Bank Resolution and the Structure of Global Banks
60 Pages Posted: 10 May 2018 Last revised: 17 Aug 2018
Date Written: August 17, 2018
We study the resolution of global banks by national regulators. Single-point-of-entry (SPOE) resolution, where loss-absorbing capital is shared across jurisdictions, is efficient but faces implementation constraints. First, when expected transfers across jurisdictions are too asymmetric, national regulators fail to set up SPOE resolution ex ante. Second, when required ex-post transfers are too large, national regulators ring-fence assets instead of cooperating in SPOE resolution. In this case, a multiple-point-of-entry (MPOE) resolution, where loss-absorbing capital is pre-assigned, is more robust. Our analysis highlights a fundamental link between efficient bank resolution, the operational structures, risks, and incentives of global banks.
Keywords: Bank Resolution, Too Big to Fail, TLAC, Ring-Fencing, Bankruptcy, G-SIBs, SIFIs
JEL Classification: G21, G28, G33
Suggested Citation: Suggested Citation