Multinational Banks and Supranational Supervision

Lóránth, Gyöngyi, Giacomo Calzolari () and Jean-Edouard Colliard

No 11326, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study the supervision of multinational banks (MNBs), allowing for either national or supranational supervision. National supervision leads to insufficient monitoring of MNBs due to a coordination problem between supervisors. Supranational supervision solves this problem and generates more monitoring. However, this increased monitoring can have unintended consequences, as it also affects the choice of foreign representation. Indeed, supranational supervision encourages MNBs to expand abroad using branches rather than subsidiaries, resulting in more pressure on their domestic deposit insurance fund. In some cases, it discourages foreign expansion altogether, so that financial integration paradoxically decreases. Our framework has implications on the design of supervisory arrangements for MNBs, the European Single Supervisory Mechanism being a prominent example.

Keywords: Cross-border banks; Multinational banks; supervision; Monitoring; Regulation; Banking union (search for similar items in EconPapers)
JEL-codes: F23 G21 G28 L51 (search for similar items in EconPapers)
Date: 2016-06
New Economics Papers: this item is included in nep-cba, nep-eec and nep-net
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Citations: View citations in EconPapers (14)

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Related works:
Journal Article: Multinational Banks and Supranational Supervision (2019)
Working Paper: Multinational Banks and Supranational Supervision (2017)
Working Paper: Multinational Banks and Supranational Supervision (2016)
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