Creating an EU-Level Supervisor for Cross-Border Banking Groups: Issues Raised by the U.S. Experience with Dual Banking

MANAGING RISK IN THE FINANCIAL SYSTEM, Raymond LaBrosse, Rodrigo Olivares-Caminal, Dalvinder Singh, eds., Edward Elgar Publishing, 2011

FRB of Atlanta Working Paper No. 2011-06

27 Pages Posted: 4 Apr 2011  

Larry D. Wall

Federal Reserve Bank of Atlanta - Research Department

Maria Nieto

Banco de España

David G. Mayes

University of Auckland

Date Written: March 1, 2011

Abstract

The European Union (EU) has been facilitating the growth of cross-border banking groups, but bank supervision remains the responsibility of national supervisors. This mismatch has long been recognized and various proposals have been offered to address this weakness. An alternative that would retain the most important advantages of full centralization is that of centralization only for those cross-border groups that are systemically important. All other banks would remain national responsibilities. To identify some of the issues (but not necessarily the best answers) raised by partial centralization in the EU, we look to the dual banking arrangements in the United States, which has long had both federal and state charters. One issue is that of who qualifies for and/or is required to adopt an EU charter. The U.S. policy of low-cost chartering changes encourages both good and bad competition among supervisors. A second issue is that of the potential mismatch between EU responsibility for prudential supervision of some banks and national provision of deposit insurance and lender of last resort services for all banks. A third potential issue is who should provide business conduct regulation.

Keywords: cross-border banking

JEL Classification: G28, F36, K23

Suggested Citation

Wall, Larry D. and Nieto, Maria and Mayes, David G., Creating an EU-Level Supervisor for Cross-Border Banking Groups: Issues Raised by the U.S. Experience with Dual Banking (March 1, 2011). MANAGING RISK IN THE FINANCIAL SYSTEM, Raymond LaBrosse, Rodrigo Olivares-Caminal, Dalvinder Singh, eds., Edward Elgar Publishing, 2011; FRB of Atlanta Working Paper No. 2011-06. Available at SSRN: https://ssrn.com/abstract=1800250

Larry D. Wall (Contact Author)

Federal Reserve Bank of Atlanta - Research Department ( email )

1000 Peachtree Street, NE
Atlanta, GA 30309-4470
United States
404-498-8937 (Phone)
404-498-8956 (Fax)

HOME PAGE: http://www.frbatlanta.org/econ_rd/bios/wall.htm

Maria J. Nieto

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

David G. Mayes

University of Auckland ( email )

Private Bag 92019
Auckland Mail Centre
Auckland, 1142
New Zealand

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