Regulation of Multinational Banks: A Theoretical Inquiry

41 Pages Posted: 27 Apr 2005

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: January 2005

Abstract

This paper examines prudential regulation of a multinational bank (MNB hereafter) and shows how regulatory intervention depends on the liability structure and insurance arrangements for non local depositors (i.e. on the representation form for foreign units). Shared liability among the MNB's units gives higher incentives for regulatory intervention than when units are legally separate entities. Cross-border deposit insurance provides lower incentives to intervene than when the regulator only has to compensate local depositors. We study the impact of shared liability and deposit insurance arrangements on regulators' incentives to monitor and acquire information on MNB's activities. Furthermore, by describing regulatory intervention and monitoring we also draw implications on the MNB's preferences over the form representation for foreign units, and discuss the effects of regulators' behavior on both MNB's lobbying and international resources shifting.

Keywords: Multinational Banks, Prudential Regulation, Representation Form, Subsidiary, Branch

JEL Classification: L51, F23, G21, G28

Suggested Citation

Calzolari, Giacomo and Loranth, Gyongyi, Regulation of Multinational Banks: A Theoretical Inquiry (January 2005). ECB Working Paper No. 431. Available at SSRN: https://ssrn.com/abstract=647943

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

Gyongyi Loranth

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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