Common Capital: A Thought Experiment in Cross-Border Resolution
30 Pages Posted: 4 Mar 2015
Date Written: May 23, 2014
Cross-border bank resolution efforts focus on burden-sharing between bank owners, private creditors and the public. There is little talk of burden-sharing among governments, despite the rich history of governments trying to stick one another with the cost of financial conglomerate failures. There is an unspoken fear that acknowledging the need to allocate losses among governments would undermine post-crisis pledges of No More Bailouts. This symposium essay argues for making government stakes in private financial firms more transparent, and for using the contingent public share as a key to loss allocation among governments in cross-border banking crises.
Keywords: bank failure, common capital, cross-border banking, bailout, government commitments
JEL Classification: F33, K12, K33, K39
Suggested Citation: Suggested Citation