Without Borders? Implications of Ring-Fencing for European Cross-Border Banks," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
- Park, Sangkyun & Peristiani, Stavros, 1998. "Market Discipline by Thrift Depositors," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(3), pages 347-64, August.
- Billett, Matthew T. & Garfinkel, Jon A. & O'Neal, Edward S., 1998. "The cost of market versus regulatory discipline in banking," Journal of Financial Economics, Elsevier, vol. 48(3), pages 333-358, June.
- Brealey, R. A. & Kaplanis, E. C., 1996. "The determination of foreign banking location," Journal of International Money and Finance, Elsevier, vol. 15(4), pages 577-597, August.
- Maria Soledad Martinez Peria, 2001.
"Do Depositors Punish Banks for Bad Behavior? Market Discipline, Deposit Insurance, and Banking Crises,"
Journal of Finance,
American Finance Association, vol. 56(3), pages 1029-1051, 06.
- María Soledad Martínez-Peria & Sergio Schmukler, 2002. "Do Depositors Punish Banks for Bad Behavior? Market Discipline, Deposit Insurance, and Banking Crises," Central Banking, Analysis, and Economic Policies Book Series, in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.), Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 5, pages 143-174 Central Bank of Chile.
- Flannery, Mark J & Sorescu, Sorin M, 1996. " Evidence of Bank Market Discipline in Subordinated Debenture Yields: 1983-1991," Journal of Finance, American Finance Association, vol. 51(4), pages 1347-77, September.
- Goldberg, Lawrence G. & Hudgins, Sylvia C., 2002. "Depositor discipline and changing strategies for regulating thrift institutions," Journal of Financial Economics, Elsevier, vol. 63(2), pages 263-274, February.
- Amihud, Yakov & DeLong, Gayle L. & Saunders, Anthony, 2002. "The effects of cross-border bank mergers on bank risk and value," Journal of International Money and Finance, Elsevier, vol. 21(6), pages 857-877, November.
- Benston, George J & Hunter, William C & Wall, Larry D, 1995. "Motivations for Bank Mergers and Acquisitions: Enhancing the Deposit Insurance Put Option versus Earnings Diversification," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(3), pages 777-88, August.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:5947. 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: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.