Supranational Supervision - How Much and for Whom?

28 Pages Posted: 9 Jul 2013  

Thorsten Beck

City University London - Sir John Cass Business School; Tilburg University - European Banking Center, CentER

Wolf Wagner

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM); Centre for Economic Policy Research (CEPR)

Date Written: July 2013

Abstract

We argue that the extent to which supervision of banks takes place on the supranational level should be guided by two factors: cross-border externalities from bank failures and heterogeneity in bank failure costs. Based on a simple model we show that supranational supervision is more likely to be welfare enhancing when externalities are high and country heterogeneity is low. This suggests that different sets of countries (or regions) should differ in their supranational orientation. We apply the insights of our model to discuss optimal supervisory arrangements for different regions of the world and contrast them with existing arrangements and current policy initiatives.

Keywords: Bank regulation, bank resolution, cross-border banking

JEL Classification: G21, G28

Suggested Citation

Beck, Thorsten and Wagner, Wolf, Supranational Supervision - How Much and for Whom? (July 2013). CEPR Discussion Paper No. DP9546. Available at SSRN: https://ssrn.com/abstract=2291367

Thorsten Beck (Contact Author)

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Tilburg University - European Banking Center, CentER ( email )

PO Box 90153
Tilburg, 5000 LE
Netherlands

Wolf Wagner

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

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

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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