Cooperation in International Banking Supervision

48 Pages Posted: 9 Aug 2005

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: April 2005

Abstract

This paper analyzes cooperation among national supervisors in the decision to close a multinational bank. The supervisors are asymmetrically informed and exchange information through 'cheap talk'. It is assumed that they consider domestic welfare only. We show that: (1) the supervisors will commit mistakes both of 'type I' and 'type II' in the closure decision; (2) the more aligned national interests are, the higher is welfare resulting from the closure decision; (3) the bank can allocate its investments strategically to escape closure; (4) allocating the decision right to an uninformed supranational supervisor can improve closure regulation, especially when interests are very disaligned.

Keywords: Multinational banks, supervision, closure, cheap talk

JEL Classification: F36, G21, G28, L51

Suggested Citation

Holthausen, Cornelia and Rønde, Thomas, Cooperation in International Banking Supervision (April 2005). CEPR Discussion Paper No. 4990. Available at SSRN: https://ssrn.com/abstract=772004

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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