Cooperation in International Banking Supervision

Rønde, Thomas and Cornelia Holthausen

No 4990, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: 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.

Keywords: Multinational banks; supervision; Closure; Cheap talk (search for similar items in EconPapers)
JEL-codes: F36 G21 G28 L51 (search for similar items in EconPapers)
Date: 2005-04
New Economics Papers: this item is included in nep-fin and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (51)

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Working Paper: Cooperation in International Banking Supervision (2003)
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