Regulatory and Bailout Decisions in a Banking Union

Andreas Haufler

No 8964, CESifo Working Paper Series from CESifo

Abstract: We model a banking union of two countries whose banking sectors differ in their average probability of failure and externalities between the two countries arise from cross-border bank ownership. The two countries face (i) a regulatory decision of which banks are to be shut down before they can go bankrupt, and (ii) a loss allocation – or bailout – decision of who pays for banks that have failed despite regulatory oversight. Each of these choices can either be taken in a centralized or in a decentralized way. In our benchmark model the two countries always agree on a centralized regulation policy. In contrast, bailout policies are centralized only when international spillovers from cross-border bank ownership are strong, and banking sectors are highly profitable.

Keywords: banking union; bank regulation; bailout policies (search for similar items in EconPapers)
JEL-codes: F33 G28 H87 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-ban, nep-cba, nep-opm and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Regulatory and bailout decisions in a banking union (2021)
Working Paper: Regulatory and Bailout Decisions in a Banking Union (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_8964

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