Burden Sharing: From Theory to Practice

DSF Policy Paper No. 6

19 Pages Posted: 13 Oct 2010 Last revised: 1 Mar 2011

See all articles by Dirk Schoenmaker

Dirk Schoenmaker

Rotterdam School of Management, Erasmus University; Erasmus Research Institute of Management (ERIM); Centre for Economic Policy Research (CEPR)

Date Written: October 12, 2010

Abstract

The handling of cross-border banks in difficulties gives rise to coordination problems between home and host countries. Goodhart and Schoenmaker (2006, 2009) have suggested to implement an ex ante burden sharing mechanism to overcome the co-ordination failure of national authorities. While burden sharing is technically not very difficult, it requires political cooperation between sovereign nations. The financial crisis has provided some spectacular examples of coordination failure: the failures of Fortis, Lehman and the Icelandic banks illustrate how much damage the absence of an adequate cross-border framework can do to the stability of the global banking system. In the aftermath of the financial crisis, some burden sharing agreements are now being put in place.

Keywords: Burden sharing, financial stability, public good

JEL Classification: E58, E60, G21, G28

Suggested Citation

Schoenmaker, Dirk, Burden Sharing: From Theory to Practice (October 12, 2010). DSF Policy Paper No. 6, Available at SSRN: https://ssrn.com/abstract=1690856 or http://dx.doi.org/10.2139/ssrn.1690856

Dirk Schoenmaker (Contact Author)

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam
Netherlands

HOME PAGE: http://www.rsm.nl/people/dirk-schoenmaker/

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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