Multinational Banks and Supranational Supervision

We study the supervision of multinational banks (MNBs), allowing for either national or supranational supervision. National supervision leads to insufficient monitoring of MNBs due to a coordination problem between supervisors. Supranational supervision can solve this problem and increase monitoring. However, this change has the unintended consequence of affecting the MNB's choice of foreign representation. MNBs may expand abroad using branches rather than subsidiaries, or abandon foreign expansion altogether. These changes completely neutralize the more intense monitoring that would otherwise occur with supranational supervision. Our paper provides insight into how the national boundaries of bank supervision interact with multinational banks.

Keywords: Cross-Border Banks, Multinational banks, Supervision, Monitoring, Regulation, Banking Union

JEL Classification: L51, F23, G21, G28

Suggested Citation: Suggested Citation

Calzolari, Giacomo and Colliard, Jean-Edouard and Loranth, Gyongyi, Multinational Banks and Supranational Supervision (January 10, 2017). HEC Paris Research Paper No. FIN-2016-1152, Available at SSRN: https://ssrn.com/abstract=2769219 or http://dx.doi.org/10.2139/ssrn.2769219