Regulation of Multinational Banks: A Theoretical Inquiry

38 Pages Posted: 5 Mar 2004

See all articles by Giacomo Calzolari

Giacomo Calzolari

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

Gyongyi Loranth

Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: February 2004

Abstract

This Paper studies prudential regulation of a multinational bank (MNB hereafter). We analyse how two frequently chosen representation forms for MNBs - branch and subsidiary representation - affect the behaviour of national regulators. We find that the different liability structure and insurance arrangements for non-local depositors under the two representations have a crucial impact on regulators' behaviour. We show that branch representation leads to a more lenient regulation for the home unit (the unit of incorporation) than subsidiary representation. Regulation of the foreign unit can be softer or tougher in branch MNBs depending on the prospect of the home unit. We examine how intervention of a regulator in charge of a given bank's unit changes with the information received about the foreign units. We discuss the effect of lobbying activity and international resources transfers on its regulation.

Keywords: Multinational banks, prudential regulation, representation form, subsidiary, branch

JEL Classification: F23, G21, G28, L51

Suggested Citation

Calzolari, Giacomo and Loranth, Gyongyi, Regulation of Multinational Banks: A Theoretical Inquiry (February 2004). CEPR Discussion Paper No. 4232. Available at SSRN: https://ssrn.com/abstract=508962

Giacomo Calzolari

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

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Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

University of Bologna ( email )

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I-40126 Bologna
Italy

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

Gyongyi Loranth (Contact Author)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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