Multinational Banks and Supranational Supervision

49 Pages Posted: 7 Feb 2017 Last revised: 11 May 2018

See all articles by Giacomo Calzolari

Giacomo Calzolari

European University Institute - Economics Department (ECO); Centre for Economic Policy Research (CEPR); University of Bologna

Jean-Edouard Colliard

HEC Paris - Finance Department

Gyongyi Loranth

Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: January 4, 2017

Abstract

Supervision of multinational banks (MNBs) by national supervisors suffers from coordination failures. We show that supranational supervision solves this problem, and decreases the expected costs of a MNB's default, taking its organizational structure as given. However, the MNB strategically adjusts its structure to the new supervisory framework. It converts its subsidiary into a branch, or conversely, with a view to reducing supervisory monitoring. We identify the cases in which this endogenous reaction leads to unintended consequences, such as higher costs to the deposit insurance fund, lower welfare, or closure of the MNB's foreign unit. Current reforms of MNB supervision should thus take into account that MNBs adapt their organizational structures to changes in supervision.

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

JEL Classification: L51, F23, G21, G28

Suggested Citation

Calzolari, Giacomo and Colliard, Jean-Edouard and Loranth, Gyongyi, Multinational Banks and Supranational Supervision (January 4, 2017). Available at SSRN: https://ssrn.com/abstract=2912802 or http://dx.doi.org/10.2139/ssrn.2912802

Giacomo Calzolari (Contact Author)

European University Institute - Economics Department (ECO) ( email )

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Centre for Economic Policy Research (CEPR) ( email )

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University of Bologna ( email )

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Italy

HOME PAGE: http://sites.google.com/view/giacomo-calzolari

Jean-Edouard Colliard

HEC Paris - Finance Department ( email )

France

Gyongyi Loranth

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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