Subsidiaries and Branches: Does One Size Fit All?

29 Pages Posted: 18 May 2011

See all articles by Inci Otker Robe

Inci Otker Robe

International Monetary Fund (IMF)

Jonathan Fiechter

International Monetary Fund (IMF)

Jay Surti

International Monetary Fund (IMF)

Michael Hsu

International Monetary Fund (IMF)

Andre Oliveira Santos

International Monetary Fund (IMF)

A. Ilyina

International Monetary Fund (IMF)

Date Written: March 7, 2011

Abstract

The paper examines the relative advantages of different organizational structures for cross-border banking groups and their home and host countries, and discusses the factors influencing a banking group’s choice of branch versus subsidiaries, as well as the financial stability implications for home and host countries. It concludes that, given the diversity of business lines and the varying stages of financial development of different countries, there is no one optimal structure for cross-border expansion. It also notes that, in the absence of an effective cross-border resolution framework, resolving cross-border banking groups organized as subsidiaries may be less costly or destabilizing than resolving groups organized as branches. The ultimate key to financial stability, however, lies in the design of mechanisms that ensure effective oversight and orderly resolution of banks, both at a national and global level. Achieving this objective would reduce financial stability risks of home and host countries and allow banks to organize themselves in a way that best fits their business models.

Keywords: Cross-Border Banking, Financial Stability, Financial Regulation, Stand-Alone Subsidiarization, Ring Fencing, Subsidiaries, Branches, Resolution

JEL Classification: G01, G20, G21, G28, G32

Suggested Citation

Robe, Inci Otker and Fiechter, Jonathan and Surti, Jay and Hsu, Michael and Santos, Andre Oliveira and Ilyina, A., Subsidiaries and Branches: Does One Size Fit All? (March 7, 2011). Available at SSRN: https://ssrn.com/abstract=1805316 or http://dx.doi.org/10.2139/ssrn.1805316

Inci Otker Robe (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Jonathan Fiechter

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Jay Surti

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Michael Hsu

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Andre Oliveira Santos

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

A. Ilyina

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
101
Abstract Views
826
rank
265,091
PlumX Metrics