Cross-Border Banking on the Two Sides of the Atlantic: Does it Have an Impact on Bank Crisis Management?

28 Pages Posted: 2 Nov 2017

See all articles by Maria Nieto

Maria Nieto

Banco de España

Larry D. Wall

Federal Reserve Bank of Atlanta - Research Department

Multiple version iconThere are 2 versions of this paper

Date Written: October 31, 2017

Abstract

In the US and the EU political incentives to oppose cross-border banking have been strong in spite of the measurable benefits to the real economy from breaking down geographic barriers. Even a federal level supervisor and safety net is not by itself sufficient to incentivizing cross-border banking although differences in the institutional set up are reflected in the way the two areas responded to the crisis. The US response was a coordinated response and the cost of resolving banks was borne at the national level. Moreover, the FDIC could market failed banks to other banks irrespective of state boundaries reducing the cost of the crisis to the US economy and the sovereign finances. In the EU, the crisis resulted in financial market fragmentation and unbearable costs to some sovereigns.

Keywords: banks, international finance, European Union, United States

JEL Classification: G21, G28, G34

Suggested Citation

Nieto, Maria J. and Wall, Larry D., Cross-Border Banking on the Two Sides of the Atlantic: Does it Have an Impact on Bank Crisis Management? (October 31, 2017). Banco de Espana Working Paper No. 1738. Available at SSRN: https://ssrn.com/abstract=3062755 or http://dx.doi.org/10.2139/ssrn.3062755

Maria J. Nieto (Contact Author)

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Larry D. Wall

Federal Reserve Bank of Atlanta - Research Department ( email )

1000 Peachtree Street, NE
Atlanta, GA 30309-4470
United States
404-498-8937 (Phone)
404-498-8956 (Fax)

HOME PAGE: http://www.frbatlanta.org/econ_rd/bios/wall.htm

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