Cooperation in International Banking Supervision

57 Pages Posted: 19 May 2004

See all articles by Cornelia Holthausen

Cornelia Holthausen

European Central Bank (ECB); Centre for Economic Policy Research (CEPR)

Thomas Rønde

University of Copenhagen - Department of Economics; Center for Economic and Business Research (CEBR); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: March 2004

Abstract

This paper analyzes cooperation between sovereign national authorities in the supervision and regulation of a multinational bank. We take a political economy approach to regulation and assume that supervisors maximize the welfare of their own country. The communication between the supervisors is modeled as a 'cheap talk' game. We show that: (1) unless the interests of the countries are perfectly aligned, Þrst best closure regulation cannot be implemented; (2) the more aligned the interests are, the higher is welfare; (3) the bank can allocate its investments strategically across countries to escape closure.

Keywords: multinational banks, closure, cheap talk

JEL Classification: G21, G28, F36, L51

Suggested Citation

Holthausen, Cornelia and Rønde, Thomas, Cooperation in International Banking Supervision (March 2004). ECB Working Paper No. 316; EFA 2002 Berlin Meetings Presented Paper. Available at SSRN: https://ssrn.com/abstract=301961

Cornelia Holthausen (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
+49 69 1344 6490 (Phone)
+49 69 1344 855 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Thomas Rønde

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark
+64 9 532 3014 (Phone)
+64 9 532 3000 (Fax)

Center for Economic and Business Research (CEBR) ( email )

Porcelaenshaven, Bldg 65
DK-2000 Frederiksberg
Denmark

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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