Bank resolution and the structure of global banks

Patrick Bolton and Martin Oehmke

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We study the resolution of global banks by national regulators. Single-point-of-entry (SPOE) resolution, where loss-absorbing capital is shared across jurisdictions, is efficient but faces implementation constraints. First, when expected transfers across jurisdictions are too asymmetric, national regulators fail to set up SPOE resolution ex ante. Second, when required ex post transfers are too large, national regulators ring-fence assets instead of cooperating in SPOE resolution. In this case, a multiple-point-of-entry (MPOE) resolution, where loss-absorbing capital is preassigned, is more robust. Our analysis highlights a fundamental link between efficient bank resolution, the operational structures, risks, and incentives of global banks.

JEL-codes: G21 G28 G33 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2019-06-01
New Economics Papers: this item is included in nep-ban and nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Published in Review of Financial Studies, 1, June, 2019, 32(6), pp. 2384 – 2421. ISSN: 0893-9454

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:90056

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