Cooperation in International Banking Supervision

By Cornelia Holthausen, Thomas Rønde. Social Science Research Network, 2004

139 citations recorded by the source corpus.

This paper analyses 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.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/e10eeb497f65ca778e1543d8f51f1ddd32a5d97d